IN THE QUIXOTIC pursuit of fiscal sanity, the House is desperately trying to cut more than $50 billion in spending over five years. But that's a measly $10 billion a year, at a time when federal deficits are hovering between $300 billion and $400 billion and are projected to double by 2015.
Overall federal spending is a mind-numbing $2.6 trillion a year. At the same time, GOP House leaders plan to extend tax cuts, primarily for the wealthiest Americans, at a cost of $70 billion over the same five years. This is the equivalent of trying to kill a tiger with a flyswatter. Most Americans have tuned out the ever-scintillating details of fiscal policy because the deficit seems so incomprehensible and intractable. But elementary school math shows that the current House approach is symbolic at best:
(1) Cutting $10 billion out of $400 billion slices a mere 2.5% off the deficit.
(2) Shaving $10 billion off $2.6 trillion cuts federal spending by 0.4%.
(3) $70 billion in tax cuts for the wealthy, minus $50 billion in spending cuts, means that the deficit will actually increase by $20 billion.
Deficits are a very real and growing problem, particularly as healthcare costs soar. Baby boomers start retiring in a few years, and the three big entitlement programs (Medicare, Medicaid and Social Security) are on track to gobble up all federal revenues by 2030. In the long run, our options are stark: Either we shut down the rest of government, raise taxes by 50% or put our economic future at great risk.
The House proposal, among other things, would slash Medicaid benefits by $11.9 billion and student loans by $14.3 billion, at a time when the poverty rate has risen four years in a row and the middle class is increasingly being priced out of college. All of this money -- and more -- will then disappear into the bank accounts of wealthy individuals, assuming the tax portion of the package is also enacted. Real deficit reduction will require curbing the big-ticket spending items. Medicare, Medicaid and Social Security consume more than $1 trillion of public spending each year -- a total that makes $11.9 billion look like chump change.
Many experts believe that Social Security can be fixed by a combination of raising the eligibility age, relating benefits more to income and raising the income cap on payroll taxes.
