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  • Battle of the Charts: Spending Is the Problem, No Doubt About It

    While Americans across the country were celebrating independence on Monday, Talking Points Memo (TPM) was churning out its “Chart of the Day” to support the false claim that the nation doesn’t have a serious spending problem.

    According to TPM, conservatives in Congress are focused on cutting discretionary spending as part of a vote to raise the debt limit. (Discretionary spending represents the sliver of the federal budget that lawmakers can control.) Discretionary spending has increased in recent years and should be reduced, but it is open-ended entitlement spending, which includes Medicare, Medicaid, and Social Security, that accounts for almost 60 percent of the budget and will drive looming deficits. Several conservative proposals exist to reform these programs (see here, here, here, and here). Their aim is to curb runaway entitlement spending and put these programs on a sustainable path.

    The Heritage Foundation has its own series of charts to separate fact from fiction. They were created using data from the non-partisan Congressional Budget Office and the President’s scorekeepers at the Office of Management and Budget, and they make it clear that spending is not just a huge problem. It is the problem.

    TPM’s chart compares security and non-security discretionary spending to entitlement spending and total revenues in 2001 and 2011, disregarding what happened in between. This shows defense spending rising over the last decade more than any other category. It should come as no surprise that military spending grew as the nation went from a time of peace to fighting the global war on terrorism. But the chart is misleading. Looking at the bigger picture, defense spending is currently below its historical average of 5.2 percent of GDP, despite wars in Iraq and Afghanistan. Meanwhile, entitlement spending has increased rapidly, from just 2.5 percent of GDP in 1965 to about 10 percent today.

    TPM also points out that federal revenue is 76 percent lower (as a percentage of GDP) than in 2001 and puts part of the blame on the 2001 and 2003 tax cuts. But low revenues are a result of the economic recession. History shows that tax revenue depends on more than just tax rates. For example, in 1960 the top individual tax rate was 91 percent, bringing in 7.8 percent of GDP in revenue. Despite a monumentally lower tax rate of 39.6 percent in 1993, tax revenue remained at the same percentage of GDP. In 2007, after the 2001 and 2003 tax rates were firmly in place, tax revenue was at 18.5 percent, above its 18 percent historical average. Tax revenues dropped shortly thereafter during the financial contagion and the global recession. The best way to raise revenue back to more normal levels is with tax reforms that promote economic growth, like those in Heritage’s Saving the American Dream proposal.

    It’s irresponsible to say Washington doesn’t have a spending problem, when spending is actually Washington’s biggest problem. The historical average for federal spending is 20.3 percent of GDP, but spending will reach 24.7 percent by the end of this year and continue to climb from there. By mid-century, funding the federal government under current policy will consume more than half the U.S. economy. Meanwhile, tax revenues will return to their historical average by the end of the decade and then continue to rise. As enormous deficits add to the national debt, it’s clear what’s to blame: spending, spending, and more spending.

    Posted in Economics [slideshow_deploy]

    6 Responses to Battle of the Charts: Spending Is the Problem, No Doubt About It

    1. The Middleman says:

      I don't disagree that spending is the main problem but the way to bring this to light is to list each and every expense on a website with check boxes and let the people check the ones that they feel are appropriate. I am sure the people could do the job easily and eliminate alot of the wasteful spending.

      Some expenses to start with is defense spending, then oil subsidies, then some of the fringe benefits for the families of congressmen and senators, followed by overhauling the tax code to eliminate loopholes. This would be a start. After that make a list of all discretionary spending line by line and cut some of that fluff as well.

      • cheap one says:

        I think the first expense that we cut would have to be all spending that the consitution does not cover.
        Like welfare, social sercurity,benefits for all those who do not want to work, all education spending we do in the nation, all the money spent on research. Then we increase spending for the defense of this country by arms services, NASA who comes up with new ways to keep us safe.

    2. Bobbie says:

      what has to be restructured are entitlements. are entitlements and special interests separate but the same? Can people get both even though they don't qualify for both? Welfare loopholes HAVE TO BE ELIMINATED!

      I'd rather have the military funded then ANY special interests. This state government sends out FLIERS to say "you and or your children may qualify for government services, call this number" so we can GET all your personal information (the main target) and deny you as we the government sees fit. And as the majority hasn't and isn't denied, that is how personal responsibility has been and continues to be removed from America's society. Ridding freedom and liberties in it's process.

    3. Pingback: Morning Bell: Liberals Force Choice Between Economic and National Security

    4. jim says:

      What exactly are the oil subsidies that "middleman" speaks of?

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