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The U.S. Budget Situation is Worse than Even You Imagined


Last week, Senator John Kerry (D.-Mass) was unhappy with a Republican plan to cut as much as $61 billion out of the federal budget.  “I think it’s an ideological, extremist, reckless statement,” Kerry said of the plan.

I hadn’t kept up on all the numbers recently, so I took a look at President Obama’s 2012 budget, which offers updated figures for this fiscal year (2011).  My shock at the numbers was matched only by my shock that even Kerry could say something that demented.

The fiscal situation America now faces is unutterably appalling.  I don’t want to bury you in numbers, so I’ll just mention a few, rounding out to the nearest hundred-billion.

First, the 2011 deficit is not just a few percentage points in the budget.  Forty-three percent of all spending is now on borrowed money—that is, $1.6 trillion out of 3.8 trillion.  That would be like spending $100,000 a year on a salary of $57,000.

If the President has his way, this situation will not change any time soon.  He projects deficits approaching the trillion-dollar-range as far as the eye can see.  And those projections assume that (1) ObamaCare saves money and (2) income tax receipts go up steeply in the next few years.  Hah!

To balance the budget with more revenue, the federal government would have to take in 75% more cash.  But if you raise taxes 75%, you won’t get 75% more money because the tax hike would hurt the economy, and people would find ways to avoid paying that much more.  So to balance the budget with revenue, you’d probably have to more than double all federal taxes.

Congress has put most federal spending on autopilot rather than reviewing and appropriating it from year to year.  (The Obama budget jocularly calls autopilot expenditures “mandatory” spending.)  Autopilot spending includes Social Security, Medicare, and Medicaid, and amounts to $2.2 trillion.  The entire rest of the budget is $1.4 trillion ($900B for defense and security; $500B for social programs).  If you immediately abolished everything not on autopilot, you’d still have a deficit.

Even if we completely and immediately eliminated both Social Security and Medicare and kept their taxes in place we wouldn’t balance the budget.

So you can check the numbers yourself, here are the principal expenditures, rounded to the nearest hundred billion:

*    Defense and other security programs – $900B
*    Appropriated social programs – $500B
*    Auto-pilot social programs – $2200B ($700B for Social Security, $500B for Medicare, $300B for Medicaid, and $700B for others)
*    Interest on debt – $200B

Note that national security—the federal government’s first constitutional responsibility—absorbs only 23%.  77% goes to other programs, many of which are flagrantly unconstitutional.  (This is in addition to state and local social spending.)

Study these numbers and three things hit you:

(1) The political and economic dynamics are such that balancing the budget will be forever impossible without radical change.

(2) Cutting $61 billion—about two percent of expenditures when the deficit is 43% of expenditures—is only “extremist” or “reckless” in a way opposite to what Senator Kerry intended.

(3) If we had honored the Constitution’s limits on federal power, this horrendous situation never would have arisen.

Rob Natelson