As More Americans Have Become Dependent on Federal Programs, Republicans Have Struggled to Uphold the Animating Principles of the Party

For some reason, progressives see the budget deal as a win for Republicans, and a few conservatives have as well. But we're going to need $100s of billions in reduced spending before we can really claim to be shrinking the public sector and restoring both fiscal sanity and limited government. And of course those on the left don't care about balancing the budget, since government expansion has been put in overdrive since Obama took office. But folks who do care should get a load of James Capretta's piece in the Winter 2011 issue of National Affairs, "Priorities for a New Congress."

In 2009, the federal government ran a budget deficit of $1.4 trillion, or 10% of the nation's gross domestic product. That was followed by a deficit of $1.3 trillion in 2010, or 8.9% of GDP. The 2011 deficit is expected to reach about 10% of GDP again. While revenues have declined because of the recession, this massive increase in deficits has been driven mostly by enormous growth in spending: Between 1990 and 2008, annual federal outlays averaged 20% of GDP, but in 2010 spending reached 23.8% of GDP — a difference of about half a trillion dollars per year. To see where such reckless imbalances lead, consider that, at the end of 2008, federal debt stood at $5.8 trillion; on its present course, it will be $20 trillion by 2020.

To make matters worse, these frightening figures do not even fully reflect the cost of paying out entitlement benefits to the retiring Baby Boom generation. Between 2010 and 2030, the number of Americans age 65 and older will increase from 41 million to 71 million. The Congressional Budget Office projects that spending on the nation's largest entitlement programs — Social Security, Medicare, and Medicaid — reached 10.3% of GDP in 2010, up from 5.4% in 1975. By 2030, the combined costs of these programs (including the provisions of the new health-care law, if it is fully implemented) will have risen to 14.7% of GDP, or nearly $3 trillion. In other words, over the next two decades, the federal budget is scheduled to absorb new entitlement-spending commitments that are roughly the size of the entire Social Security program today.

The only real options for closing the budget gap are to lower spending, increase revenues, or pursue some combination of both. Republicans won the 2010 election in large part because most Americans do not trust the Democrats to solve this problem: They believe that unified Democratic control of the executive and legislative branches will mean a heavy tilt toward tax increases to reduce deficits and borrowing. Americans would prefer their elected leaders to come at the deficit problem from the other side, cutting government spending so that it does not exceed available revenue.
It's a great piece, so check out the rest at the link above.

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