Some Very Basic Math on Our Long-Term Fiscal Challenge (aka my Mastercard commercial)
May 12th, 2008 . by economistmomI’ll elaborate on this a little bit tomorrow and maybe over the next few days, but here’s my briefest “commercial” on why both revenue- and spending-side options have to be on the table in addressing the “entitlements problem”…
Current (fiscal year 2007) federal spending as a share of the economy (% of GDP): 20.0%
minus
Current federal revenues as a share of the economy: 18.8%
equals
Current budget deficit as a share of the economy: 1.2%…
Workers per retiree:
- in 2007: 3.3
- in 2050: 2.1 (under Trustees “intermediate” assumptions)
(Translation: more older people, fewer younger workers to support them.)
Future growth in per-capita health costs in excess of economic growth: ???
- But historically, over 1975-2005: +2.1% over GDP growth.
(Translation: not just more older people, but also higher costs per older person.)
Probability we can “flat-line” federal government spending as share of the economy: 0.
That the current level of federal revenues (at 18.8% of GDP) exceeds the 40-year (1968-2007) historical average of 18.3% of GDP?…
MEANINGLESS.
You government people speak so casually with your euphemisms for armed robbery, it makes me wonder if you forget there are real people out there. I’m not a number, and no one is “entitled” to the money I earn with my labor except ME!!!! If I decide to share it, out of the kindness of my heart, with someone less fortunate, the last person to whom I would entrust the job of spending it effectively is some scheming bureaucrat.
I swear, it’s not your money, so stop talking about other people’s labor (the taxpayer) like it’s some natural resource you own and realize those are actual human beings, with their own goals and values and priorities, which have nothing to do with financing half an old person’s “entitlements” or a vast foreign war machine and matching domestic police state.
If the government was an efficient employer of capital, then additional revenue (taxes) might be in our interest. But the government rarely is; just the opposite. Health care costs are exploding because the government is involved with the 3rd party payer problem. You state that flat lining spending is not an option. Why? The first thing a business or household should do when facing a deficit is to cut spending. This sounds like a lack of political will. The answer is not to hobble the economy. As for revenue neutral, how could you possilby measure that? The dyanamic aspects of revenues and behavior around a change in taxes make it very difficult to determine revenue neutrality. Every estimate I’ve ever seen always overestimates the expected revenue from a tax increase and the cost from a tax cut.