President Obama’s State of the Union speech was filled with big government jingoism, attempting to tap into the can-do American spirit to push his expansionist public policy agenda. The media seized on his declaration that this was a “Sputnik moment.” Obama said we should respond to current challenges as we did in the space race and declared that “we do big things.” But it’s worth noting that when America faced its actual Sputnik moment in 1957, the nation was in a much better position to respond precisely because we weren’t as burdened by massive debt from government programs.
— In 2011, the U.S. will run a projected deficit of 9.8 percent of GDP, or nearly $1.5 trillion. In 1957, the government was running a surplus of .8 percent of GDP, or $120 billion if adjusted for the 2011 GDP estimate.
— In 2011, debt is projected to be 69.4 percent of GDP, and trending upward. In 1957, debt was 48.6 percent of GDP as we were still paying of debt from World War II, but trending downward. Adjusted for today’s dollars, the debt was $3.1 trillion lower back in 1957.
— In 2011, Social Security, Medicare, Medicaid and other health care programs such as S-Chip cost about $1.6 trillion, or 10.6 percent of GDP. In 1957, Social Security cost 1.5 percent of GDP, or $226 billion if adjusted. Medicare, Medicaid, S-Chip, and related programs did not exist.
The existence of those programs today, however, produces the following outlook from the CBO:
Beyond the 10-year projection period, further increases in federal debt relative to the nation’s output almost certainly lie ahead if current policies remain in place. The aging of the population and rising costs for health care will push federal spending as a percentage of GDP well above that in recent decades. Specifically, spending on the government’s major mandatory health care programs—Medicare, Medicaid, the Children’s Health Insurance Program, and health insurance subsidies to be provided through insurance exchanges—along with Social Security will increase from roughly 10 percent of GDP in 2011 to about 16 percent over the next 25 years. If revenues stay close to their average share of GDP for the past 40 years, that rise in spending will lead to rapidly growing budget deficits and surging federal debt. To prevent debt from becoming unsupportable, policymakers will have to substantially restrain the growth of spending, raise revenues significantly above their historical share of GDP, or pursue some combination of those two approaches.
It’s hard to do “big things” when you have to pay for big government.
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