The Spectacle Blog

The Deficit Is Not Just an Arithmetic Problem

By on 11.9.11 | 11:39AM

As the SuperCommittee heads toward an inevitable train wreck (the deadline is soon, and there's been no significant movement), the hand-wringing over who to blame has started. And, predictably, Politico comes rushing to the defense of Democrats, claiming that Republicans need an "arithmetic lesson."

[T]he 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.

Emphasis mine, because that's an awfully massive caveat to put into their "arithmetic" calculations. "Structural benefit reforms," of course, amount to spending cuts. So Politico is accusing Republicans of being unable to close the deficit if they're not allowed to cut the most expensive programs. Good show.

To be sure, there are Republicans who pretend that the deficit can be eliminated with only cuts to "waste, fraud and abuse" and (the most popular spending cut) foreign aid. But those people are few and far between - and the GOP's top budget cutter, Paul Ryan, takes bold and politically-risky steps to go after those "structural benefit reforms."

As far as the CBO goes? Tax revenues have been dramatically down in recent years, but it's because of the recession. Tax revenue totaled 14.9 percent of GDP in 2010, but absent any major tax hikes - the CBO's "alternative fiscal scenario" envisions an extension of the Bush tax cuts for all but the highest income-earners - tax revenue will rebound to 18.6 percent of GDP in 2020. And as far as a "cuts only" approach goes? We'd only have to get spending as a portion of GDP down to what it was in the last year of the Clinton administration, when it was at 18.4% of GDP.

It would be extremely difficult to do that, due to the exploding entitlement state. But cutting government spending to a point at which the U.S.' projected tax revenue doesn't put us back in the stone ages as far as the federal government goes. We'd be looking at a government about the size that it was in the Clinton era.

Moving on, Politico also notes Democrats' "demands" in exchange for big cuts.

There remains bipartisan support for tax reform — which promises to generate revenue by simplifying the Tax Code and lowering rates — but Democrats want more of a concrete "down payment" up front for deficit reduction.

"Down payments up front" would be a favorite demand for Democrats. In past deals in which tax hikes were exchanged for spending cuts, tax hikes have the advantage of taking place immediately, while spending cuts tend to disappear in later sessions of Congress. Americans for Tax Reform found that

In 1990, President George H.W. Bush was promised $2 in spending cuts for every $1 in tax hikes by Congressional Democrats. That's not what happened... Not only did the $274 billion in promised baseline spending cuts never materialize--baseline spending was actually $22 billion higher than what CBO projected it would be before the deal.

Long story short - the budget is a lot more than just a matter of arithmetic, the SuperCommittee is likely to be a bust, and it's really, really hard to cut spending.

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