I have two New Year’s resolutions: (1) try even harder to find ways to elicit bipartisan support for fiscal responsibility; and (2) Brad Setser’s blog more often. For those grown-up Republicans who wish to support (1), read this from Brad:
Take out social security, which takes in more revenue than it spends, and the budget math is even worse: revenues of 11.4% v. spending of 16.3%, or a deficit of nearly 5% of GDP.
Actually, the 16.3% or so counts only the interest in Federal debt held by the public (2% of GDP) and one we include the interest payments to the Social Security Trust fund (around 1% of GDP), the General Fund deficit is near 6% of GDP. Now President Bush is convinced that tax increases are not needed as spending cuts will do the trick. Before one tries to divide the 6% deficit by the circa 17.5% in non-Social Security spending to suggest a 35% cut in spending will do the trick, consider just three things: (a) not paying interest will be considered default – so take that 3% off the table; (b) the GOP is not about to reduce DoD spending – so take that 4% off the table; and (c) reducing Federal revenue sharing (about 3% of GDP) would mean that the states would have to raise taxes to pay for public education and public order (police and fire departments).
So of the remaining Federal spending, which is about 7.5% of GDP – we would have to cut this by 80% to balance the budget. With the vast majority of this remainder being for health care, which the Bush Administration has guaranteed will go up as the Rx bill is enacted, where does the GOP plan to cut spending enough to balance the budget or even cut it in half?
Well, the answer simply cannot be found anyway in the General Fund. Which is why they wish to slash Social Security benefits as they convert our payroll contributions into employment taxes.