Category Archives: spending out of control

Without Entitlement Reform, Federal Spending Could Consume One-Half of the Economy by 2056

Without Entitlement Reform, Federal Spending Could Consume One-Half of the Economy by 2056

Everyone wants to know more about the budget and here is some key information with a chart from the Heritage Foundation and a video from the Cato Institute.

The major entitlements—MedicareMedicaid, the Obamacare subsidy program, and Social Security— are on track to push spending to unsustainable levels. These programs must be reformed in order to improve the long-term budget outlook.

PERCENTAGE OF GDP

 
 
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Without Entitlement Reform, Federal Spending Could Consume One-Half of the Economy by 2056

Source: Congressional Budget Office (Alternative Fiscal Scenario).

Chart 33 of 42

In Depth

  • Policy Papers for Researchers

  • Technical Notes

    The charts in this book are based primarily on data available as of March 2011 from the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO). The charts using OMB data display the historical growth of the federal government to 2010 while the charts using CBO data display both historical and projected growth from as early as 1940 to 2084. Projections based on OMB data are taken from the White House Fiscal Year 2012 budget. The charts provide data on an annual basis except… Read More

  • Authors

    Emily GoffResearch Assistant
    Thomas A. Roe Institute for Economic Policy StudiesKathryn NixPolicy Analyst
    Center for Health Policy StudiesJohn FlemingSenior Data Graphics Editor

Senator Mark Pryor in favor of debt deal: “We must continue making tough decisions to reduce our debt”

Mark Pryor voted for the Debt Deal on August 2, 2011.  He said, “We must continue making tough decisions to reduce our debt. ” However, I don’t think cutting 22 billion out of projected increases in a 3.6 trillion budget is “making the tough decision to reduce our debt.”

Aug 01 2011

Statement by Senator Mark Pryor In Support of the Bipartisan Solution to Raise the Debt Ceiling

1. “The debate over raising the debt ceiling has been difficult…” After the vote he stated, “This has been an ugly process and an unnecessary process.”

Only because liberals in Congress are addicted to overspending like a drug addict is to his drugs. Have you ever heard a drug say he was going to kick the habit and then you invite him in and he steals your shirt to go buy more drugs!!!!

2. “…but essential to reduce the deficit…’

Are you kidding me. The projected debt will now be over 20 trillion in a few years instead of 23 trillion. Also once our credit rating is downgraded in a few months then all the projections will have to increased because we will be paying more interest. SENATOR PRYOR DID YOU THINK OF THAT WHEN YOU WERE PROTECTING ALL YOUR VOTERS SPECIAL INTERESTS THAT LIVE OFF OF GOVERNMENT PROGRAMS LIKE FOOD STAMPS (34 billion in 2007 but 72 billion today, 40 million people in the USA). We are reaching the point of no return.

3. “…avoid default…”

Why make a big deal about default when your refusal to cut spending has allowed us to rack up huge deficits and possibly get our credit rating downgraded in the next few months. Orrin Hatch makes it clear that the solution is “cut, cap and balance” and his speech on the floor this morning made that point.

4. “…and provide more certainty in our economy….”

THE ONLY CERTAINTY WE WILL HAVE IN OUR ECONOMY IS THAT WE WILL BE JOINING GREECE SOON!!!!!  

5. “We started with harmful, partisan plans and advanced to an agreement on a bipartisan, practical solution.”

The only partisan politics according to you is done by the Tea Party activists that are outside your office shouting: “DON’T TAKE US DOWN THE SAME PATH AS GREECE!!!!” By the way can you say that you disagree with their conclusion? You got the same numbers in front of you.  

6. “While not perfect, I plan to vote for this bill. It makes a nearly $1 trillion in spending cuts…”

You mean it will not raise the debt to 23 trillion in the next 1o years but it will take 12 years before the country goes bankrupt with that much debt.

7. “…and sets the stage for long-term savings…”

Let’s talk about longterm savings. It sounds like you care about our savings accounts. Babies born today have around  $45,000.00 they already owe as their part of the national debt.  In 10 years that “savings” will put the amount owed to new born babies around $70,000.00. That seems that the term “savings” is not a proper term to use in this case.

8. “It does so without dismantling safety net programs such as Social Security and Medicare, which would have been unacceptable to hundreds of thousands of Arkansans.”

The dismantling of these programs is coming if we do nothing. Did you know that the baby boomers will be completely on Social Security by 2029 and all three of these programs will beyond repair by then.  EVEN BILL CLINTON KNOWS THIS!!! 

9. Though it is a step in the right direction, we must continue making tough decisions to reduce our debt.

These are tough decisions but all you want to do is kick the can down the road.

10. “Arkansans have shared with me how truly frustrated they are about the gridlock in Washington, DC.  I agree.”

THE ONLY REASON YOU SAY THAT ARKANSANS ARE FRUSTRATED IS BECAUSE YOU SENSE THAT THIS STATE IS GOING CONSERVATIVE AND YOU AND MIKE ROSS ARE THE ONLY DEMOCRATS LEFT. IN 2012 YOU WILL BE THE ONLY ONE LEFT AND IN 2014 YOU WILL FACE THE FRUSTRATED ARKANSAS VOTERS YOURSELF.

11. “We need to work better together in order to put Americans back to work and earn back their trust.”

PUTTING AMERICANS BACK TO WORK DOES NOT MEAN ALLOWING UNEMPLOYED WORKERS TO STAY ON UNEMPLOYMENT FOR A 2 YEAR PERIOD OR BALOONING OUR FOODSTAMP ROLLS TO COVER 40 MILLION!!! SOUNDS LIKE YOU WOULD RATHER HAVE PEOPLE DEPENDENT ON YOUR GOVERNMENT STIMULUS AND GOVERNMENT PROGRAMS THAN WORKING IN THE PRIVATE SECTOR. OF COURSE, YOUR OBAMACARE IS NOT TOO POPULAR DOWN HERE EITHER. 

_______________________

Here are the real facts about where government spending is going:

Debt Deal: Spending in Perspective

Posted by Tad DeHaven

The following chart looks at total projected federal spending according to the Congressional Budget Office’s adjusted March baseline and its score of the debt deal. The chart only considers the reduction in outlays resulting from the deal’s cap on discretionary spending, which the CBO says will save $917 billion over the next ten years.  It does not consider the $1.2-$1.5 trillion in future “deficit reduction” that Dan Mitchell discusses here.

Total spending under debt deal

Excluding outlays for the wars in Afghanistan and Iraq, which are unlikely to materialize, total spending over the next ten years would be about $43 trillion under the discretionary spending caps instead of $44 trillion. In other words, even if Congress holds to the caps — and even if the “deficit reduction” targets established in the bill are achieved — the federal government’s spending binge will continue. If this is a “win” for the limited government crowd, I’d hate to see what the Beltway establishment would consider a “loss.”

Rand Paul against debt deal

John Brummett entitled his article “It is a crafty deal — good too,” Arkansas News Bureau, August 2, 2011, and that is because this deal DOES NOT INCLUDE ANY REAL CUTS TO THE BUDGET IN 2011. IN FACT, IT CUTS 22 BILLION OUT OF THE PROJECTED INCREASE IN THE 3.6 TRILLION BUDGET THAT WILL HAVE A 1.5 TRILLION DEFICIT!!!

Rand Paul hits a homerun with this open letter. That is why he was the number one name in the nation for yahoo search engine searches right now:

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WASHINGTON, D.C. – Today Sen. Rand Paul issued an open letter on the subject of the debt ceiling compromise facing the Senate. Below is that letter.

To paraphrase Jim DeMint: When you’re speeding toward the edge of a cliff, you don’t set the cruise control. You stop the car.

The current deal to raise the debt ceiling doesn’t stop us from going over the fiscal cliff. At best, it slows us from going over it at 80 mph to going over it at 60 mph.

This plan never balances. The President called for a “balanced approach.” But the American people are calling for a balanced budget.

This deal does nothing to fix the overreaches of both parties over the past few years: Obamacare, TARP, trillion-dollar wars, runaway entitlement spending. They are all cemented into place with this deal, and their legacy will be trillions of dollars in new debt.

The deal that is pending before us now:

· Adds at least $7 trillion to our debt over the next 10 years. The deal purports to “cut” $2.5 trillion, but the “cut” is from a baseline that adds $10 trillion to the debt. This deal, even if all targets are met and the Super Committee wields its mandate – the BEST case scenario is still $7 trillion more in debt over the next 10 years. That is sickening.

· Never, ever balances.

· The Super Committee’s mandate is to add $7 trillion in new debt. Let’s be clear: $2.5 trillion in reductions off a nearly $10 trillion,10-year debt is still $7 trillion in debt. The Super Committee limits the Constitutional check of the filibuster by expediting passage of bills with a simple majority. The Super Committee is not precluded from any issue therefore the filibuster could be rendered most. In addition, the plan harms the possible passage of a Balanced Budget Amendment. Since the goal is never to balance, having the BBA as a “trigger” ensures that the Committee will simply report its $7 trillion in new debt and never move to a BBA vote.

· Cuts too slowly. Even if you believe cutting $2.5 trillion out of $10 trillion is a good compromise, surely we can start cutting quickly, say $200 billion-$300 billion per year, right? Wrong. This plan so badly backloads the alleged savings that the cuts are simply meaningless. Why do we believe that the goal of $2.5 trillion over 10 years (that’s an average of $250 billion per year) will EVER be met if the first two years cuts are $20 billion and $50 billion. There is simply no path in this bill even to the meager savings they are alleging will take place.

Buried in the details of this bill there also appears to be the automatic Debt increase as proposed a few weeks ago. Second half of the debt ceiling is increased by President automatically and can only be stopped by two-thirds of Congress. This shifts the Constitutional check on borrowing from Congress to the President and makes it easier to raise the debt ceiling. This would cede debt ceiling to the President, and none of the triggers in this deal include withholding the second limit increase.

Debt agencies have clearly stated the type of so-called cuts envisioned in this plan result in our AAA bond rating being downgraded. Ironically then, the only way to avoid our debt from downgrading and the resulting economic problems that stem from that is for this bill or the resulting Super Committee to fail, so that a Balanced Budget Amendment can save our country.

This plan does not solve our problem. Not even close. I cannot abide the destruction of our economy, therefore I vigorously oppose this deal and I urge my colleagues and the American people to do the same.

Sincerely,

Rand Paul, M.D.

U.S. Senator

Even Eliminating Vital Defense Spending Completely Would Not Solve the Entitlement Spending Problem

Even Eliminating Vital Defense Spending Completely Would Not Solve the Entitlement Spending Problem

Everyone wants to know more about the budget and here is some key information with a chart from the Heritage Foundation and a video from the Cato Institute.

Long-term deficits are the result of unsustainable levels of spending on entitlement programs. Rather than tackle them directly, some would cut defense. But even if spending on this crucial national priority was eliminated completely, entitlements would continue to drive deficits to unmanageable levels.

PERCENTAGE OF GDP

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Even Eliminating Vital Defense Spending Completely Would Not Solve the Entitlement Spending Problem

Source: Heritage Foundation calculations based on Congressional Budget Office data.

Chart 39 of 42

In Depth

  • Technical Notes

    The charts in this book are based primarily on data available as of March 2011 from the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO). The charts using OMB data display the historical growth of the federal government to 2010 while the charts using CBO data display both historical and projected growth from as early as 1940 to 2084. Projections based on OMB data are taken from the White House Fiscal Year 2012 budget. The charts provide data on an annual basis except… Read More

  • Authors

    Emily GoffResearch Assistant
    Thomas A. Roe Institute for Economic Policy StudiesKathryn NixPolicy Analyst
    Center for Health Policy StudiesJohn FlemingSenior Data Graphics Editor

New Deal promises mythical cuts to be carried out in 2013

I am not too happy with the budget deal because I WANT TO SEE REAL CUTS. I knew when I heard President Obama say yesterday that there would be no cuts during this sensitive time that meant till after his Presidency was over. That means these are mythical cuts that are scheduled for 2013 and may never happen.

Michael Tanner  notes, “those cuts would not go into effect until 2013, after the next election.  Since the current Congress cannot bind future Congresses, it’s entirely possible – even likely – that those cuts will be rewritten, reduced, or done away with altogether.”

Michael Tanner sums up my views in his article, “A Deal, Not a Solution, August 1, 2011, Cato Institute:

The deal that President Obama and congressional leaders may well be the best deal that Republicans could get – and any deal that makes Paul Krugman this apoplectic can’t be all bad – but it should not be considered a solution to our fiscal problems.  

In the face of a $1.1 trillion budget deficit, a $14.3 trillion official debt, and a real indebtedness of more than $120 trillion, the deal would reduce the baseline increase in planned spending initially by about $1 trillion, or an average of roughly $100 billion per year – less than the federal government will borrow this month.   Moreover, the cuts are unspecific – apparently Congress still can’t find actual programs to eliminate – raising the specter that it will employ the same budgetary gimmicks as the Continuing Resolution last May, that promised $61 billion in cuts and delivered less than $8 billion.  Any cuts that do occur are simply reductions in baseline increases, not actual year-over-year reductions.  And most cuts are pushed far out into the future when they may or may not materialize.

The plan also creates a “”supercommittee – there’s an original idea – to propose an additional $1.2-1.7 trillion in spending cuts or tax increases, but few Washington observers expect it to be able to reach an agreement that could actually pass Congress.   Of course, in theory, if that happens, there would be automatic cuts of about $1.2 trillion, split equally between domestic programs and defense.   However, those cuts would not go into effect until 2013, after the next election.  Since the current Congress cannot bind future Congresses, it’s entirely possible – even likely – that those cuts will be rewritten, reduced, or done away with altogether.   Certainly there is no reason why we should count on them occurring.

The net result of this deal is that – if every penny of the proposed cuts actually occurs – our official national debt will rise to about $20 trillion by 2020.  That it otherwise would have reached $23 trillion is scant comfort.  With our country careening toward a fiscal cliff, Congress has chosen to tap on the breaks, not change direction. 

More troubling, the deal fails to deal with entitlement reform.   It is Medicare, Medicaid and Social Security that are driving this country towards insolvency, but this plan does not include any structural reform of these programs.   They are exempt from the first round of cuts, and the level of cuts that can be proposed by the supercommittee are far too small to encompass anything like the Medicare reforms that Paul Ryan proposed early this year.   And both Social Security and Medicaid are exempt from the across-the-board cuts that kick in if the committee’s cuts do not occur.  In that case Medicare would be trimmed, but only in terms of further reductions in reimbursements to providers.

Certainly, this deal could have been worse.  There are no tax increases (yet).  There are at least theoretical cuts in spending.   We’ve moved a long way from when President Obama proposed an increase in spending as part of his 2012 budget.  But no one should pretend that we’ve put our fiscal house in order.

 

Arthur Brooks on Debt Ceiling

I got a lot of useful information out of this article from the Wall Street Wall Street Journal  The Debt Ceiling ‘Skirmish  

 

MONDAY, JULY 25, 2011

The Debt Ceiling ‘Skirmish’

 
 
We couldn’t help but be impressed with a column by Arthur C. Brooks, President of the American Enterprise Institute which is appearing in the Wall Street Journal.   The column, The Debt Ceiling and the Pursuit of Happiness, probably won’t appear in the local daily but it sure spells out the reality of the current fight and what is at stake.   With that said we suggest the following is mandatory reading for our conservative and liberal friends:
_________________________

“The battle over the debt ceiling is only the latest skirmish in what promises to be an ongoing, exhausting war over budget issues. Americans can be forgiven for seeing the whole business as petty, selfish and tiresome. Conservatives in particular are beginning to worry that public patience will wear thin over their insistence that our nation’s government-spending problem must be remedied through spending cuts, not by raising more revenues.

But before they succumb to too much caution, budget reformers need to remember three things. First, this is not a political fight between Republicans and Democrats; it is a fight against 50-year trends toward statism. Second, it is a moral fight, not an economic one. Third, this is not a fight that anyone can win in the 15 months from now to the presidential election. It will take hard work for at least a decade.Consider a few facts. The Bureau of Economic Analysis tells us that total government spending at all levels has risen to 37% of gross domestic product today from 27% in 1960—and is set to reach 50% by 2038.

The Tax Foundation reports that between 1986 and 2008, the share of federal income taxes paid by the top 5% of earners has risen to 59% from 43%. Between 1986 and 2009, the percentage of Americans who pay zero or negative federal income taxes has increased to 51% from 18.5%. And all this is accompanied by an increase in our national debt to 100% of GDP today from 42% in 1980.

Where will it all lead? Some despairing souls have concluded there are really only two scenarios. In one, we finally hit a tipping point where so few people actually pay for their share of the growing government that a majority become completely invested in the social welfare state, which stabilizes at some very high level of taxation and government social spending. (Think Sweden.)

In the other scenario, our welfare state slowly collapses under its weight, and we get some kind of permanent austerity after the rest of the world finally comprehends the depth of our national spending disorder and stops lending us money at low interest rates. (Think Greece.)

In other words: Heads, the statists win; tails, we all lose.

Anyone who seeks to provide serious national political leadership today—those elected in 2010 or who seek national office in 2012—owe Americans a plan to escape having to make this choice. We need tectonic changes, not minor fiddling.

Rep. Paul Ryan’s (R., Wis.) budget plan is the kind of model necessary. But structural change will only succeed if it’s accompanied by a moral argument—an unabashed cultural defense of the free enterprise system that helps Americans remember why they love their country and its exceptional culture.

America’s Founders knew the importance of moral language, which is why they asserted our unalienable right to the pursuit of happiness, not to the possession of property. Similarly, Adam Smith, the father of free-market economics, had a philosophy that transcended the mere wealth of nations. His greatest book was “The Theory of Moral Sentiments,” a defense of a culture that could support true freedom and provide the greatest life satisfaction.

Yet today, it is progressives, not free marketeers, who use the language of morality. President Obama was not elected because of his plans about the taxation of repatriated profits, or even his ambition to reform health care. He was elected largely on the basis of language about hope and change, and a “fairer” America.

The irony is that statists have a more materialistic philosophy than free-enterprise advocates. Progressive solutions to cultural problems always involve the tools of income redistribution, and call it “social justice.”

Free-enterprise advocates, on the other hand, speak privately about freedom and opportunity for everybody—including the poor. Most support a limited safety net, but also believe that succeeding on our merits, doing something meaningful, and having responsibility for our own affairs are what give us the best life. Sadly, in public, they always seem stuck in the language of economic efficiency.

The result is that year after year we slip further down the redistributionist road, dissatisfied with the growing welfare state, but with no morally satisfying arguments to make a change that entails any personal sacrifice.

Examples are all around us. It is hard to find anyone who likes our nation’s current health-care policies. But do you seriously expect grandma to sit idly by and let Republicans experiment with her Medicare coverage so her great-grandchildren can get better treatment for carried interest? Not a chance.

If reformers want Americans to embrace real change, every policy proposal must be framed in terms of self-realization, meritocratic fairness and the promise of a better future. Why do we want to lower taxes for entrepreneurs? Because we believe in earned success. Why do we care about economic growth? To make individual opportunity possible, not simply to increase wealth. Why do we need entitlement reform? Because it is wrong to steal from our children.

History shows that big moral struggles can be won, but only when they are seen as decade-long fights and not just as a way to prevail in the next election. Welfare reform was first proposed in 1984 and regarded popularly as a nonstarter. Twelve years of hard work by scholars at my own institution and others helped make it a mainstream idea (signed into law by a Democratic president) and perhaps the best policy for helping the poor to escape poverty in our nation’s history. Political consultants would have abandoned welfare reform as unworkably audacious and politically suicidal. Real leaders understood that its moral importance transcended short-term politics.

No one deserves our political support today unless he or she is willing to work for as long as it takes to win the moral fight to steer our nation back toward enterprise and self-governance. This fight will not be easy or politically safe. But it will be a happy one: to share the values that make us proud to be Americans.”

Mr. Brooks is president of the American Enterprise Institute and author of “The Battle: How the Fight Between Free Enterprise and Big Government Will Shape America’s Future” (Basic Books, 2010).

Hiking Taxes to Pay for Entitlements Would Require Doubling Tax Rates

Hiking Taxes to Pay for Entitlements Would Require Doubling Tax Rates

Everyone wants to know more about the budget and here is some key information with a chart from the Heritage Foundation and a video from the Cato Institute.

The cost of MedicareMedicaid, and Social Security is rising substantially. Paying for this spending solely through federal income tax increases would require more than a twofold increase of current tax rates, even for the lowest tax bracket.

MARGINAL INCOME TAX RATES

 
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Hiking Taxes to Pay for Entitlements Would Require Doubling Tax Rates

Source: Congressional Budget Office.

Chart 35 of 42

In Depth

  • Technical Notes

    The charts in this book are based primarily on data available as of March 2011 from the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO). The charts using OMB data display the historical growth of the federal government to 2010 while the charts using CBO data display both historical and projected growth from as early as 1940 to 2084. Projections based on OMB data are taken from the White House Fiscal Year 2012 budget. The charts provide data on an annual basis except… Read More

  • Authors

    Emily GoffResearch Assistant
    Thomas A. Roe Institute for Economic Policy StudiesKathryn NixPolicy Analyst
    Center for Health Policy StudiesJohn FlemingSenior Data Graphics Editor

Medicare Spending Is Adding to Future Deficits Faster Than Other Program Spending

Medicare Spending Is Adding to Future Deficits Faster Than Other Program Spending

Everyone wants to know more about the budget and here is some key information with a chart from the Heritage Foundation and a video from the Cato Institute.

Entitlement spending is the main cause of long-term runaway deficits. While reform must address spending within each program, Medicare is the largest driver due to the effects of an aging population and rising health care costs.

PERCENTAGE OF GDP

 
 
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Medicare Spending Is Adding to Future Deficits Faster Than Other Program Spending

Source: Congressional Budget Office (Alternative Fiscal Scenario).

Chart 32 of 42

In Depth

  • Technical Notes

    The charts in this book are based primarily on data available as of March 2011 from the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO). The charts using OMB data display the historical growth of the federal government to 2010 while the charts using CBO data display both historical and projected growth from as early as 1940 to 2084. Projections based on OMB data are taken from the White House Fiscal Year 2012 budget. The charts provide data on an annual basis except… Read More

  • Authors

    Emily GoffResearch Assistant
    Thomas A. Roe Institute for Economic Policy StudiesKathryn NixPolicy Analyst
    Center for Health Policy StudiesJohn FlemingSenior Data Graphics Editor

Brummett: Tea Party is “right-wing extremists” and are causing debt ceiling crisis

Ernest Istook at the Saint Paul Tea Party Rally 4/16/2011 Part 1

John Brummett in his article “Taking a stand  upside the face,” July 30, 2011, Arkansas News Bureau, asserted:

The problem is that hard-right, tea party-inspired Republicans ought to be marginalized in the debate, paid no attention, while mainstream Republicans and Democrats fashion a practical compromise of strategic spending cuts and routine agreement to pay our debts, which ought to go without saying. But mainstream Republicans have been cowed by these right-wing extremists, leading to a potential debt default and likely lowering of our country’s credit rating. This could well cause harm to all of us economically. We are left only with the option to get behind the bipartisan last-gasp efforts of the Senate leaders, Harry Reid and Mitch McConnell, while tea party types get invited to go take the proverbial flying leap.

_______________________________

What is the root of the problem? Is it the Tea Party right wing Republicans? Or is it the uncontrolled spending? Why can’t we eliminate the Dept of Education and cut out the food stamp program that has doubled in the last 3 or 4 years?

My response is very simple. I saw a video clip by Reason TV on the debt ceiling and it showed a husband and wife at the dinner table looking over a pile of credit card bills. She  tells her husband that they are 14 trillion in debt and his response is, “We will get more credit cards!!” Her expression is classic when he says this. It is also very humorous when he walks into the next room and tells his one year old son who is now standing, “I need you to grow and get a job.” His son’s puzzled look is also very funny.

Alert icon

 
 Here are some thoughts from Reason TV below followed by an article on food stamps.
 

Uploaded by on Mar 1, 2011

[Editor’s Note: Go to http://reason.com/blog/2011/03/01/raising-the-debt-limit-it-just for details, charts, and links]

Some say the world will end in fire and some say in ice.

But in Washington, a lot of people say it will end if we don’t continually raise the debt ceiling.

The statutory debt limit, or debt ceiling, represents the maximum amount of debt the federal government can carry at any given time. The limit was created in 1917 so that Congress wouldn’t have to vote every time the government wanted to increase the amount of debt (which was becoming a more and more frequent occasion). Since then, the Treasury Department has had the authority to issue new debt up to whatever the limit is to fund government needs. Last year, the limit was raised to $14.3 trillion, an amount that is about to reached.

As it approaches, Federal Reserve Chairman Ben Bernanke has said failing to raise the limit would likely mean the U.S. would default on its debt, creating “real chaos” in place of the fake chaos that’s out there now. Treasury Secretary Timothy Geithner has said that failing to raise the limit would be “deeply irresponsible” and and Austan Goolsbee, President Obama’s chief economic adviser, has said that not raising the limit would create “the first default in history caused purely by insanity.”

Eh, maybe.

As Reason columnist and Mercatus Center economist Veronique de Rugy, has pointed out, we’ve maxed out the nation’s credit card in the past without such dire results. In the mid-1980s, the mid-1990s, and in 2002, for instance, the debt limit wasn’t raised for months at a time and the government got along just swell. The government has a big bag of tools it can use, ranging from playing around with the amount of spending that is liable to the limit to prioritizing interest and debt payments over other outlays. Interest on the debt for this year is projected to be about $225 billion and government revenue is expected to be around $2.2 trillion, so the government can easily pay the vig and avoid defaulting.

What it shouldn’t do is simply keep piling on the debt. The limit has been raised no fewer than 10 times in the past decade. When Republicans ran the White House and the Congress, they voted overwhelmingly to charge it and Democrats, including Sen. Obama, hollered bloody murder. In 2006, he called the need to yet again increase the debt limit “a sign of leadership failure.” Now that Dems run the show, the GOP has suddenly rediscovered its inner cheapskate.

So it goes.

The boldest plan to rein in spending and debt comes from newcomer Sen. Mike Lee (R-Utah), a Tea Party favorite who dispatched Republican incumbent Bob Bennett in the primaries before coasting to victory in the general election last fall. Lee has vowed to block passage of a debt-limit increase unless Congress signs on to his balanced-budget amendment which would cap annual federal spending at 18 percent of Gross Domestic Product (GDP). The amendment would require a super-majority of two-thirds in the Senate and House of Representatives. Lee’s bill is competing with another Republican proposal from Sens. Hatch (Utah) and Cornyn (Texas) to cap spending at 20 percent of GDP. The Hatch-Cornyn bill has weaker rules on its higher cap as well.

In 2010, spending came to about 24 percent of GDP and it’s expected to come in around 25 percent of GDP in 2011. Since 1950, total federal revenues have averaged 17.8 percent and have reached higher than 20 percent exactly once. Spending over the same time has averaged just under 20 percent.

Whether Lee’s proposal carries the day — and there’s a strong case that its passage would do more to calm financial markets than simply bumping up the federal credit line — neither the Democratic nor the Republican leadership has yet to advance a serious proposal to cut spending and reduce outstanding debt. Indeed, both the president’s budget proposal for 2012 and the generally non-existent Republican response are not only deeply irresponsible but clear signs of insanity.

That ain’t right. But it does help explain why a government that has increased spending over 62 percent in real dollars can no longer get by on a $14 trillion debt ceiling.

For more info, go to http://reason.com/blog/2011/03/01/raising-the-debt-limit-it-just

Video written and produced by Austin Bragg. Article text by Nick Gillespie.

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Food Stamp Price Tag Rising

 

Food stamp usage is at record levels according to the New York Times, with one in eight Americans now receiving benefits. There are several reasons for the upswing, including expanded eligibility in the 2000s and the severe economic downturn. The following chart shows the dramatic rise in spending for the Supplemental Nutrition Assistance Program, known as the Food Stamp program until 2008 when Congress changed its name to sound more palatable.  

  

Most Americans think that we should aid those in real need, but individuals should do so voluntarily without resorting to forced government transfers.  
 
The Times gives three examples of people who recently started receiving food aid. Each offers some food for thought.
 
The first is a 45 year-old Harlem widow with an annual income of $15,000. A food bank had encouraged her to apply for the benefits:
A big woman with a broad smile, Ms. Bostick-Thomas swept into the group’s office a few days later, talking up her daughters’ college degrees and bemoaning the cost of oxtail meat. “I’m not saying I go hungry,” Ms. Bostick-Thomas said. “But I can’t always eat what I want.” The worker projected a benefit of $147 a month. “That’s going to help!” she said. “I wouldn’t have gone and applied on my own.”
I don’t know this woman’s exact circumstances, and there’s no reason to doubt she needs assistance. But aren’t her college-educated daughters in a position to help their mother? Government welfare undermines the traditional role the family played in mutual assistance.
 
Here’s the second example: 
Juan Diego Castro, 24, is a college graduate and Americorps volunteer whose immigrant parents warned him “not to be a burden on this country.” He has a monthly stipend of about $2,500 and initially thought food stamps should go to needier people, like the tenants he organizes. “My concern was if I’m taking food stamps and I have a job, is it morally correct?” he said.
But federal law eases eligibility for Americorps members, and a food bank worker urged him and fellow volunteers to apply, arguing that there was enough aid to go around and that use would demonstrate continuing need. “That meeting definitely turned us around,” Mr. Castro said.
This fellow’s annualized monthly stipend is more than I made in my first job in Washington. And for Mr. Castro, who was warned not to be a burden on this country, he ought to be told that the federal Americorps program is exactly that. But more disconcerting is the fact that the food bank worker urged him and his colleagues to go the dole in order to advertise it.
 
This anecdote illustrates Michael Tanner’s argument that government poverty programs serve vested interests:
Among the non-poor with a vital interest in anti-poverty programs are social workers and government employees who administer the programs. Thus, anti-poverty programs are usually more concerned with protecting the prerogatives of the bureaucracy than with fighting poverty.
The last example from the Times is a Columbian immigrant who missed three months of work as a janitor because she fell and had to have knee surgery:
Last November, she limped into a storefront church in Queens, where a food bank worker was taking applications beside the pews.
About her lost wages, she struck a stoic pose, saying her san cocho — Colombian soup — had less meat and more plantains. But her composure cracked when she talked of the effect on her 10-year-old daughter. “My refrigerator is empty,” Ms. Catano said.
Last month, Ms. Catano was back at work, with a benefit of $170 a month and no qualms about joining 38 million Americans eating with government aid. “I had the feeling that working people were not eligible,” she said. “But then they told me, ‘No, no, the program has improved.’”
This is precisely the sort of person that is deserving of charity. But the federal government isn’t a charity; it is a forced transfer machine. The less fortunate, and society as a whole, would be better off if the taxes paid to support inefficient, counterproductive government programs were instead left in the hands of supportive individuals and organizations. 

See this essay for more on government food subsidies.

Rising Deficits Drive U.S. Debt Limit Higher, Faster

Rising Deficits Drive U.S. Debt Limit Higher, Faster

Everyone wants to know more about the budget and here is some key information with a chart from the Heritage Foundation and a video from the Cato Institute.

Congress first placed a statutory limit on total federal debt in 1917, in the Second Liberty Bond Act. Since 1962, Congress has altered the debt limit through 74 separate measures, raising it 10 times since 2001. Since 1990, the debt limit has been raised a total of $10.1 trillion, but nearly half of that increase has occurred since September 2007.

U.S. DEBT LIMIT

 
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Rising Deficits Drive U.S. Debt Limit Higher, Faster

Source: Congressional Research Service and White House Office of Management and Budget (Table 7.3, Historical Tables).

Chart 26 of 42

In Depth

  • Policy Papers for Researchers

  • Technical Notes

    The charts in this book are based primarily on data available as of March 2011 from the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO). The charts using OMB data display the historical growth of the federal government to 2010 while the charts using CBO data display both historical and projected growth from as early as 1940 to 2084. Projections based on OMB data are taken from the White House Fiscal Year 2012 budget. The charts provide data on an annual basis except… Read More

  • Authors

    Emily GoffResearch Assistant
    Thomas A. Roe Institute for Economic Policy StudiesKathryn NixPolicy Analyst
    Center for Health Policy StudiesJohn FlemingSenior Data Graphics Editor