Budget Deficit Closing In on $ 2 Trillion A Year

Last year I posted about my dismay and concern over the fact that then President Bush was projecting a budget deficit of roughly $ 500 billion for the 2008-2009 budget year. At the time I lamented the fact that the reaction was mostly partisan, with each side pointing fingers at the other rather than seriously examining the issue and accepting that both sides had some share of the blame.

Now we have an announcement from  President Obama that the projected deficits for the next two budget years (2009-2010 and 2010-2011) will come in at $ 1,800,000,000,000 and $ 1,400,000,000,000 respectively. That’s roughly $ 3.2 trillion dollars in debt for just two budget years ($ 3,200,000,000,000). To put this in perspective it took until around 1990 (or about 200 years of spending) for the US debt to reach that point.

Obviously in that 200 year figure we do have to factor inflation but it is still a pretty shocking statistic which will result in close to half of the spending being from borrowing.

Certainly a good portion of the deficit results from either past policies or bailouts, but it also results from a series of spending increases that were entirely the policy of the administration, as pointed out by US News and World Report writer Peter Roff.

For my part, I am reposting a modified version of my 2008 comment, which sadly seems to be even more appropriate today.

Just to put that in proper perspective the current $ 3.2 trillion in debt works out to $ 10,000 per person for the two budget years alone. This will bring the total national debt to nearly $ 15 trillion dollars ($ 15,000,000,000,000) or in excess of $ 50,000 per person.

Sadly the major response to this news has been finger pointing and political gamesmanship with the Republicans slamming Obama while Democrats point the finger back blaming past Bush policies. But partisan fighting is not going to solve the problem. You might score points by attacking an opponent as a ‘tax and spend liberal’ or condemn them for ‘wasting money in Iraq’ but you are not going to resolve the problem.

The difficulties in the current budget reflect years of mismanagement. During the 1990’s we thought we were balancing the budget but what we were really doing is basing it on unrealistic economic performance.  In reality the blame can be laid on both parties. Decades of runaway spending and irresponsible tax cuts and stimulus packages have done their damage. We need to take a harsh and realistic new look at the whole process rather than raising partisan rhetoric.

For those who would lay the blame on Iraq for example, the total current spending for operations in Iraq is estimated at about $ 10 billion a month (per then candidate Obama) which works out to $ 120 billion a year or less that 10% of the total debt for the two years. The stimulus package alone cost at least $ 170 billion so it is more to blame for the debt than Iraq (though I think they are of equal value to the economy, none).

As I discussed in a previous posting relating to the California State budget, what we need here is some real leadership on the part of both political parties. The $ 3.2 trillion dollar deficits represent nearly 64 % of total income or 40% of total spending (based on a projected two year income of $ 5 trillion and projected spending of $ 8.2 trillion). 

By contrast the 2008-09 budget the figures were both around 20%, and that was disturbing enough. It is clear that you are not going to balance the budget through tax increases or spending cuts alone. The numbers simply won’t allow it.

So what is the solution ?

Well I am hardly an expert on the budget and until someone chooses to elect me to the House or appoint me to the Senate I’m not sure I want to work that hard on the process but I do know it will require some major changes.

We are already looking at the likelihood of reducing and/or eliminating our operations in Iraq over the next couple of years so that in theory will give us some of the cuts we need, though I suspect the number will come in a little lower than this. The point we sometimes forget is that even if these troops were not in Iraq most of them would be somewhere doing something for the military so I’d cut 20 billion off for those costs. This assumes that actually do save the money

But all this does is save maybe $ 250 billion out of the $ 3,200 billion needed. In theory we will save more due to the lack of future stimulus packages though that is likely to be countered by the increases in spending on other areas of domestic policy. This is why we need to look at some major changes in this area.

A second area we will need to look at is the Medicare/Medicaid/Social Security trifecta. These 3 items alone represented 41% of the total spending in FY 2007. We may need to consider things like raising retirement age or increasing the amount of the SS and Medicare taxes. I know it’s not popular but we can’t spend what we do not have.

Finally in terms of spending we need to look at reducing spending in any other areas we can find, though cutting pork spending in Washington is kind of like trying to raise the Titanic with tweezers.

Democrats at this point are probably raging and Republicans celebrating the idea of reducing spending, but that won’t last long because we need to look at tax increases as well. Even if you factor in the reduction of most of the costs of Iraq, wipe out the cost of the stimulus package and work to trim other spending you are sill only about half way there and the other part needs to come from the income side of the equation.

I’ve already discussed the idea of raising Medicare or Social Security taxes, which would help resolve problems there but we also need to look at rolling back some of the 2001/02 tax cuts. If we are expecting to resolve the problem you simply have to get the money from somewhere. I would however suggest that the load be spread out over all taxpayers. A shared burden for a shared benefit so to speak.

Obviously these ideas are very rough and require a lot of fleshing out. Perhaps some of our political ‘leaders’ can start to work on this but somehow I doubt that they will.

If they do then I’ll be the first to offer praise for their efforts.

But if they keep up with the old partisan wrangling, maybe it’s time for all of us to get together and form that long discussed Third Party and toss all the idiots out.