We’re a nation of spenders

Published 11:00 pm Wednesday, May 30, 2012

Our national debt is $15.8 trillion; our federal deficit for 2012 will be around $1.4 trillion; and leadership in Washington — President Obama and Congress — aren’t interested in tackling the source of our debt and deficit problem: excessive spending. Since 1970, federal spending has grown from $925 billion to more than $4 trillion; median household incomes in the US, meanwhile, have barely budged.

In 1970, Medicaid, Medicare, and Social Security accounted for less than 1/3 of all federal spending; today, more than half of all federal dollars go to our big three entitlement programs, and they will take up an even larger share of the federal budget in the future. Since expenditures on the big three entitlement programs are treated as untouchable by politicians, discretionary spending — spending on defense, education, and highways — is the only option for cutting. Here again, though, politicians are unwilling to make the deep cuts necessary to assure balanced budgets.

By failing to tackle America’s most serious problem—excessive federal spending—political leaders in Washington have pushed us to the fiscal cliff. Leadership in Washington has done something most people know not to do: they have spent beyond their means. From 1959 to 2008, federal tax revenue averaged 18.1 percent of national income, but federal expenditures averaged 20.2 percent. In the last few years, things have gotten worse: revenues in 2012 were 16.1 percent of national income because of our weak economy, but expenditures were 23.3 percent. When spending exceeds revenue, the gap must be covered by borrowing.

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Some believe America can cover its deficits with more revenues — higher taxes on the rich, more economic growth, new taxes—but increasing revenue alone will not solve our problem. Cuts aimed at discretionary and entitlement spending are needed, and they must be made soon.

To see why discretionary and entitlement spending must both be cut, consider the following: People often say they’d like to see NASA funding and foreign aid cut, but NASA and foreign aid account for $43 billion of combined spending; our deficit is around $1.4 trillion. We could eliminate NASA and foreign aid, but we’d still have $1.35 trillion of cuts to go! Larger discretionary items, such as defense, are far more popular. They could be cut, but cuts short of eliminating most of our nation’s discretionary departments are not enough.

Cuts to the big three entitlement programs must occur. More than 100 million people receive Social Security, Medicare, or Medicaid benefits. Few beneficiaries want to see cuts, and I encounter their concerns first-hand when talking about the economy to groups: “Just make sure nobody touches my Social Security,” is an all too common refrain. That Medicare expenditures are soaring is dismissed because health care is a “right.” Even though people think their entitlement benefits should last forever, the generous funding they enjoy now will soon go away because the federal dollars needed to sustain America’s entitlement programs aren’t going to be there.

The lack of money means federal programs are going to have to change. But, how will they change—through compromise and political leadership or all at once when we’re falling off the fiscal cliff? America’s political system makes me pessimistic about political elites fixing our mess. Spending cuts through the political process asks politicians to fall on their swords by putting the country’s long-term interests above their own interests. If we count on politicians, we’re in trouble! Thomas Jefferson, in fact, knew politicians couldn’t be counted on to fix our country when he wrote the following in 1782: “Every government degenerates when trusted to the rulers of the people alone. The people themselves, therefore, are its only safe depositories.”

Jefferson’s correct: We shouldn’t expect much from our political rulers. Rather than turn to them, maybe America’s fiscal crisis will cause people to wake up to the following reality: some things cannot be trusted to government and some things — things like health care for the elderly and retirement savings — are best left to the people.


Dr. Scott Beaulier is Executive Director of the Manuel H. Johnson Center for Political Economy at Troy University.