Our national frustration with federal spending discussions stems from irreconcilable political debates involving figures so large that our eyes glaze over and our minds go numb. . Everyone senses that Washington’s dysfunction and denial about spending puts the country’s finances at grave risk, but few know how bad it really is. Even fewer seem to know what to do about it.
So to open our eyes, let’s convert the federal budget and debt numbers in President Obama’s budget into household terms by simply removing eight zeros. This reveals such a mismatch of income and spending that no family could survive the debt load. . Add back those eight zeroes, and you understand the danger we face as a nation.
By the end of his first term, President Obama will have added nearly $6 trillion to the national debt. That amount equals – shockingly – the accumulated debt of the country’s first 225 years. But his budget projections – which add another $6.7 trillion in deficits and debt over the next 10 years – suggest an even greater risk. As events in Greece show, there’s no good end to a nation’s compounding debt.
Fortunately, Rep. Paul Ryan, R-Wis., released an alternative budget on Tuesday, and remarkably, the political axes are shifting. Last year’s ads, which depicted Ryan pushing granny in her wheelchair off a cliff, seem passé. When Ryan speaks, people now listen.
At the same time, President Obama’s budget has been all but ignored.
Ryan’s budget has become the centerpiece of the Republicans’ presidential campaign, even drawing verbal support – but not a vote – from Democrat Ron Wyden of Oregon. As Ryan explains, as enormous as these numbers look, they don’t fully account for the unfunded liabilities of Social Security, Medicare and Medicaid. Within 10 years, these programs will absorb half of federal spending, and grow exponentially thereafter. Entitlements will become the chief compounder of the national debt.
Politicians may lie, but demographics don’t. Without reform, the U.S. entitlement state will collapse. To avoid national insolvency, our political leadership must honestly ask:
- What incentives do we need to create jobs, increase economic growth and pump up the tax base?
- What reforms in entitlement spending do we need to balance federal revenue and expenditures?
To his credit, President Obama doesn’t hide his budget’s agenda in the footnotes. His budget boldly calls for more than doubling taxes on capital gains and dividends, and extracting more wealth from the very successful people who create private-sector jobs. He offers little reform to a corrupt tax code, and continues to give unelected bureaucrats and federal regulators more power over our individual and corporate lives.
While the Obama budget does project reductions in deficit spending over the next two years, deficits begin to grow again thereafter, largely because the president chooses not to take on the reform of entitlement programs. In the Obama budget’s own words, the government’s fiscal position “gradually deteriorates” beyond 2022.
In contrast, the Ryan budget makes some hard choices. More than $5 trillion in spending is cut from the federal budget over 10 years. Power is returned to the states. Market choice and competition are introduced to Medicare. Corporate tax rates are cut to 25 percent from 35 percent to be competitive with other countries. Individual taxes are simplified, and tax brackets reduced from five to two – 10 and 25 percent – by eliminating loopholes and most deductions. Ryan’s tax and regulatory reforms are structured to restore incentives for capital formation, job creation and economic growth. In Ryan’s words, “Our budget returns power to individuals, families and communities … We put our trust in citizens, not government.”
The two budgets present starkly contrasting visions for the country’s future. Before casting his or her vote in November, every voter should ask: “Which vision do I think will provide a better future for my kids and grandkids?”
2012 federal budget in personal terms
Revenue: $2.47 trillion
Expenditures: $3.8 trillion
Deficit: $1.33 trillion
Debt: $11.58 trillion
* Charged to credit cards during 2012
** Credit card balance including previous years
Scott S. Powell is a senior fellow at the Discovery Institute, an adjunct at the Competitive Enterprise Institute and a managing partner at RemingtonRand LLC.