Will The US Government Ever Balance The Budget?
"The causes [of the roughly projected $1.5 trillion budget deficit for 2010] are many: falling tax receipts in a severe recession, two long wars, tax cuts for everyone, emergency relief for financial markets and the jobless,
stimulus spending on infrastructure, and more... The more pressing issue is how to bring revenues and expenses back into balance. Whatever is done on the revenue side -raising taxes, holding them at current levels or
cutting them - must be accompanied by spending restraint. And that's something Congress has never been good at. Members of Congress get elected by saying yes, not no." - Kiplinger.com.
Why is it so hard to cut spending?
- Approximately 57% of Obama's $3.8 trillion 2011 budget comes in direct payments to individual Americans or is spent on their personal behalf.
- Here's a breakdown of what the government has earmarked for the American people: 1) Health care (23.8%): General senior population - 13%; Poor - 7.8%; Veterans - 3%; 2) Pensions (22.2%): Social security
recipients - 19%; federal civilian and military retirees combines - 3.2%; 3) Unemployment benefits - 2.8%; 4) Food stamps and other nutrition programs for the poor - 2.7%; 5) Housing subsidies for the poor - 1.7%;
6) Cash payments to the disabled and poor - 1.3%; 7) Low-income tax credit (direct payment to the lowest earners) - 1.2%; 8) cash welfare for poor mothers with children - 0.8%; 9) College-tuition aid (not including
GI bill) - 0.5%; 10) Crop subsidies - 0.3%.
So why can't we trim this 57% allocation?
- Entitlements are not subject to freezing or trimming, unless Congress changes the authorizing laws.
- The lobbies for every entitlement are immensely powerful, and they remind Congress that transfer payments are spent almost immediately, supporting consumer demand across the nation.
- Military operations and hardware. Almost 1/5 of next year's budget.
- Defense is the third largest federal expenditure by function, after health care and pensions (19.6% of total federal spending).
- Obama and Congress are eyeing major cuts in armament programs, but defense contractors will remind the voters of how many manufacturing jobs they support in the US.
- All other discretionary spending (16% of total federal spending): 1) Transportation; 2) Education; 3) Public health; 4) Medical research; 5) Foreign aid; 6) Diplomacy; 7) Trade promotion; 8) Homeland security; 9)
Disaster relief; 10) Law-enforcement aid to State and Local Governments; 11) Alternative-energy research and subsidies; 12) Environmental protection; 13) National parks; 14) Basic science research; 15) Space
exploration; 16) And more...
- No one of these functions gets even 3% of the budget, and many are well under 1%. They are the scraps and crumbs on Washington's dinner table - even if a 1% share equals $38 billion in a federal budget of $3.8 trillion.
The future of our deficit
- According to the Congressional Budget Office, under Obama's plan deficits never shrink below 4% of the economy between now and 2020.
- The cumulative deficits between now and 2020 would total $9.76 trillion, and debt held by the public would amount to 90% of the nation's gross domestic product.
- CBO's re-estimate of the president's budget ($ in billions): 1) 2010 ~ 1.500; 2) 2011 ~ 1.300; 3) 2012 ~ 910; 4) 2013 ~ 750; 5) 2014 ~ 720; 6) 2015 ~ 795; 7) 2016 ~ 850; 8) 2017 ~ 900; 9) 2018 ~ 1.000;
10) 2019 ~ 1.150; 11) 2020 ~ 1.200.
- The biggest stuff is hardest to cut. Aside from direct payments and military operations & hardware, literally uncuttable are the interest payments Washington must make every year - half of the total to foreign creditors, on
the accumulated deficits of past years. Interest is now 7% of the budget and climbing.
Kiplinger | Sources: Kiplinger, CBO.