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The enormity of the 10-year gap between federal spending and revenues

Writing for the New Republic, William Galston provides a helpful but incredibly depressing look at the 10-year projections for taxes, spending and debt. He frames it as an illustration of the problem Republicans face as they try to rebrand their party for future marking purposes. And it works. But I hope he or someone soon will do a similar analysis of the implications of these numbers liberal deficit hawks as well.

If all goes according to the Congressional Budget Office 10-year projection, the deficit in fiscal year 2023 will be a mere $978 billion. (We once thought that was a big number.) The current meaning of life for Republicans is to lay out a 10-year plan that leads to a balanced budget without any further tax increases. If you had 10-years to phase in $978 billion in savings, you might be able to do it without the proverbial throwing-grandma-off-a-cliff. I don't know.

But as Galston points out, CBO is required to base its projections on "current law." Current law includes a great many things that aren't going to happen. Of the things that are scheduled to happen under current, Galston writes:

"Three are crucial: the budget cuts determined by sequestration will go into effect and remain in place for ten years; the reimbursement rate for Medicare providers will be allowed to fall steeply for nine years, starting on October 1; and the many temporary tax provisions extended for a year under the fiscal cliff agreement will be allowed to expire en masse at the end of the current fiscal year. If these three things don’t happen, the cumulative ten-year deficit would rise by more than $2.5 trillion, and the deficit in 2023 would be $1.307 trillion—about $300 billion more than under the baseline."

Galston argues that any mathematically-credible plan to balance the budget 10 years out without raising taxes would contain cuts that would utterly demolish the hoped-for Republican rebranding.

Galston doesn't do a Democratic version of the plan that would deal with this scary future. Maybe Pres. Obama will lay it out tonight in his State of the Union. But don't count on it. 

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Comments (7)

Time-bomb !

What is truly horrifying is the chart at this link:

http://www.thefiscaltimes.com/Columns/2013/01/25/~/media/Images/Inline/2...

Which is chart 5 from this Treasury report:

http://www.fms.treas.gov/fr/12frusg/12frusg.pdf

It's a rare budget chart that show the cost of interest payments for the debt in relation to the total budget.

Take a look at the light blue line that rises above the various non-interest spending categories in the budget. That is the line of the the budget when interest payments on the debt are included--as they necessarily will be.

In the decade of 2020 to 2030, just 10 years from now, interest payments will consume more money than Medicare, or more than defense, and certainly more than all non-defense discretionary spending.

This is truly a "hair on fire" chart.

Who knows what interest rate the thin blue line is based on--but higher interest rates would surely increase the slope of the line.

There is no doubt that the deficit and debt monsters must be tamed

I wonder

if these projections are based on two conflicting assumptions:
That historically typical interest rates will prevail (i.e., the federal government will pay 4% for money rather than the 1% that it is paying now),
and that
current revenues will prevail, rather than those of pre recession times (in other words, assuming that the current recession will continue indefinitely and that the federal government will not be able to retire debt).

Revenue Levels

Paul, revenue levels are back to where they were before the recession started. The nearly trillion dollars in debt is due to greatly increased spending.
I don't know how they figure interest rates, but I'd think that any long term projection should include more typical rates rather than historically low ones. I'm just guessing on that though. If any one with actual knowledge knows, I'd be curious to hear too.

In absolute terms yes

However, we would have to role back the population and adjust for demographic shifts (aging).
And of course in 2007 revenues were already depressed by tax cuts.
A good part of the increased spending is due to the effects of the recession (unemployment/underemployment and other social support services).
And we're still getting out from under the spending due to two wars started in the '90's (we'll never get completely out -- we'll be paying for the costs of injured veterans for the next half century).

We could, of course

return to the economic policies of more rational times, when tax rates were higher and business and the economy flourished.

Tell You What

In exchange for going back to higher tax times, can we also go back to the lower spending? We'll go back to the Clinton rates in full, and also readjust the budget back to those spending levels? Does that sound like a fair deal?

As usual, life isn't that simple.

If we make appropriate adjustments for demographic changes, we could lower spending relative to GDP from where it is now. First we will have to improve the employment situation, though. We need some incentives for businesses to increase employment here; not in Asia (even China is outsourcing now). Un/under employment both decreases revenue and increases spending. The latest news on health costs (the other driver of spending) IS encouraging.
And note that you refer to a relative change in revenues (tax -rates-) but an absolute change in spending. As you state it, you're asking for something for nothing.