A New Record of Folly

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A new report that hasn’t gotten much play in the afterglow of President Obama’s state of the union address was the Congressional Budget Office estimate for the budget deficit this year. The CBO estimates that the deficit will hit a new record of $1.5 trillion. And it projects that the 2012 deficit will be $1.1 trillion. Even though this will be the third year of trillion-buck-plus deficits, and it will top last year’s record-setting deficit of $1.4 trillion, no doubt Obama will continue to blame Bush (whose largest deficit was a little over $400 billion in 2008). But that rhetorical trope is working less and less well for Obama.

Obama seems now to be aware that the populace is becoming increasingly alarmed at these unprecedented budget deficits. His speech proposed a meager deficit reduction — about $400 billion over ten years.

The big question is how much stomach the Republicans have to push for steeper cuts. The public is now aware of the problem but is still fiscally incontinent: it favors cutting the budget generally but opposes cutting specific popular programs. Even Tea Party members typically support the major entitlement programs (Medicare, Medicaid, and Social Security) that are metastasizing most rapidly.

There are slight signs that the Republicans may strap on some stones and step up to the plate. Orrin Hatch (R-UT) has once again proposed a balanced budget amendment, stronger than the amendment that failed by one vote in the Senate 14 years ago. Hatch’s version would require a two-thirds majority for Congress to raise taxes. But while a dozen Republican senators have signed on, no Democrats have, indicating that this has little chance of passing.

Sen. David Vitter (R-LA) has raised the deficit issue in a different way. He has asked the administration to provide actual figures on the drop in offshore drilling revenue collected by the federal government. That information would show us just how much the Obama slowdown of offshore drilling has and will cost the government in revenues, and hence added to the deficit. One calculation puts the amount of lost revenue due to lower production in the Gulf at about $3.7 million a day.

But most interesting is the legislation introduced by Rep. Jim Jordan (R-OH) and Sen. Jim DeMint (R-SC) that would cut the deficit by $2.5 trillion over ten years. Some of the savings would come from the elimination of a number of programs and agencies, such as the US Agency for International Development (savings: $1.39 billion a year) and from cutting the subsidies of the Corporation for Public Broadcasting ($445 million a year), Amtrak ($1.5 billion a year), and high-speed rail ($2.5 billion a year). But most of the savings would come from rolling back all non-defense discretionary spending to 2006 levels across the board, and keeping it there until 2021.

It is unlikely that this proposal will even come to a vote in the Senate, much less be signed into law by Obama. Even if it did, as exemplary as it is, it would not address the real threat, which is the “Entitlement Explosion” — the ballooning costs of Medicare, Medicaid, and Social Security, costs that are going to drive the country’s economy to the wall as the Baby Boomers quite predictably age, retire, and sicken. In fact, the CBO just reported that this year Social Security will run a deficit of $45 billion (or $130 billion, if the cut in payroll taxes is included), and will continue to run deficits until the bogus “trust fund” is exhausted in 2037. As late as last year, please note, Social Security was projected to run surpluses until 2016.

The entitlement programs are what really endanger the country (and I haven’t even mentioned the state employee pension fund liabilities). The American people haven’t yet reached what I call the public-choice tipping point, the point at which a problem becomes so large that it is no longer rational for the average citizen to be ignorant of it. So the Republicans may do a little by way of deficit reduction, but I wouldn’t hold out hope that they will do a lot — the public isn’t there quite yet.

Give it a few more years, and a bout of high inflation . . . and that may finally do the trick. By then, of course, the economy will be in ruins. Rational ignorance is such a bitch, isn’t it?




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