It is astonishing to me how the two the political parties continue to argue about the economy when the facts are well known. The posturing is demagoguery on both sides, so I submit that it is time for a simple review. Here are some facts from well-edited pages on Wikipedia.
The crisis in the federal budget can best be expressed as a percentage of GDP. As you can see in the chart above, if revenues, the dotted line, are held constant as a percentage of GDP (and that takes inflation out of the picture), then clearly we are living beyond our means. Note that while we run out of money somewhere around 2030 we even now are spending more than we are taking in. This is shown by the white bar sticking up above the dotted line. This is why we are now seeing Congress beginning to trim. (They cut a mere $4 Billion just the other day, an amount so small it wouldn’t even show up on the chart.)
What is the main factor in lifting spending above the dotted line? It is the light blue part, which is Medicare. The red, representing interest on the debt, is simply the result of spending more than we take in. Keep the bars below the dotted line and the red disappears. The green, representing Social Security, is not a big factor and it can even be kept level by small adjustments in eligibility age or means-testing, so fears of it collapsing are unfounded. Where is defense spending here? It is in the white part of the bars along with all the other discretionary spending that keeps the government running. So when the white lifts above the dotted line you are talking about real fiscal pain.
So what about military spending? What has been the trend on that and what is the projection for the future? Here is a chart on that.
As you can see, based on a long history defense spending as a percentage of our total outlays is low. Given the sad state of world affairs I submit that this is not an area we should cut further.
Are we spending our federal dollars on the right things? Here is a pie chart on that.
You can see that our discretionary spending has shrunk to only 19% of the total last year, and unless we take decisive action it is going to continue to shrink. That’s right. Everything left to argue about is all packed into this small brown wedge. This is one reason that it is kind of silly, really, for the politicians to be fighting so furiously over the small chunks of the budget when the real problem is entitlements. If we fixed the entitlements then we would have a bigger brown chunk to argue over.
So, the real problem is MEDICAL. The cost of medical care, like the cost of education, has been rising much faster than inflation for years. Below is a chart showing how we would have to raise taxes to afford the projected costs each year (now and forever) of MediCare and Social Security.
In other words, medical costs as they are trending are simply unsustainable and with the aging of the boomers it is going to get worse, not better.
How do we fix the ongoing budget deficit problem? The only way to do it is to live within our means, principally in the area of medical care. The cost of medical care dwarfs all the other factors. I can’t emphasize that enough. But the difficulty of dealing with that is readily apparent from the fracas over the Affordable Healthcare Act, a title which is an oxymoron because it does not address the affordability of health care at all, it simply tames it a little by requiring the uninsured to contribute. And the GOP is determined to quash even that effort.
As a people, Americans are in denial. A recent poll shows a solid 3 out of 4 do not want Congress to “cut” medical “benefits”. We are like spoiled children demanding what is unaffordable. The costs must be reduced. Options should, in my opinion, include making medical care competitive. This is because we are both unable and unwilling to pay for what technology can provide. This may result in things like doctors being paid less, fewer expensive tests, fewer expensive testing machines, people deferring medical care longer, or even outright rationing and socialized medicine.
Bottom line: The problem is medical costs. The Democrats want all that science can provide and they want the rich to shoulder a lot more of the cost. Even if they tried, which is unrealistic, it wouldn’t be enough. The Republicans want to solve the problem only by cutting taxes and growing the economy. That is unrealistic also, as shown by the first chart. Compromise between the parties is clearly essential. The dotted line needs to be raised, not lowered. I submit the way is clear. First, tame the costs, then squabble over not whether to raise taxes, but how much. As a people it’s time to man-up and pay for what we want.