February 6, 2006, Guns and Gutter
The President's budget, weighing in at an absurd two and three quarter trillion dollars, was released, and as predicted, features more war spending, less social spending (sort of) and more tax cuts (yee ha!)
Nothing terribly unexpected: the President is running to his base, who, by and large, don't like social programs that benefit anyone earning less than $200,000 per year, like defense spending, and love tax cuts... so that's what it is. With bogus deficit projections, contending that the deficit is somehow less than the unbelievable half a trillion dollars per annum that it actually is.
As I constantly do, I will reiterate my thumbnail "federal budget" lesson. The federal government budget is roughly divided into five more or less equal slices of around half a trillion dollars each (you read that correctly). These five components are: (1) interest on the national debt (legally inviolate), (2) defense/homeland security and (3) social security transfer payments to the elderly and disabled (politically inviolate), (4) Medicare/Medicaid, and (5) everything else, from Agriculture to Zimbabwean aid (if we gave any!)
So... a half trillion dollar deficit means that roughly 20% of the government is not being paid for out of current tax revenues; which means that interest next year will go up, because it has to. Which means that next year, either taxes must go up, other spending must go down, or the following year's interest must go up again. Nothing really magic about it, and contrary to what the Administration says, its tax cuts haven't been particularly stimulative (certainly not in the sense of job creation or enhanced national saving and investment)... they have simply been redistributional, as they are designed to be.
As it is now, our deficits consume something like 87% of the world's cumulative savings (a lot of which is in China and Japan). Which means that the only actual way ultimately to control the deficit in any kind of predictable way is... taxation... or spending cuts (or put another way, the entire planet is actually running out of the surplus capital needed to support our deficit.). Of course, spending cuts to social security will be... politically bad. I can solve the social security future actuarial problem by mandating that the minimum wage and "cap out" on contributions be indexed to cost of living adjustments in social security transfer payments but... that would be too easy and too painless to actually pull off. So just forget that. Also-- cuts to social security will probably lead to much penury among the elderly and disabled. Medicare/Medicaid cuts will... result in sick people... likely dying in the streets (at great social cost; naturally, these and general spending cuts are the cuts that are coming). Cuts in interest are illegal and will cause a default, ending the game. Cuts in general spending are plausible, but its only 20%-- so, even much vaunted "5% across the board cuts in discretionary spending" would only reduce the actual budget a mere 1% and the deficit by only... 5% (that's right-- the deficit alone represents almost as much as a single entire slice of the federal government-- interest, discretionary spending, Medicaid/Medicare, Social Security transfer payments, or defense/homeland security.)
Cuts in "defense" spending make the most economic sense, of course: they put the least back into the economy, and we outspend the rest of the world on defense at a time when we have no real enemies. Ah, but you say, the terrorists are everywhere preparing and plotting to murder all of our children the second we vote Democratic. Yes, yes... except it's not true, and it ultimately undermines our national security if we can't pay for anything and have to throw ourselves on the tender mercies of China, a country, ironically, that we spend hundreds of billions of dollars a year-- and yes, it's that much-- preparing to fight a hypothetical war against. We could probably cut defense spending by, oh, half, and barely notice it. Seriously. Why is it that it is always liberals who are accused of trying to solve all problems by throwing money at them? The fact is, it hasn't been shown that the answer to effectively combatting terrorism is the sort of super high tech big ticket items (aircraft carriers, stealth bombers, anti-ballistic missle systems, etc.) that we are told we need to fight terrorism. We could use, for example, people who can read and understand Arabic for example... by comparison, much cheaper. Of course, we tend not to concern ourselves with the human element (too inexpensive; and no kickbacks-- which, after all, is the real purpose of a $500 billion annual defense budget in a world where we have no real enemies to speak of.) Hence, the "defense" component is a big shell game, of course, and as politically inconceivable as cutting social security (maybe more so-- as Democrats would never consent to cut defense, lest they be perceived as soft on terror, whereas the Alito fillibuster fiasco teaches us that Dems may well roll on anything else).
Since none of the spending is either politically viable to cut, or will matter much at the levels that can be cut, the only other part of the equation that matters is taxation. Of course, the country did swimmingly at tax levels under Clinton that would more or less end the deficit immediately, and probably pay down a lot of the folly of the last 5 years... but those are doctrinally unacceptable to the Party of LeGree and Warbucks.
And so... I give you... the federal budget. You can keep it...
Comments
If you keep writing about the budget and the deficit in an intelligent way I'm going to have to stop listening to you. I am putting my fingers in my ears and yelling "NANANANANA" very loud now because I can't bear to hear sensible information about important issues. I am, of course, an American taxpayer.
Posted by DBK at February 9, 2006 9:37 AM