In their coverage of that $70 billion addition to the Federal debt, the Washington Post adds:
House Majority Leader John A. Boehner (R-Ohio) said that holding the line on spending while allowing the low tax rates to spur the economy will close the gap. But the spending problem lies not so much with the federal programs at Congress’s annual discretion but with entitlement programs such as Medicare and Social Security, which will grow by 23 percent through 2010. To close the projected budget deficit by 2010, the economy would have to grow at an average annual rate of 4.9 percent – or 5.5 percent if war costs continue but taper off, according to Leonard E. Burman, a tax policy analyst at the Urban Institute. Such rates have not been seen since the mid-1960s, and most economists see them as impossible, if for no other reason than that the Federal Reserve Board would raise interest rates enough to cool down the growth
Real GDP growth averaged 3.5% per year from 1947 to 2000 and if the OMB’s predictions are correct, the average annual growth rate for the first decade of this century will be less than 3%. Boehner knows that closing the fiscal gap without tax increases cannot happen unless Congress and the White House have the political courage to massively slash government spending, which of course, they don’t. And for all the nonsense about free lunch supply-side economics, reducing national savings does not increase long-term growth.
Dean Baker objects to the discussion of entitlements:
The cost of Social Security is rising only slightly faster than GDP. Over the next decade, Social Security spending is projected to increase by just 0.2 percentage points as a share of GDP. By contrast, spending on Medicare and Medicaid is projected to increase by a total of 1.5 percentage points of GDP. Furthermore, Social Security is financed by a designated tax that is projected to keep the program fully solvent through the 2052 by the non-partisan Congressional Budget Office. This means that any cuts to Social Security should in principle be matched by cuts in the tax, unless the intention is to mislead people about the purpose of this tax. There is a large and powerful lobby that would badly like to cut and/or privatize Social Security, and they have no qualms about playing with the truth to advance their agenda. The media should not help them.
Finally, while the opening of this post says $70 billion – Kevin Drum notes:
Here’s the gimmick. On a regular IRA, you pay no taxes on contributions, but you do pay taxes when you withdraw money. Roth IRAs are just the opposite. So when you do the five-year projections, this bill makes the deficit look a little better because more people are paying taxes on their contributions in 2010-2012 as they switch to a Roth. But the cost is $100 billion or so in the out years. But hey. As long as it makes the five-year projection look better, that’s all that matters. If you’re a Republican, anyway.