Remember how public anger over the federal debt reaching new sky-high levels last year drove lawmakers into a flurry of discussions about budget controls? Responding to public and international pressure to do something about permanently spiraling deficits, President Obama established a flawed commission to tackle the spending problem. Congress, doing its part, voted for a massive $1.9 trillion increase in the debt limit to $14.3 trillion. That increase was so large it would allow them to spend freely during this election year without upping the limit on the federal credit card again. What’s more, they could use the Obama’s commission as a figleaf of cover towards fiscal responsibility. Bad enough, right? But the real story behind the nation’s debt is far worse.
The debt limit is comprised of two types of debt: debt held by the public and debt held by other governmental entities like the Social Security Trust fund. This measures money lent to the federal government by others as well as money lent from one part of the government to another. But there is much more the taxpayers are on the hook for and it can be found in the Annual Financial Report of the United States Government. The recently released report for 2009 shows that total liabilities are $14.5 trillion, more or less equal to the debt, but up $2.3 trillion from 2008, driven by spending on TARP and declining revenues and tax cuts for low income Americans. However, the long-term excess costs from burgeoning entitlement costs like Social Security and Medicare are $45.8 trillion, up $2.9 trillion – a far larger increase. Along with other commitments and contingencies, the total obligations of the U.S. Government total $63.3 trillion, or $63,300,000,000,000.
If that makes your eyes glaze over, this represents a debt burden of $200,000 for every man woman and child in America. It is a $16,000 jump over last year. This is the real debt that Washington doesn’t want you to know about. This is the real debt that Congress must immediately get serious about. So when Congress passes new spending bills or a massive new entitlement benefit like the health care bill now being debated, they should tell the taxpayers – present and future- how it will affect this real debt – $63.3 trillion, $200,000 for every American.
Last Friday, the Congressional Budget Office (CBO) released its analysis of the president’s 2011 budget submission to Congress. This report hasn’t gotten nearly the attention it deserves.
When the administration released its budget in early February, the news seemed bad enough. By its own reckoning, the Obama administration’s budget plan would result in massive deficits and borrowing if adopted in full. According to the administration’s estimates, the president’s budget plan would produce deficits totaling $10.1 trillion over the period 2010 to 2020, and by 2020 federal debt would reach $18.6 trillion.
But now we learn that that was the rosy scenario.
According to CBO, the Obama budget plan would run up much larger budget deficits and pile up even more debt than the administration reported in February.
Over the period 2010 to 2020, CBO expects the Obama budget would run a cumulative deficit of $11.3 trillion — $1.2 trillion more than the administration predicted. By 2020, total federal debt would reach an astonishing $20.3 trillion — up from $5.8 trillion at the end of 2008.
The president likes to say he inherited a mess. He did in fact enter office during a deep recession that sent deficits soaring on a temporary basis. But his policies have unquestionably made an already difficult medium- and long-term budget outlook much, much worse. The problem is that President Obama is a world-class spender. He wants to pile massive new commitments on top of a bloated and unreformed government. He is willing to raise taxes to pay for some of his wish list, but far from all of it. For the rest, he plans to run up the nation’s debt with reckless abandon.
CBO’s numbers tell the story.
Over the next ten years, CBO says the Obama budget would increase federal spending by $2.3 trillion, including $0.8 trillion in net interest costs on the additional borrowing that would be required.
Bad as that is, it’s a lowball estimate. The president’s budget assumes that war-fighting funds will plummet from $130 billion in 2010 to just $50 billion in 2012 and every year thereafter. No one believes this will happen. More realistic assumptions would add $500 billion or more to the president’s defense funding request over a ten-year period.
The biggest problem in the federal budget is runaway entitlement spending. And so what would the Obama budget do? Increase entitlement spending, of course. By $1.9 trillion over ten years, according to CBO. In 2020, federal entitlement spending would reach $3.3 trillion, up from $2.1 trillion in 2009.
The administration has been touting a supposed three-year spending “freeze” as evidence of its determination to cut the budget back. But only a very small portion of the budget would be frozen, and only after the administration had spent two years stuffing in more funding. CBO expects that discretionary spending under the Obama budget, excluding war funds and Pell Grants (which would become an entitlement), will increase by $0.5 trillion over ten years.
Two years ago, CBO expected total federal spending to reach $4.3 trillion in 2018. Now, if the president’s budget plan were adopted, CBO projects spending would exceed $5.0 trillion in 2018.
Between 2010 and 2030, the population age 65 and older is expected to rise from 41 million to 71 million people. CBO projects spending on Social Security, Medicare, and Medicaid in 2030 will reach 14.4 percent of GDP, up from 9.8 percent today. That will be like adding a whole new Social Security program to the budget without any additional revenue to pay for it.
The federal government is drowning in unaffordable entitlement commitments. President Obama’s response is to spend, entitle, and borrow even more, while he can. And then, with an even bigger government locked into the “baseline,” he plans to pivot and use the prospect of a debt crisis he made much more probable to push for a massive tax increase.
Unfortunately for the president, the public is already onto this game. And they want no part of it.