In Part 1 of this budget series I concluded that the recent federal budget deal succeeded in making some spending cuts and moving the overall debate to a place where we're debating where and how much to cut rather than if we should cut. However those "cuts" still leave us with a Fiscal Year 2011 deficit approaching $1.5 trillion, which means that this deal is only a success if it leads to long-term reforms that bring down the deficit.
In FY 2010 the government revenues were $2.16 trillion and spending was $3.46 trillion. How long could a citizen avoid bankruptcy if he brought in $21,600/yr and spent $34,600/yr? This level of irresponsibility would be catastrophic to a regular person and it's a catastrophe for our country. In fact, just today S&P shockingly downgraded our country's outlook from stable to negative due to our mountain of debt. To understand what must be done starting with the FY 2012 budget, first we need to understand where the money is going.
Social Security cost $701 billion. Medicare was $446 billion. Medicaid cost $273 billion. These 3 entitlement programs by themselves cost $1.42 trillion. Important to note: in each program costs are projected to explode in the next 10 years. Currently those 3 programs alone are expected to nearly double to $2.67 trillion in 2021. They must be reformed if we have a chance at getting control of our budget.
Excluding the repaid TARP money, the federal government spent a total of $2.064 trillion in FY 2010 on entitlement programs. In addition, the government spent $196 billion on net interest payments to the holders of their debt. The government is obligated to make all of these expenditures.
The entitlement programs and net interest payments combined cost $2.26 trillion. Yet total government revenues were only $2.16 trillion. In other words, the government was already $100 billion in the hole before it authorized a penny of spending!
Security spending, which includes Defense spending, Homeland Security, Veterans Affairs, and other security-related expenses, totaled $815 billion. Non-security discretionary expenses were $491 billion.
With these numbers in mind, let's return to the recent budget fight. Congressional Republicans focused exclusively on non-security discretionary spending for their spending cuts. They ignored the other 86% of the budget. The government could shut down the entire military, all homeland defense, and all other discretionary spending, and it still wouldn't be able to balance the budget.
It's time for everyone to grow up. We can't afford any further tax cuts. We can no longer refuse to make significant changes to entitlement programs, that by themselves are consuming most government revenues. We can no longer exempt the military from spending cuts, pay freezes, and all other reforms that other government agencies are already being forced to accept. Needless to say, Democrats must accept the fact that non-security discretionary spending must be cut. But that can only be a start. Everything has to be on the table.
- Part 3 of this series will list a number of cuts and reforms that we must make if we are to save our country from a fiscal meltdown.