The Congressional Budget Office (CBO) issued a report today stating that if the tax cuts signed into law by President George W. Bush are extended and the current spending spree continues, the federal debut could grow to more than double the size of the U.S. economy over the next 25 years.
In the report the CBO stated that if the Bush cuts are allowed to expire as scheduled on December 31 and by some miracle the legislature were to act responsibly and enact spending policies that reflect the realities of an aging populace, U.S. debt could shrink significantly to a more sustainable 53 percent of gross domestic product from the 73 percent this year.
While comparisons to the debt crisis in Greece are unavoidable, we aren’t quite there yet. Greece is saddled with a national debt above 160 percent of its Gross Domestic Product (GDP) for the year. Still the direction of this nation and current mismanagement points to a future more dire than that faced by Greece today.
These latest CBO forecasts will only serve to increase partisan arguments that likely will result in a lame duck session this fall where nothing is accomplished and both sides trot out the CBO report to bolster their positions
Democrats will use the CBO report to argue for increased taxes through the now infamous “Buffett Rule” and allowing the Bush tax cuts to expire for anyone making in excess of $200,000 annually.
Republicans will find backing from the CBO report to insist that discretionary spending is the root of all evil.
Where the Democrats will stumble is on the facts. The U.S. doesn’t have an income problem. Tax revenue grew at an all-time high during the Bush Administration, despite the sizable tax cuts he implemented.
Federal revenues grow only when the economy flourishes. This is an inarguable fact that President John Kennedy knew nearly 50 years ago:
“Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased – not a reduced – flow of revenues to the federal government.” – President John F. Kennedy, Jan. 17, 1963, annual budget message to the Congress, fiscal year 1964
From 2004 through 2007, federal tax revenues increased by $785 billion, the largest four-year increase in American history, right when the Bush tax cuts began to be fully realized. Apparently facts are pesky little critters to those on the left side of the aisle.
President Barack Obama wants to rewrite the nation’s financial history by declaring that leaving the Bush tax cuts in place is fiscally irresponsible, new revenues must be implemented and the rich must pay their “fair share.”
While we’re on the subject of raising more federal income, perhaps we should at least be honest about one of the primary reasons the federal government doesn’t have the revenue many Liberals believe it should: far fewer of us pay federal taxes.
In the 1960s most Americans paid federal taxes. Even during President Johnson’s period of social realignment, dubbed the “Great Society,” which created much of the social welfare we can no longer afford, the percent of American’s paying taxes grew. It wasn’t until the administration of George H. W. Bush that the percent of Americans that pay taxes began to take a dramatic slide.
The CBO report finds, as it has in past years, that the biggest source of growth in federal spending will come from those health care programs. By 2037, if no health care changes are enacted, federal health care spending would double to around 10 percent of gross domestic product compared to around 5 percent in 2010.
“The aging of the U.S. population and the rising costs for health care mean that the combination of budget policies that worked in the past cannot be maintained in the future,” the CBO said in the report.
If we want to be an entitlement society, where fewer and fewer folks contribute to the benefits while greater numbers draw upon them, we best develop a taste for the fiscal Baklava our grandkids will be serving us. The CBO report only reinforces what we’ve known for years.
The “austerity” being foisted upon the Greeks today will seem far more distasteful should our elected officials ignore this approaching train wreck..