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  • Memo to Deficit Commission: Spending is the Problem

    The President’s deficit commission met yesterday to begin its task to address the mounting fiscal crisis facing the nation.  As we show in our 2010 Budget Chart Book, the estimated federal deficit in 2010 will be $1.54 trillion, and spending on entitlement programs (Medicare, Medicaid, and Social Security) and interest on the federal debt is slowly squeezing out other programs.  House Majority Leader Steny Hoyer (D-MD) outlined a way forward for the commission yesterday in the Wall Street Journal, and while we agree with Leader Hoyer on the gravity of the nation’s financial situation, his analysis was lacking in the following ways:

    • Pointing the Finger in the Wrong Direction. Leader Hoyer attributes the climbing deficit to President Bush, claiming that “more than 90% of the projected deficit we will face over the next decade is the result of President Bush’s 2001 and 2003 tax cuts, the wars in Afghanistan and Iraq, the rescue of the financial sector he began in the last few months of his presidency, and lower revenues from the recession.” To ascribe the enormous deficits of the past, present, and future to President Bush is erroneous.  Heritage’s budget expert Brian Riedl finds that the cost of the Bush tax cuts, funding of wars in Iraq and Afghanistan, and the Medicare prescription drug program created under the Bush administration comprise a little over a third of the $13 trillion in baseline deficits for the next decade.

    • False Hopes for Obamacare. Leader Hoyer claims the health care overhaul will lower federal spending by lowering health care costs.  Though the Congressional Budget Office projected the bill will reduce the deficit, this is based on unrealistic assumptions about the future behavior of Congress that the score-keeping agency is required to make.  In reality, when the doc fix and the double counted savings are factored in and equal years of revenues and outlays are accounted for, the new health care law is more likely to add billions to the deficit.  Furthermore, according to the Chief Actuary of the Centers for Medicare and Medicaid Services (CMS), Obamacare will increase, not reduce, health spending by $311 billion over ten years.

    Leader Hoyer further claims that “…critics of the legislation wrongly and knowingly portrayed [Obamacare’s] Medicare savings as a cut in benefits.” But the critics were right.  The Actuary predicts that cuts to Medicare Advantage will “generally reduce MA rebates and thereby result in less generous benefit packages.”  Moreover, all the cuts to Medicare will total $575 billion, which the Actuary predicts could cause as many as 15 percent of hospitals to become unprofitable if they continue to see Medicare patients.  Ending participation in Medicare would severely jeopardize access to care for seniors. 

    • That’s What You Call Fiscal Responsibility?! Leader Hoyer praised the President for embracing fiscal responsibility through a slew of largely ineffective fiscal constraints.  These included a cap on non-defense non-discretionary spending, which would reduce the deficit by an unimpressive 1.1 percent.  Also, Leader Hoyer praised the President for cutting the deficit in half by 2013—which shouldn’t be too hard, since President Obama quadrupled the deficit in 2009 alone.  Moreover, Heritage’s Brian Riedl writes that the end of the recession, pulling troops out of Iraq, and phasing out stimulus spending would alone cut the deficit in half.  Finally, the President embraced PAYGO intending to keep Congress from spending without first creating offsets.  In reality, PAYGO exempts discretionary spending, which is 40 percent of the budget, has no effect on the current trajectory of entitlement spending, and doesn’t actually reduce spending or the federal deficit.  The simple fact that, between 1991 and 2002, PAYGO was not once enforced, points to its ineffectiveness.
    • Ignoring the Real Problem. Leader Hoyer claims that “nobody likes raising revenue—but sometimes, it’s necessary”.  Well, in this case, it’s not.  Measuring taxes and spending against their historical averages shows that, while revenues hover near their historical average, spending in 2020 will be 5.3 percent of Gross Domestic Product above the 40-year average.  It is Congress’ out-of-control spending, not under-taxation, which is causing major deficits, so spending should be the first place the deficit commission looks to make changes.  Plans like Representative Paul Ryan’s (R-WI) Roadmap for America’s Future would put entitlement spending on a sustainable trajectory and reduce the deficit to zero.  Leader Hoyer demonizes this fiscally responsible plan as one that would be harmful to Medicare, when in reality, Rep. Ryan’s plan would model Medicare after the successful and popular health care plan Congress itself uses.

    Posted in Economics [slideshow_deploy]

    7 Responses to Memo to Deficit Commission: Spending is the Problem

    1. Zack says:

      "Bush administration comprise a little over a third of the $13 trillion in baseline deficits for the next decade"

      oh Heritage, Heritage, Heritage….

      Lets display numbers that have already happened instead of the typically skewed and political fiscal fear mongering conservative charts and graphs on what might happen in this decade.

      From (2001-2008 alone) under http://www.treasurydirect.gov bush and republicans/conservatives (understanding that 93% of all public law was republican/conservative sponsorship from 2006-2008 in the 110th congress) http://www.votesmart.org. bush and republicans/conservatives through spending added 4.9 trillion to the national debt including another .6 trillion for the 2009 shared budget for the national debt increase.

      …that's not including the revenue decrease+ borrowing+ spending+ adding debt from other programs that obtain cost when revenue drops+NOT taxing BOTH BUSH TAX CUTS FOR 250k ANNUAL INCOMES AND UP- which adds up a predicted 2.5 trillion increase to the national debt by 2015(2.06 trillion + 439 billion of interest), also not including unfunded private military contracts for "operation iraqi freedom" which was another .5 trillion.

      so far, thanks to republicans/conservatives + Bush we have 8.5 trillion added to the national debt if not more.

      "estimated federal deficit in 2010 will be $1.54 trillion"

      -bush+republicans/conservatives beat that number in the 2008 deficit by about 100 billion!

      your entire approach to Medicare, Medicaid, and Social Security is severely flawed. Would Heritage ever decide to mention money being put into these programs. Heck, at best by 2075 if these programs hold no attention people making over 250,000 at todays value would have a 3.1% federal income increase. 3.1%….the sky is falling!

      Obama did not "quadruple" or "double" the deficit or is he expected to until 2012 or 2016. Do you assume nobody pays attention to your numbers?

      Just for giggles, in order for Obama to "double the national debt" which I hear conservatives speak of…..ahem, The national debt would be at 22 trillion!

      Here is the best part…the only two president to become about 100 billion shy to double the national debt were gwb and the beloved and fiscal responsible r. reagan!

      Man oh man, sometimes I just wish I was able to ignore this website but it is way too much fun!

    2. Zack says:

      no doubt Hoyer is way off his numbers too. -typical democratic fear mongering. See Heritage, It is possible to bash your own party!

      But as far as your numbers go……all I can say is….WOW!

    3. Zack says:

      correction… i forgot to put tax increase after 3.1. that would be a (3.1% federal tax increase) by 2075 for all those rich people that suffer!

    4. Zack says:

      “estimated federal deficit in 2010 will be $1.54 trillion” -Heritage

      -"bush+republicans/conservatives beat that number in the 2008 deficit by about 100 billion!" -Zack

      -that information is wrong, my mistake.

      I type to fast .the national (debt) increase in 2008 was 1.5 trillion (not defecit), still much worse then a assumed deficit number that Heritage shows for Obama in 2010. Just so everyone knows…that 1.5 trillion in 2008 not even including the shared 2009 budget is money not payed back. It was solid debt and nothing else.

      Pardon the mistake. Heck, at least I can admit when i'm wrong, can Heritage?

      oh, and nobody knows what the 2008 deficit was. Bush was magically able to make the first tarp, military contracts and implemented tax cuts dissapear from the deficit so I think its safe to say that I will stand by that fact that his deficit could have been 100 billion higher the 1.54 trillion assumed by Heritage for obama in 2010. At least obama is open about his deficit and spending.

    5. Ali, Virginia says:

      First of all, Heritage is non-paritsan. Therefore; they do not have a party. Heritage has invited Democrats, Republicans, and Independents to speak. If you watched any lectures online, you would probably know that.

      Secondly, they WERE critical of Bush's spending.

      For example the expansion of entitlements under Medicare Part D.

      http://www.heritage.org/Research/Commentary/2006/

      However; the spending under that administration wasn't growing at the rate then that it is now and was not coupled with the government-can-solve-everything-that-ails-us attitude that this administration and most of the congressional democrats hold.

      Third, whenever Obama doubling the national debt is mentioned it is within the timeframe of the next decade. So the fact that you somehow find it laughable or inconceivable that we could reach $22 trillion is interesting when in this first year alone the debt ceiling has been raised to $14.3 trillion. Congress doesn't raise the debt ceiling unless Congress plans to spend that money. No one said Obama has already doubled the national debt this year or will double it next year.

      National Debt on Jan 1, 2009 = $10,699,804,864,612.13

      The current national debt is at about $12.9 trillion

      Finally,you're right, Obama didn't quadruple or double the defit, he tripled it.

      http://content.usatoday.com/communities/theoval/p

      Unless of course the liberal US Today got it wrong.

    6. Zack says:

      "First of all, Heritage is non-paritsan"

      -HAHAHAHAHAHAHAHA. hmmmm. yea, and msnbc is non-partisan. and fox news is non-partisan.

      and posting a link from some other "heritage research" is digging you deeper in that hole.

      and an article from usa today…..ahem.

      please, I need a real debate.

    7. Zack says:

      Let me break this down a little bit for you..

      Ali, Virginia on April 29th, 2010 at 2:00pm said:
      First of all, Heritage is non-paritsan.(the conservative think tank is non-partisan…are you kidding me?)

      Therefore; they do not have a party.(you mean the conservative party that follows the conservative Heritage Foundation?)

      Heritage has invited Democrats, Republicans, and Independents to speak. If you watched any lectures online, you would probably know that.(How does that make Heritage non-partisan?)

      Secondly, they WERE critical of Bush’s spending.(sure sure, were you also critical of the republican and conservative house and senate for 12 years, treasury secretary’s, banking and finance committe chairs for 12 years and administration for 8 years too, or did that not count?), or the (ineffective tax cuts, over extended military budget, 100% neglected regulatory reform or any reform for any part of the economy?)(8.5 trillion added to the national debt under your power)

      For example the expansion of entitlements under Medicare Part D.
      http://www.heritage.org/Research/Commentary/2006/02/Medicare-Part-D-For-Disaster(first off posting a link from other “heritage research” is adding to the problem with your debate and Medicare-Part-D is of bi-partisan sponsorship so of course, you being a conservative, would be critical of that), (besides, I would love to see the economic status without programs like Medicare, Social Security and Medicade), (I would like to ask all of those republican/conservative house rep’s, senators and every single republican/conservative voter that most benefit from those programs if I could take those programs away from them tomorrow…..wonder how the reaction would be)

      However; the spending under that administration wasn’t growing at the rate then that it is now(last I remember Bush added 1.5 trillion to the national debt in 2008 alone(treasurydirect.gov), (Obama is accountable for 1 trillion of the 1.6 trillion added to the national debt in 2009 if you account for the shared budget and increase, which you probably choose to forget, and when did 1 Trillion become greater then 1.5 Trillion?)

      and was not coupled with the government-can-solve-everything-that-ails-us attitude that this administration and most of the congressional democrats hold.
      (well hey, neglecting regulation reform, not passing a single bill for housing market or financial reform(from the 103-109 congress), doing nothing for healthcare reform worked out so great because the “free market” has done so well the last decade right?)

      Third, whenever Obama doubling the national debt is mentioned it is within the timeframe of the next decade. So the fact that you somehow find it laughable or inconceivable that we could reach $22 trillion is interesting when in this first year alone the debt ceiling has been raised to $14.3 trillion.
      (and what I find very laughable is that you can’t seem to understand that a great deal of any defecit or debt increase for years to come is largely due to Bush/conservative/republican policies and legislation that have already become public law. example, 2.5 trillion in spending possibly adding 3 trillion to the national debt for both bush tax cuts or .5 trillion for unfunded military contracts, and lets talk about money that has already been spent that will add to the national defecit instead of the “what if’s” and typical fiscal fear mongering by conservatives)

      Congress doesn’t raise the debt ceiling unless Congress plans to spend that money. No one said Obama has already doubled the national debt this year or will double it next year.
      (no one said that? really? I hear conservatives day in and day out on the radio, tv and in person that obama had doubled the national debt already, partly due to most people not understanding the difference between deficit and debt)

      National Debt on Jan 1, 2009 = $10,699,804,864,612.13
      The current national debt is at about $12.9 trillion
      (12.9-10.7= about 2.2 trillion, and Obama is accountable for 1 trillion of the national debt for 2009 shared increase again, something you would choose to forget, and the remaining .6 trillion for 2010 and that’s just going off of assumed defecit and debt accountability, infact, based on public law and executive policy, republicans, bush and conservatives hold about 50% of the acuired debt increase to the current date, somthing else you would choose to forget or atleast not understand.)

      Finally,you’re right, Obama didn’t quadruple or double the defit, he tripled it.
      http://content.usatoday.com/communities/theoval/post/2009/10/620000005/1
      Unless of course the liberal US Today got it wrong.
      (you linked to an inaccurate source. what evidence do you have that Obama “tripled” the deficit at all, besides the “us today”? 1.4 trillion? even so, you are willing to tell me that the last bush deficit was only .46 trillion? you again magically forget both bush tax cuts, unfunded military contracts and the fact that bush alone added 1.5 trillion to the national debt in 2008, plus another .6 for 2009 and all together about 8.5 trillion for public law passes so far and that number will be sure to grow), (Bush was really really good at hiding numbers as we all found out, at least Obama is open with deficit and debt)

      to summarize, you need to understand that economic and legislative history and executive policies is what holds any administration or political party accountable for deficit and national debt. Conservatives and Republicans have little to no say on spending and debt. Previous legislation and programs fall into the next administration and sometimes for years to come. Besides, spending money on healthcare reform, financial reform, immigration reform, housing reform and other reform hold a heck of alot more water then spending money on a useless war, tax cuts for the rich and an over budgeted military. Again, Democrats and Obama have spent no more money then bush, republicans and conservatives did. The most laughable part is that conservatives want to push the same exact policies that for the most part, put us in this mess in the first place.

      pardon my sarcasm, but you cant just reply with other links to inaccurate sites and espically links from “heritage”. It’s like feeding off of yourself.

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