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Federal spending on autopilot

Federal spending trends

Many people know that a large portion of the federal budget is effectively out of lawmakers’ hands. Together Social Security, Medicare, Medicaid, and interest on the debt presently consume about 48 percent of federal spending. But if nothing changes, these programs will grow to consume 90 percent of federal spending by 2084.

This is the conclusion of Mercatus Center Senior Research Fellow Veronique de Rugy. Her analysis is based on data from the Congressional Budget Office, which makes forecasts in its Long-Term Budget and Economic Outlook. Her report is Defense and Non-Defense Spending Programs Squeezed as Autopilot Programs and Debt Interest Explode.

The key is this is a forecast if nothing changes. The spending on entitlement programs that drive this forecast are under federal legislators’ control. They can act to make changes over the long term, if they wish to.

But before last year’s elections, few politicians, even Republicans, were willing to confront the problem head-on. One of the few officeholders willing to do so is Wisconsin Congressman Paul Ryan, who is now chair of the House Budget Committee. His Roadmap for America’s future is a plan that recognizes the seriousness of the current situation, not only with Social Security, but in other areas of the federal budget.

His recommendations, specific as they are, cause consternation among some Republicans who would rather talk about problems in general terms rather than specifics. A recent Washington Post profile of Ryan referred to “… many Republican colleagues, who, even as they praise Ryan for his doggedness, privately consider the Roadmap a path to electoral disaster. Unlike most politicians of either party, he doesn’t speak generically about reducing spending, but he does acknowledge the very real cuts in popular programs that will be required to bring down the debt.”

Many of the new members of Congress are eager to take on the long-term problem illustrated in de Rugy’s chart. Let’s hope they have success.

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2 Comments

  1. Anonymous March 22, 2011

    The interest estimate is to low. Well let’s say it’s optimistic. If the bond rate double to 10% the interest on the national debt will be more than 1/3 the entire 2010 budget.

  2. tom beebe st louis March 23, 2011

    Here’s another road map, more comprehensive than Ryans, but then I’m not running for office. Please take a look and express yourself. I’d estimate the adult exemption at $15,000 and the tax rate at 50%.

    1. All persons residing in the U.S. shall come together in households for the purpose of reporting all income from any source, each item to be identified by payer’s and payee’s tax number, and for receipt of federal and state benefits. Members of a household need not be related, need not reside together, and a household may consist of as few as one person.
    2. Each year congress shall set by legislation a “minimum wage” and a “tax rate”.
    3. The following income shall not be subject to taxation:
    • An amount equal to a year’s earnings at the minimum wage rate, for each adult (age 20-65) member of the household, decreasing 10% per year to 50% at age 15, and increasing 10% per year to 150% at age 70.
    • All payments for what is classified as necessary health care for all members of the household including medical care, any pharmaceuticals prescribed by a recognized health care professional, vision and hearing aids, and membership fees for health-enhancing entities such as gyms or other exercise facilities. Health care insurance premiums may be deducted but not health care expense paid for by such insurance.
    • All educational expenses including day care for young children or legally incompetent persons, that portion of state and local taxes identified as spent on education, that portion of parochial school tuition, fees and other expenses identified as going for non-sectarian education, tuition, fees and educational materials for private school education at any level, and a per-diem allowance for students traveling more than 50 miles from primary residence for education.
    • All income saved into an identified account from which investments may be made. All withdrawals from this account for the benefit of any member of the household shall be reported as income to that member.
    4. The “tax rate” shall be applied to any income over and above the deductions listed above, regardless of amount.
    5. At the request, by legislation duly enacted by any municipality having greater than 100,000 inhabitants or any state, a surtax may be imposed on citizens of that municipality or state which shall be applied in a manner exactly as applied for the Federal tax.
    6. For households whose deductions exceed total income, the Federal Government shall make payment equal to the tax rate multiplied by the shortfall in income, as shall municipalities and states.
    7. There shall be no federal tax on corporations or other business entities.
    8. The Office of Management and Budget shall compute revenues to be expected using the newly set tax rate and minimum wage, applied to the previous year’s reported incomes. No expenses in excess of that amount may be authorized or made by the federal government without approval by 75% of each house of Congress.

    Your suggestions sincerely requested. E-mail them to tbeebe6535@yahoo.com.

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