Decades or centuries from now, scholars will examine U.S. government documents from our time and notice something strange: In four consecutive years around the close of the 20th century, the federal budget was recorded as having a surplus. That hadn't happened since 1969, it hasn't happened since, and the way things are going, it may never happen again.
Recent years have seen the collapse of all federal fiscal discipline. At the end of the 2001 fiscal year, the national debt stood at $5.7 trillion. Today, it's over $12 trillion. With the population at roughly 300 million, your share is, oh, about $40,000. And you ain't seen nothin' yet. In the next decade, according to the Obama administration's own estimates, Washington will pile up another $9 trillion in deficits.
This has been a bipartisan achievement. When Republicans controlled Congress and the executive branch during the Bush administration, the surpluses gave way to deficits. Now that Democrats are in power, they are doing the same, in spades. Both have found political advantage in lavishing voters with benefits that someone else (future voters) will have to pay for.
Blameworthy as they are, the politicians didn't do it all by themselves. The recession of 2001 caused revenue to drop and spending to rise, as every downturn does. The much deeper recession that began in December 2007 (and may have ended last summer) had an even greater effect on both.
But on top of that, the Bush administration tried to revive growth with a $168 billion fiscal stimulus last year, as well as the $700 billion Troubled Asset Relief Program. Shortly after Barack Obama took office, he and Congress agreed on another stimulus, this one priced at $787 billion.
All these efforts were attempts to contain the fiscal fallout by averting an even worse contraction, and some of the outlays (especially TARP) undoubtedly were worth the cost. But they also provide cover for politicians to approve spending that stimulates nothing -- except the growth of government.
Worse, they accustom our elected officials to abandoning all restraint. The bigger the deficit and the debt, the more pointless it seems to muster the political courage to say "no."
That sort of fortitude will be especially precious in the coming years, as more and more members of the baby boom generation start collecting Social Security benefits and running up Medicare bills. The Peterson-Pew Commission on Budget Reform recently projected that in the next three decades, given current trends, federal spending will rise to 36 percent of gross domestic product, up from 25 percent today, while revenue will remain below 20 percent of GDP.
In time, the growing gap may cause investors at home and abroad to demand higher returns to justify the risk of something that is no longer unimaginable -- a default by the U.S. government. The other day, an official of China's central bank said pointedly, "The world does not have so much money to buy more U.S. Treasuries."
It's a crisis that grew gradually for years and is now growing rapidly. It's one that will force Americans to choose between getting our fiscal house in order or inviting an economic decline of the sort we associate with banana republics. And it's one that demands action sooner rather than later.
Right now, we're aboard the Titanic in a sea of red ink -- but we still have a chance to avoid the iceberg that looms straight ahead.
WASHINGTON (AP) — Democrats are troubled by the inconsistency of Republican lawmakers who approved a major Medicare expansion six years ago that has added tens of billions of dollars to federal deficits, but oppose current health overhaul plans.
All current GOP senators, including the 24 who voted for the 2003 Medicare expansion, oppose the health care bill that's backed by President Barack Obama and most congressional Democrats.
The Democrats claim that their plan moving through Congress now will pay for itself with higher taxes and spending cuts and they cite the nonpartisan Congressional Budget Office for support.
By contrast, when Republicans controlled the House, Senate and White House in 2003, they overcame Democratic opposition to add a deficit-financed prescription drug benefit to Medicare. The program will cost a half-trillion dollars over 10 years, or more by some estimates.
With no new taxes or spending offsets accompanying the Medicare drug program, the cost has been added to the federal debt.
Some Republicans say they don't believe the CBO's projections that the health care overhaul will pay for itself. As for their newfound worries about big government health expansions, they essentially say: That was then, this is now.
Six years ago, "it was standard practice not to pay for things," said Sen. Orrin Hatch, R-Utah. "We were concerned about it, because it certainly added to the deficit, no question." His 2003 vote has been vindicated, Hatch said, because the prescription drug benefit "has done a lot of good."
Sen. George Voinovich, R-Ohio, said those who see hypocrisy "can legitimately raise that issue." But he defended his positions in 2003 and now, saying the economy is in worse shape and Americans are more anxious.
Sen. Olympia Snowe, R-Maine, said simply: "Dredging up history is not the way to move forward." She noted that she fought unsuccessfully to offset some of President George W. Bush's deep tax cuts at the time.
But for now, she said, "it's a question of what's in this package," which the Senate passed Thursday in a party-line vote. The Senate bill still must be reconciled with a House version.
The political situation is different now, Snowe said, because "we're in a tough climate and people are angry and frustrated."
Some conservatives have no patience with such explanations.
"As far as I am concerned, any Republican who voted for the Medicare drug benefit has no right to criticize anything the Democrats have done in terms of adding to the national debt," said Bruce Bartlett, an official in the administrations of Ronald Reagan and George H.W. Bush. He made his comments in a Forbes article titled "Republican Deficit Hypocrisy."
Bartlett said the 2003 Medicare expansion was "a pure giveaway" that cost more than this year's Senate or House health bills will cost. More important, he said, "the drug benefit had no dedicated financing, no offsets and no revenue-raisers. One hundred percent of the cost simply added to the federal budget deficit."
The pending health care bills in Congress, he noted, are projected to add nothing to the deficit over 10 years.
Other lawmakers who voted for the 2003 Medicare expansion include the Senate's top three Republican leaders, all sharp critics of the Obama-backed health care plans: Mitch McConnell of Kentucky, Jon Kyl of Arizona and Lamar Alexander of Tennessee. Eleven Democratic senators voted with them back then.
The 2003 vote in the House was even more divisive. It resulted in a nearly three-hour roll call in which GOP leaders put extraordinary pressure on colleagues to back the prescription drug addition to Medicare. In the end, 204 Republicans and 16 Democrats voted for the bill.
Democrats certainly have indulged in deficit spending over the years. They say they have been more responsible over the last two decades, however. Bill Clinton's administration was largely constrained by a pay-as-you-go law, requiring most tax cuts or program expansions to be offset elsewhere with tax increases and spending cuts.
Clinton ended his presidency with a budget surplus. But it soon was wiped out by a sagging economy, the Iraq war, GOP tax cuts and the lapsing of the pay-as-you-go restrictions.
Obama and many Democrats in Congress have vowed to restore those restrictions. But they waived them this year for programs, including heavy stimulus spending meant to pull the economy from the severe recession of 2008-09.
The 2010 deficit is expected to reach $1.5 trillion, and the accumulated federal debt now exceeds $12 trillion. When the Republican-led Congress passed the Medicare expansion in 2003, the deficit was $374 billion and projected to hit $525 billion the following year, in part because of the new prescription drug benefit for seniors.
Wow! These articles were actually rather fair and balanced! Obviously, neither was from IBD. I am sincerely impressed, Doc.
I love Orrin Hatch's quote that "six years ago it was standard practice not to pay for things." Could there be a more damning statement on this topic?
Once we have returned to the Clinton era top marginal rates, there will be little more to be gained from the top end. Thus - as followers of Bruce Bartlett will attest - we will soon be hearing about a VAT in a meaningful way. If it is introduced while our economy is growing, it will add a great deal of needed revenue to federal coffers with very little drag on the economy.
Additional taxes are coming - honest politicians from both sides of the aisle recognize that we need to to pay for things today - including all those things bought in the last eight years that were not paid for per "standard practice".
4 comments:
Decades or centuries from now, scholars will examine U.S. government documents from our time and notice something strange: In four consecutive years around the close of the 20th century, the federal budget was recorded as having a surplus. That hadn't happened since 1969, it hasn't happened since, and the way things are going, it may never happen again.
Recent years have seen the collapse of all federal fiscal discipline. At the end of the 2001 fiscal year, the national debt stood at $5.7 trillion. Today, it's over $12 trillion. With the population at roughly 300 million, your share is, oh, about $40,000. And you ain't seen nothin' yet. In the next decade, according to the Obama administration's own estimates, Washington will pile up another $9 trillion in deficits.
This has been a bipartisan achievement. When Republicans controlled Congress and the executive branch during the Bush administration, the surpluses gave way to deficits. Now that Democrats are in power, they are doing the same, in spades. Both have found political advantage in lavishing voters with benefits that someone else (future voters) will have to pay for.
Blameworthy as they are, the politicians didn't do it all by themselves. The recession of 2001 caused revenue to drop and spending to rise, as every downturn does. The much deeper recession that began in December 2007 (and may have ended last summer) had an even greater effect on both.
But on top of that, the Bush administration tried to revive growth with a $168 billion fiscal stimulus last year, as well as the $700 billion Troubled Asset Relief Program. Shortly after Barack Obama took office, he and Congress agreed on another stimulus, this one priced at $787 billion.
All these efforts were attempts to contain the fiscal fallout by averting an even worse contraction, and some of the outlays (especially TARP) undoubtedly were worth the cost. But they also provide cover for politicians to approve spending that stimulates nothing -- except the growth of government.
Worse, they accustom our elected officials to abandoning all restraint. The bigger the deficit and the debt, the more pointless it seems to muster the political courage to say "no."
That sort of fortitude will be especially precious in the coming years, as more and more members of the baby boom generation start collecting Social Security benefits and running up Medicare bills. The Peterson-Pew Commission on Budget Reform recently projected that in the next three decades, given current trends, federal spending will rise to 36 percent of gross domestic product, up from 25 percent today, while revenue will remain below 20 percent of GDP.
In time, the growing gap may cause investors at home and abroad to demand higher returns to justify the risk of something that is no longer unimaginable -- a default by the U.S. government. The other day, an official of China's central bank said pointedly, "The world does not have so much money to buy more U.S. Treasuries."
It's a crisis that grew gradually for years and is now growing rapidly. It's one that will force Americans to choose between getting our fiscal house in order or inviting an economic decline of the sort we associate with banana republics. And it's one that demands action sooner rather than later.
Right now, we're aboard the Titanic in a sea of red ink -- but we still have a chance to avoid the iceberg that looms straight ahead.
If we hit it, our options will get a lot worse.
WASHINGTON (AP) — Democrats are troubled by the inconsistency of Republican lawmakers who approved a major Medicare expansion six years ago that has added tens of billions of dollars to federal deficits, but oppose current health overhaul plans.
All current GOP senators, including the 24 who voted for the 2003 Medicare expansion, oppose the health care bill that's backed by President Barack Obama and most congressional Democrats.
The Democrats claim that their plan moving through Congress now will pay for itself with higher taxes and spending cuts and they cite the nonpartisan Congressional Budget Office for support.
By contrast, when Republicans controlled the House, Senate and White House in 2003, they overcame Democratic opposition to add a deficit-financed prescription drug benefit to Medicare. The program will cost a half-trillion dollars over 10 years, or more by some estimates.
With no new taxes or spending offsets accompanying the Medicare drug program, the cost has been added to the federal debt.
Some Republicans say they don't believe the CBO's projections that the health care overhaul will pay for itself. As for their newfound worries about big government health expansions, they essentially say: That was then, this is now.
Six years ago, "it was standard practice not to pay for things," said Sen. Orrin Hatch, R-Utah. "We were concerned about it, because it certainly added to the deficit, no question." His 2003 vote has been vindicated, Hatch said, because the prescription drug benefit "has done a lot of good."
Sen. George Voinovich, R-Ohio, said those who see hypocrisy "can legitimately raise that issue." But he defended his positions in 2003 and now, saying the economy is in worse shape and Americans are more anxious.
Sen. Olympia Snowe, R-Maine, said simply: "Dredging up history is not the way to move forward." She noted that she fought unsuccessfully to offset some of President George W. Bush's deep tax cuts at the time.
But for now, she said, "it's a question of what's in this package," which the Senate passed Thursday in a party-line vote. The Senate bill still must be reconciled with a House version.
The political situation is different now, Snowe said, because "we're in a tough climate and people are angry and frustrated."
Some conservatives have no patience with such explanations.
"As far as I am concerned, any Republican who voted for the Medicare drug benefit has no right to criticize anything the Democrats have done in terms of adding to the national debt," said Bruce Bartlett, an official in the administrations of Ronald Reagan and George H.W. Bush. He made his comments in a Forbes article titled "Republican Deficit Hypocrisy."
Bartlett said the 2003 Medicare expansion was "a pure giveaway" that cost more than this year's Senate or House health bills will cost. More important, he said, "the drug benefit had no dedicated financing, no offsets and no revenue-raisers. One hundred percent of the cost simply added to the federal budget deficit."
The pending health care bills in Congress, he noted, are projected to add nothing to the deficit over 10 years.
Other lawmakers who voted for the 2003 Medicare expansion include the Senate's top three Republican leaders, all sharp critics of the Obama-backed health care plans: Mitch McConnell of Kentucky, Jon Kyl of Arizona and Lamar Alexander of Tennessee. Eleven Democratic senators voted with them back then.
The 2003 vote in the House was even more divisive. It resulted in a nearly three-hour roll call in which GOP leaders put extraordinary pressure on colleagues to back the prescription drug addition to Medicare. In the end, 204 Republicans and 16 Democrats voted for the bill.
Democrats certainly have indulged in deficit spending over the years. They say they have been more responsible over the last two decades, however. Bill Clinton's administration was largely constrained by a pay-as-you-go law, requiring most tax cuts or program expansions to be offset elsewhere with tax increases and spending cuts.
Clinton ended his presidency with a budget surplus. But it soon was wiped out by a sagging economy, the Iraq war, GOP tax cuts and the lapsing of the pay-as-you-go restrictions.
Obama and many Democrats in Congress have vowed to restore those restrictions. But they waived them this year for programs, including heavy stimulus spending meant to pull the economy from the severe recession of 2008-09.
The 2010 deficit is expected to reach $1.5 trillion, and the accumulated federal debt now exceeds $12 trillion. When the Republican-led Congress passed the Medicare expansion in 2003, the deficit was $374 billion and projected to hit $525 billion the following year, in part because of the new prescription drug benefit for seniors.
Wow! These articles were actually rather fair and balanced! Obviously, neither was from IBD. I am sincerely impressed, Doc.
I love Orrin Hatch's quote that "six years ago it was standard practice not to pay for things." Could there be a more damning statement on this topic?
Once we have returned to the Clinton era top marginal rates, there will be little more to be gained from the top end. Thus - as followers of Bruce Bartlett will attest - we will soon be hearing about a VAT in a meaningful way. If it is introduced while our economy is growing, it will add a great deal of needed revenue to federal coffers with very little drag on the economy.
Additional taxes are coming - honest politicians from both sides of the aisle recognize that we need to to pay for things today - including all those things bought in the last eight years that were not paid for per "standard practice".
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