Last week, The Washington Post’s Wonk Blog published a post by Ezra Klein on a new paper by the Congressional Budget Office (CBO). From the post (emphasis added):
What these three charts tell you is simple: It’s all about health care. Spending on Social Security is expected to rise, but not particularly quickly. Spending on everything else is actually falling. It’s health care that contains most all of our future deficit problems. And the situation is even worse than it looks on this graph: Private health spending is racing upwards even faster than public health spending, so the problem the federal government is showing in its budget projections is mirrored on the budgets of every family and business that purchases health insurance.
These graphs are built atop what’s called “the current policy” baseline. The current policy baseline assumes nothing changes. We don’t pass any new laws. We don’t follow through on the hard parts — like the cost controls in the Affordable Care Act — of any of the laws we’ve already passed. We don’t raise taxes.
That won’t work for very long. Page 9 of the report includes this remarkable statistic: If we just continue on the way we’re going, then “spending for Social Security, Medicare, other major health programs, defense, and interest payments” will “nearly equal all of the government’s revenues in 2020 and would exceed them from 2022 onward — leaving no revenues to cover any other federal activities, such as income security programs, retirement benefits for federal civilian and military employees, transportation, research, education, law enforcement, and many other programs.”
So we need to get health-care costs down. But because we can only do that so quickly, we’re also going to need to get taxes up.
Klein is both right and wrong in this post. Here are a few key points he makes:
- The major problem with the federal budget is indeed health care. Unfortunately, the President’s health care law will make things worse, as costs will continue to skyrocket and rationing will take place. Additionally, the massive tax increases in the law will hurt every American who pays them.
- “Current policy” shows a disastrous future for America. This assumption of future policies by CBO basically assumes Congress continues to avoid cutting spending and doing tax reform, as has been done for years.
- Klein ignores the cost of interest payments in his assessment of the government’s future budget obligations. Payments are at or near record lows, as people like Paul Krugman regularly point out, but as was noted http://washingtonexaminer.com/its-the-social-spending-stupid/article/118874#.UKO_EIaKTK1 in The Washington Examiner last year, interest payments on current debt take up hundreds of billions of dollars. According to TreasuryDirect.gov, the interest payments in Fiscal Year 2012 totaled $359 billion, though that includes an unusual decrease of $75 billion due to an accounting change in the Department of Defense. So let’s use Fiscal Year 2011’s interest payments, which totaled $454 billion…or 12.52% of the federal budget in 2011.
Remember, this is when interest rates are around three percent. What if we accumulate another trillion in debt and rates go to four percent? This would total $680 billion, quite a significant cost to taxpayers.
4. Klein says that we need tax increases to temporarily hold off fiscal troubles until health care reforms kick in. However, his assessment misses the fact that much of what the federal government does in education, transportation, security, and other areas of federal oversight are unconstitutional. Cutting those programs out would do at least as much as raising taxes, insofar as the budget deficit is concerned, and also reduce the federal government’s constant encroachment of the rights of citizens.
In short, the federal government faces massive financial problems in the near future. Liberals like Klein have identified some of the problems, but it seems they purposely ignore the facts when it comes to actually identifying solutions.