Four spending myths keeping U.S. from recovery
The dome of the U.S. Capitol is seen in Washington Jan. 4, 2011. / AFP/Getty Images
(TomDispatch) We're at the edge of the cliff of deficit disaster! National security spending is being, or will soon be, slashed to the bone! Obamacare will sink the ship of state!
Each of these claims has grabbed national attention in a big way, sucking up years' worth of precious airtime. That's a serious bummer, since each of them is a spending myth of the first order. Let's pop them, one by one, and move on to the truly urgent business of a nation that is indeed on the edge.
Spending Myth 1: Today's deficits have taken us to a historically unprecedented, economically catastrophic place.
This myth has had the effect of binding the hands of elected officials and policymakers at every level of government. It has also emboldened those who claim that we must cut government spending as quickly, as radically, as deeply as possible.
In fact, we've been here before. In 2009, the federal budget deficit was a whopping 10.1% of the American economy and back in 1943, in the midst of World War II, it was three times that -- 30.3%. This fiscal year the deficit will total around 7.6%. Yes, that is big. But in the Congressional Budget Office's grimmest projections (PDF), that figure will fall to 6.3% next year, and 5.8% in fiscal 2014. In 1983, under President Reagan, the deficit hit 6% (spreadsheet) of the economy, and by 1998, that had turned into a surplus. So, while projected deficits remain large, they're neither historically unprecedented, nor insurmountable.
More important still, the size of the deficit is no sign that lawmakers should make immediate deep cuts in spending. In fact, history tells us that such reductions are guaranteed to harm, if not cripple, an economy still teetering at the edge of recession.
A number of leading economists are now busy explaining why the deficit this year actually ought to be a lot larger, not smaller; why there should be more government spending, including aid to state and local governments, which would create new jobs and prevent layoffs in areas like education and law enforcement. Such efforts, working in tandem with slow but positive job growth in the private sector, might indeed mean genuine recovery. Government budget cuts, on the other hand, offset private-sector gains with the huge and depressing effect of public-sector layoffs, and have damaging ripple effects on the rest of the economy as well.
When the economy is healthier, a host of promising options are at hand for lawmakers who want to narrow the gap between spending and tax revenue. For example, loopholes and deductions in the tax code that hand enormous subsidies to wealthy Americans and corporations will cost the Treasury around $1.3 trillion in lost revenue this year alone -- more, that is, than the entire budget deficit. Closing some of them would make great strides toward significant deficit reductions.
Alarmingly, the deficit-reduction fever that's resulted from this first spending myth has led many Americans to throw their support behind de-investment in domestic priorities like education, research (PDF), and infrastructure -- cuts that threaten to undo generations of progress. This is in part the result of myth number two.
Spending Myth 2: Military and other national security spending have already taken their lumps and future budget-cutting efforts will have to take aim at domestic programs instead.
The very idea that military spending has already been deeply cut in service to deficit reduction is not only false, but in the realm of fantasy. The real story: despite headlines about "slashed" Pentagon spending and "doomsday" plans for more, no actual cuts to the defense budget have yet taken place. In fact, since 2001, to quote former Defense Secretary Robert M. Gates, defense spending has grown like a "gusher." The Department of Defense base budget nearly doubled in the space of a decade. Now, the Pentagon is likely to face an exceedingly modest 2.5% budget cut in fiscal 2013, "paring" its budget down to a mere $525 billion -- with possible additional cuts shaving off another $55 billion next year if Congress allows the Budget Control Act, a.k.a. "sequestration," to take effect.
But don't hold your breath waiting for that to happen. It's likely that lawmakers will, at the last moment, come to an agreement to cancel those extra cuts. In other words, the notion that our military, which has been experiencing financial boom times even in tough times, has felt significant deficit-slashing pain -- or has even been cut at all -- is the Pentagon equivalent of a unicorn.
What this does mean, however, is that lawmakers heading down the budget-cutting path can find plenty of savings in the enormous defense and national security budgets. Moreover, cuts there would be less harmful to the economy than reductions in domestic spending.
Mattea Kramer, a TomDispatch regular, is senior research analyst at the National Priorities Project and lead author of the new book "A People's Guide to the Federal Budget." This piece originally appeared on TomDispatch. The opinions expressed in this commentary are solely those of the author.
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Do the math...
Someone has to pay for government spending. Where does the money come from for the huge deficits?
Americans lost 40% of their net worth in the last few years. Where did it magically disappear to?
Put 2 and 2 together--our wealth is disappearing down the black hole of government spending.
Myth #1 - Even Senator Obama saw that spending by the Federal Government was unsustainable in 2006 when he voted against raising the debt ceiling and citing these words........"The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the U.S. Government can't pay its own bills." And 'Increasing America's debt weakens us domestically and internationally. Leadership means that "the buck stops here."' Seems we can have our cake and eat it too......just depends who is cutting the cake.
Myth #2 - Pretty much agree that Defense spending can be greatly reduced....but article is muddling over the fact that both parties embrace large defense spending when is suits their purposes.....and this purpose is often not for the defense of the nation but rather employers in their areas. For instance, research how it took over 3.5 billion dollars before they could finally end funding of the second engine option for F35 fighter.......the Air Force did not want this funded or need the second engine........but both Dems and Repubs both argued to retain this funding for years. Furthermore, if you research you will see that funding has been restored previously under the 'budgeting process' so whether this one single example of poor government has finally stopped is debatable.
Myth #3 and Myth #4 - The biggest myth here is that any solutions have been attained for years. Both parties keep looking at ways to shift the costs around and never address the fundamental issue of cost increases. Steadfast refusal to look at other industrialized countries systems to find out how they cover 100% of their citizens and MUCH lower rates and costs is just arrogant and stupid. But like so much policy we see 'crafted' by our Federal government - industry seems to always steer the government towards solutions that are weighted in said industries behalf. Of course health care is now over 18% of GDP soon to be even more.....so reduction in health care spending also reduces GDP, which could cause recession......o what a tangled web we have created.
And the articles statement that: 'For example, as a huge player in the health-care market, the federal government has been successful at negotiating lower prices than small private insurers can. And that helps us de-bunk myth number four.' Apparently, the author failed to acknowledge again Obama's hypocrisy to allow re-importation of US pharmaceuticals to lower costs (something he championed as Senator) or acknowledge the deal made with Big Pharm to support Obama care during the 'open door' crafting of this legislation.
Yes I can read big words and I sure wish the team mentality of politics could end so we can finally start making the country better again as opposed to simply rooting for Democrat or Republican victories.
Romneys refusal to release his tax records will destroy him. People already do not "like" him. Now, they will decide they cannot trust him. Whatever he is hiding must be really, really bad.
Ring a bell ?
by bmallen3 July 18, 2012 4:22 AM EDT
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Then quit crying about Obama and the unemployment rate.
Its not the government's responsibility to get you a job.