Budget Deficit

Politico: 2011, the Year in Which the Federal Government Spent the Most Money It Has Ever Spent, Proves that Spending Cuts Alone Won't Fix the Deficit

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A piece in Politico headlined "CBO figures throw cold-water on cuts-only approach," argues that the latest budget math makes it difficult to substantially reduce the federal budget strictly through cuts:

A new Congressional Budget Office report Tuesday shows that government spending flat-lined in the fiscal year that ended Sept. 30 — leading to a modest dip in the deficit, thanks to an estimated $141 billion increase in federal receipts.

It's a turning point for which Republicans can take some credit. But the data highlights what's also become the great arithmetic lesson for the GOP: Even if spending were frozen in place, the nation's debt keeps piling up, absent more structural benefit reforms and tax revenue.

Indeed as measured by CBO, 2011 was a year that saw spending trends break heavily in favor of deficit hawks. The combined federal outlays for Medicaid, Medicare and Social Security rose by a little more than 3 percent — less than half of what had been the five-year average. Military spending grew by 1.1 percent, and after a 7.2 percent increase in 2010, other government activities fell by a negative 2.2 percent.

Yet even in this climate, the deficit in 2011 ended up well north of $1 trillion for the third year in a row, all underscoring the poor economy but also the need for more change on both sides of the ledger.

Notice what's missing from those Medicare, Medicaid, Social Security, and defense spending figures? Actual spending cuts.  

Yes, the rise in spending on these programs slowed this year relative to recent trends. But on the most costly government programs, and the biggest drivers of the long-term debt, spending is not only still rising, but expected to continue growing. That's the real problem. In coming years, it's projected spending growth on those programs—Medicare and Medicaid in particular—that most threaten the stability of the federal budget.

Also missing? The rise in federal interest payments, which jumped 16.7 percent between 2010 and 2011.

You know what else the federal government did in the 2011 fiscal year that supposedly favored deficit hawks so much? It spent more money than any year before in history: $3.6 trillion. How again does this prove that, when it comes to dealing with mounting federal debt levels, spending cuts just won't do the trick?

The better argument for tax hikes is they properly price government and therefore help restrain its growth. Economist James Buchanan and former Cato economist William Niskanen have both made versions of this argument, suggesting that deficit spending (which we're doing a lot of these days) acts as an invisible subsidy that makes government seem cheaper than it actually is and therefore encourages the public to want larger government. Make people pay full price for the government, (the simplified version of) the argument goes, and they'll want less of it.

Yet there's only so much revenue that can plausibly be raised through tax hikes, especially if you're focused on the rich, even under the most favorable assumptions. The millionaire's surtax that recently made the rounds, for example, was projected to raise about $450 billion over the next decade. That doesn't even pay for half of this year's budget deficit, much less make a big dent in the roughly $14 trillion-and-rising federal debt.

In the long run, the CBO has made it fairly clear that heading off the debt-driven budgepocalypse will require either a substantial reform of the current entitlement system or raising taxes "significantly above their average [historical] share of GDP"—allowing taxes to eventually consume more than 30 percent of the economy—which will inevitably mean raising taxes on the middle class. That's not a good option, and it's also not going to happen. Which means that the bulk of the work of debt reduction is going to have to come by restraining spending.

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  1. It’s simple Pete, we have to spend more money in order to save more money.

    You remember Joe “We need to spend our way out of bankrupcty” Biden right?

    Maybe just ONE MORE stimulus plan will finally get it right. I’m sure the SUPERFRIENDS COMMITTEE will figure this all out.

    1. Governments are no good at solving anything.
      Committees are no good at solving anything.
      What makes anybody think a government committee will be any good at solving anything?

      1. it’s not about actually solving anything; it is about giving the appearance of attempting to solve something. Activity disguised as action.

    2. Sorter big government lovers at Politico

      We are stupid and we think you are just as dumb.

  2. Let’s just phase out reality. It’s too much trouble.

    1. Tune in, turn on, vote Obama?

      1. Voting Obama – it’s like seeking out the brown acid at Woodstock.

        1. Voting Obama – it’s like seeking out the brown acid at Woodstock.

          The brown acid? RACIST!!!11!!!

      2. That’s his last, best hope. Dump LSD into the U.S. drinking supply right before the election.

        1. There is nothing more helpless and irresponsible than a man in the depths of a politics binge.

          1. Dude, I see The Anointed One riding a unicorn through rainbows! Oh, please, can’t I vote for him more than once?

            1. We can’t stop here! This is Republican country!

              1. Oh god oh god oh god oh god rethuglican Bush why did I take the shit I can’t hear the light help help.

                1. But our election was different. It was a classic affirmation of everything right and true and decent in the national character. It was a gross, physical salute to the fantastic possibilities of life in this country-but only for those with empty platitudes. And we were chock full of them.

            2. The only problem is a lot of people wouldn’t make it out of their homes.

              1. No, they have people to ensure that correct-voting folk can get to the polls at least once.

        2. He’s saving it for last because there’s a strong chance we’ll elect Santorum instead.

        3. “Dump LSD into the U.S. drinking supply”

          That’s also my last, best hope. Though I think I expect different results than he does.

          1. We’ll all have stomach aches from the laughter.

          2. LSD breaks down rapidly in water when exposed to light. And even a tiny amount of chlorine degrades it quickly. Mass dosing of water supplies with LSD has always been impractical to impossible.

            1. See, you lack imagination. Let’s posit a Kentucky-based company that makes miniature spheres of edible products. Let’s further assume that the federal government secretly manipulated matters to force it into bankruptcy. Finally, let’s just noodle on this fact and wonder whether that technology could be used on a microscopic level to successfully introduce LSD into the water supply.

              In 2012, Obama will be re-elected (thanks to the dark light posters and LSD), and we’ll have, for the first time, an all-Moon Hoax Party Congress.

              1. Would it be easier just to gas the red areas of the country on election day? Chemtrails over Texas–carefully skirting Austin–would knock them out before they could vote.

                You always try to do stuff the hard way.

                1. I’m sure the administration is considering multiple options to stop the Republican menace.

                  1. What are we, chopped liver?

  3. “fell by a negative 2.2 percent.”

    No, it fell by positive 2.2 percent. People get paid to write this shit.

  4. Our judgment cometh, and that right soon. Just ask Italy.

  5. I wonder if Tony will show up at this thread, seems tailor-made for him to object to.

    Sometimes I miss Tony, a far better alternative to He-Who-Shall-not-be-named’s idiocy.

  6. Re: the Buchanan and Niskanen argument, I think they are right but it overlooks the much larger problem that about 52% of the population pays no income taxes and is therefore completely insulated from the cost of most government programs, regardless of the government’s level of borrowing.

    1. They pay a shitload of other taxes, however.

      1. Some do. About a quarter of all “taxpayers” pay negative federal tax, all inclusive, including SS and medicare payroll taxes.

        Because they get more cash benefits (tax credits, welfare payments, etc.) than they pay in taxes.

        The point is that EVERYONE needs to pay some tax. People with skin in the game give a shit what happens when taxes are raised. Those paying no income tax don’t give a rat’s ass if the taxes triple.

        1. I don’t see how any tax system isn’t going to have the same problem, to some degree. It’s impossible to have a system where you pay exactly the amount of tax that you take. The idea that the poor don’t pay any tax or have any skin in the game is nonsense.

          1. It’s not. Payroll taxes paid by the poor aren’t taxes in any real sense b/c the government is promising to pay the money back plus much more. That’s not a tax but a required contribution to a generous retirement plan.

      2. Yes, they do, but income taxes are palpable and in your face, whereas sales taxes, etc. are much less so.

        1. FICA isn’t palpable? My paystub says otherwise.

          1. It is, but when you have to file a return and write a check, I think that tends to be more in your face than something you don’t even know is missing.

          2. Plus, with respect to FICA, that’s something that people think they are getting back later.

            1. Actually, the worst part about FICA isn’t the part you see on your check. The employers matching “contribution” may not be on your paycheck but you can guarantee that your employer considers it a part of the cost to employ you, not some fee that he will take out of his children’s college fund.

  7. My god the stupid in the article and the comments hurts.

  8. “Which means that the bulk of the work of debt reduction is going to have to come by restraining spending.”

    Or, alternatively, not at all.

  9. Remember: Something doesn’t have to cut spending to be a spending cut, any more than something has to stimulate anything to be a stimulus.

  10. Make people pay full price for the government, the simplified version of the argument goes, and they’ll want less of it.

    Well yeah. And the creatures who inhabit government would want that why?

  11. But the data highlights what’s also become the great arithmetic lesson for the GOP: Even if spending were frozen in place, the nation’s debt keeps piling up….

    So, because spending didn’t increase (yes yes, but let’s pretend) and the debt still increased, that proves that decreasing spending wouldn’t help. Derp math so hard. If the budget outlays had been $1.2 trillion less the last two years, and the deficit had turned into a surplus, would that prove something different? Or would a one year decrease in the debt still show that spending cuts don’t work? The idiocy makes me want to cry. I can feel the tears forming in my neocortex.

    1. Accounting doesn’t apply to government, don’t you know? Neither does logic, ethics, science, or reality.

      1. Sorry, “nor” reality.

      2. Are these people actually this stupid or just dishonest hacks trying to write anything to keep the gig going?

        1. Since virtually all of us have to have at least some rudimentary understanding of accounting–gotta make more than you spend, especially in the longer run–it’s the latter.

        2. Economically and financially illiterate agenda pushers.

        3. Are these people actually this stupid or just dishonest hacks trying to write anything to keep the gig going?

          Yes.

  12. the fact that this piece comes from Politico makes it questionable. The plain fact is that no amount of money is too much for Congress to spend. Govt could take in the entire GNP and deficits would only increase.

  13. I have a credit card balance of $50,000, and I need to get it down. I’m making monthly payments but I’ve also been continuing to charge more stuff, so the balance keeps going up. So I reduced my new purchases from $500 a month to just $75 a month, thinking that if I reduce my rate of spending the balance would go down. I was shocked to leann that it didn’t. I called the bank and they told me that by spending more money I don’t have I continue to run up more debt. I said screw you and did the only thing a responsible modern day dumbass could so: joined OWS.

    1. You forgot to add “I am the 99%”.

  14. AAAAAAaaaaaaaauuuuuugggggghhhhhhh!
    It’s the end of the world!

    1. Oh, it was just a test.

      1. Just be glad they trimmed it from three minutes to 30 seconds. People would’ve been freaking for real.

    2. Here ya go, buddy…

      http://www.minyanville.com/bus…..1/id/37845

      http://www.minyanville.com/bus…..1/id/37559

  15. Even if spending were frozen in place, the nation’s debt keeps piling up,

    Isn’t this trivially true? Of course, if you freeze spending at level that produces deficits, you will keep getting deficits?

    Why does this prove that spending cuts can’t work? Doesn’t it prove instead that spending freezes can’t work, and thus make the case for cuts?

    The better argument for tax hikes is they properly price government and therefore help restrain its growth.

    Only if you pretend the government won’t borrow the difference.

    Why isn’t it the case that Americans have consistently “priced” the federal government they want at around 18-20% of GDP? And that, therefor, government needs to be cut back to that level?

    1. Jesus, this isn’t hard. Give me some boxes of red pens and the budget, and our problems will soon be over.

      1. You are sounding awfully Kurtz like there Pro. Do you need two battalions of such men with red pens?

        1. Busted!

          1. Your methods have become…unsound.

            1. I don’t have a method at all. Just boxes of red pens and the will to use them.

              1. It couldn’t produce anything worse than what we have now.

                I vote Pro L for Red Pen Wielder.

                1. Thank you for your vote.

                  If I can get donations, I might use red permanent markers instead of red pens.

                  1. ProL, I think you meant pallets and pallets and pallets of red pens, not boxes.

                  2. ProL, I think you meant pallets and pallets and pallets of red pens, not boxes.

                  3. ProL, I think you meant pallets and pallets and pallets of red pens, not boxes.

      2. Oh you heartless bastard!

        You would cut off checks going to people who are so accustomed to living off plunder that they can’t otherwise support themselves!

        You would take government workers who have never done a productive thing in their entire lives and expect them to make a living in the dreaded private sector!

        Aaaaaaauuuggggggghhhhhhhh!

        1. I’d free the hearts and minds of men from lies and dependency.

          1. MONSTER!

      3. You think it is that easy? You will be ruined within one hour. It will consume your mind. It can’t be killed.

        1. It’s easy since I was shot. . .with a diamond. . .a diamond bullet right through my forehead.

  16. gee, weren’t Obama and ilk planning to ‘gorge the beast’, increasing government spending so taxes would be bound to go u? Of course a recession is a lousy time to pull such a gag.

    1. I think they had no idea how bad the economy was. They figured it would come back on its own and they could spend more and take the credit for saving the economy.

      1. It’s been a winning strategy for a while. But I’ve long wondered when the parasites would suck too much blood from the economy for it to continue. We might not be there yet, but we might be.

      2. They don’t care.

        They are there to gorge themselves on what they can steal. This is the Robert Mugabe school of economics in action.

        1. Welcome to the kleptocracy.

      3. Yeah, because “it’s always gotten better before” so they figured they could do the usual useless something and then mop up the next few cycles after things improved. Of course, since they all have absolutely no idea how an economy works, or what would fix it, they’re pretty much floundering idiots at this point.

        Of course, Obama might realize the economy is toast, hence his desire to promote yet another DOA recovery package, so that when things continued to not improve, he could somehow turn it back on the GOP. Or he’s an idiot who still thinks just a little more spending can really solve things. It’s truly a challenge to separate the stupidity from the evil.

  17. The Greatest Libertarian of Our Era.

  18. You know what else the federal government did in the 2011 fiscal year that supposedly favored deficit hawks so much? It spent more money than any year before in history: $3.6 trillion.

    Advice to everyone reading this. Drop the “trillion” and always, always write out the full number, e.g. $3,600,000,000,000. Maybe people will stop and think a teeny tiny bit more. But probably not. I give up.

    1. I see your point (yes, a trillion really is 1000 billions), but I suspect that most people will just see that and say “big number” and couldn’t be bothered to figure out that that is the symbol for 3.6 trillion or that that is the same thing as 3.6 million million.
      Perhaps saying “million million” would help, though. I think that people have a pretty good idea of what a million is and pointing out that a trillion is a million times that might make an impression. I’m quite numerate and I am sometimes a bit awe struck thinking about how many millions you have to stack up to get to the numbers that government spends.

      1. You may be right; a hybrid approach could work. Write it $3,600,000 million? Or would people just get confused and think it’s just saying $3.6 million?

        1. I used to think that writing all the zeros was the best way, but I think Zeb is correct that most people just see “big number”. I think $3.6 million millions is much more powerful than all the zeros.

          And yes, it is simply an astronomical number that represents a horrible, evil confiscation of wealth. Damn, now I have to go downtown and find an OWSer to kick!

  19. Maybe what they are saying is that electing a bunch of legislators who talk about making cuts isn’t sufficient because when they get to DC, they will not actually cut anything. Like what happened with Reagan and with the Contract w/ America.

  20. But the financial collapse of the government will!!!

  21. Another way to put it into perspective is to say “3.6 million millions of dollars”.

    1. Oh, sure, like I am supposed to scroll all the way down before I comment.

  22. I think they had no idea how bad the economy was. They figured it would come back on its own and they could spend more and take the credit for saving the economy.

    The sane ones, the insane ones however…

    1. He’s a fucking moron. Whatever competence he has in his field is completely destroyed by his desire to use his status as an economist to influence people for purely political reasons.

      We don’t need a fucking war or war analogue. Wars have been going on forever. It wasn’t war that made the American economy the biggest economy in human history. And it wasn’t an ever-meddling and intervening government, either.

      1. Krugman really is loathsome and idiotic beyond my tolerance levels.

    2. Krugman said he believes that the Federal Reserve should print more money to spur “above-average” inflation for five years, raising prices to bring down both unemployment and debt.

      Will someone explain to me how this is supposed to work? Seriously, I think I have a good grasp on economics, but I can’t understand this.

      1. There’s nothing to understand.

      2. Inflation, combined with stagnated wages, lowers the cost of employees.

        Debt, which is in already set terms, becomes less onerous as the value of currency is destroyed.

        Of course, the fact that those stuck wages would be used to pay off the also-set debt (and the resulting misery) never occurs to them. Nor do prosperity-increasing alternatives.

  23. This shit just has no effect on me any more.

    Oh God…I Love Big Brother!!!!!

    *runs away in horror*

  24. Make people pay full price for the government, the simplified version of the argument goes, and they’ll want less of it.

    That doesn’t seem to be so. Income tax rate correlates with (polled) support for tax increases.

    Part of this is identity-politics stuff. All educated people know “Taxes have never been lower,” “Austerity has failed,” “…market-fundamentalist Kochtopus-Zionist lies…,” “more easy answers from the Palintards,” etc.

    But also?and this makes psychological if not moral sense?even though total taxation is pretty much flat across incomes (because the progressive/regressive effects of various taxes are roughly balanced), the more people know they’re taxed?and the income tax is the most blatant tax we have?the more in favor of raising other people’s taxes they are.

    Because fuck those freeloaders with no “skin in the game,” right? Though the game already costs them about 25% of their skin, it doesn’t do it just like it does that me, so sic ’em.

    Taxation makes assholes. Because doing bad things to people fucks them up.

    That’s uncontroversial, right?

    1. That makes a lot of cents when you think about it! LOL!

      http://www.cents.de

      1. Hey Winston:

        Rats in my room –
        I am bothered by those rats in my room;
        I would rather have some gnats in my room
        Instead of all those awful rats in my room.

        Rats in my room –
        Every day I have more rats in my room;
        Guess I’d better get some cats in my room
        So they can handle all those rats in my room.

        Geez, how I’d love to taste some cheese;
        I could accomplish that with ease,
        Except my cupboard’s always empty and bare
        Because those dirty little rats have been there.

        Rats in my room –
        I can’t face seeing all those rats in my room;
        I’m afraid that I’ll go bats in my room
        Because of all those nasty rats in my room.

        Rats, rats, rats, rats!

  25. But the data highlights what’s also become the great arithmetic lesson for the GOP: Even if spending were frozen in place, the nation’s debt keeps piling up, absent more structural benefit reforms and tax revenue.

    Is this actually what passes for an argument, these days?

  26. No dollar, once budgeted, can EVER be cut. To believe otherwise is childish and insane.

  27. Politico’s headline is pretty unfair to the piece. The piece is actually a balanced look at the different proposals between Republicans and Democrats, and what they actually mean in terms of tax revenue. As I understand it, most article authors don’t write their own headlines. If so, the author has a right to bitch at Politico. The article’s a good, depressing read.

  28. Everyone’s talking about cuts –> cuts must be happening

    But the deficit is not going down –> therefore cuts don’t work

    Is politico stupid or trolling?

    1. Can it not be both?

    2. Yes, and yes?

  29. “But the data highlights what’s also become the great arithmetic lesson for the GOP: Even if spending were frozen in place, the nation’s debt keeps piling up….” = “We are spending more than we make and freezing our budget at that level keeps increasing the debt. Therefore cutting spending wont help us reduce the debt.”

    Do you have to fail an IQ test to get a job writing for Politico?

    1. You can still work there if you pass, they just give you a bedpan lobotomy first.

    2. Do you have to fail an IQ test to get a job writing for Politico?

      My understanding is that , no, they do not like any writers with IQ’s above 90. It isn’t ideological, just simple business. It is because a writer with a higher IQ is more likely to write things a majority of their readers won’t understand.

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