Question to Dana Perino – Who Should Pay for This War?

Mark Thoma follows up on this discussion with a post called War on the Cheap:

here’s a way the costs are being reduced: by making sure soldiers who served in Iraq are not eligible for education benefits after they return. This is not how we should be saving money or treating our soldiers.

And we were complaining that Bush vetoed SCHIP! So George W. Bush limits his fiscal conservatism to screw the kids of the working poor and screw the troops. But look – the amount of savings from these two large cuts in small programs (as Max Sawicky might call this) are a drop in the bucket to the General Fund deficit. Looking at table B-78 from this source, it seems that Bush’s own economists believe that total Federal debt will exceed $9 trillion by the end of this fiscal year, which translates into a deficit of $556 billion for the year. OK, they projected a much small rise in the debt held by the public as the surpluses of the Trust Funds was projected to be around $300 billion. Their projection for fiscal year ending October 31, 2008 looks even worse. OK, we know they’ve overestimated these things before to declare some sort of great improvement when the actual increase turned out less than their phony forecasts. Nonetheless, the General Fund is still huge and all this garbage about an improving unified deficit is nothing more than the rising Social Security surpluses.

I think it’s time to go big picture as to how much the government purchases and where we raise taxes. Our first graph shows defense spending (Def) non-defense Federal purchases (NonDef) and state & local government purchases (SL). Back in the last year of that leftwing high tax Clinton bad old days, total government purchases were 17.5% of GDP. As of 2007QII, the fiscal responsible George W. Bush made sure we only spent 19.4% of GDP on total government purchases. OK – we had do that stupid war in Iraq so the fact that defense spending went from 3.75% of GDP to 4.75% of GDP is no surprise. Non-defense Federal purchases actually went up – a bit. But then non-defense Federal purchases are only 2.3% of GDP. The state & locals, however, have seen their purchases rise from 11.7% of GDP to 12.3% of GDP. Yes, we do want our schools, our police and fire protection, and our roads maintained. I don’t see anyone in the Republican Party suggesting any significant reduction in government purchases as most of these fellows are wedded to Endless War.

Our second graph breaks up what we spend in taxes between Federal income taxes, Federal payroll taxes, and taxes paid to the state & locals. In 2006, they totaled 32% of GDP – which does sounds like a lot. Of course, their total was almost 34% of GDP back in 2000. So what happened? Well, the state & locals still have their take at almost 13.5% of GDP – while our payroll taxes, which are supposed to be contributions to our Social Security retirement benefits – are still around 7% of GDP. What happened was a big dip in what we paid in terms of Federal income taxes followed by only a partial recovery. While we used to pay as much as Federal income taxes as we paid to the state & locals, last year Federal income taxes were only 11.7% of GDP.

Now I know the rightwing excuse makers are ready to pounce with their supply-side stupidity so let me point that real GDP as of 2007QII was a mere 16.52% greater than it was as of 2000QIV. Hmm – population grew by 6.55% over this period. The 9.35% increase in per capita income is less than 1.4% per year. Not exactly a great performance.

So how do we return to fiscal sanity if we are stuck with Endless War and this GOP fear of raising taxes? You might say – cut entitlements. That seems to be the GOP mantra these days. But George W. Bush has increased entitlements with his bloated Prescription Drug Benefit that he loves to brag about in the same breathe he says he cut taxes. The only large pot of cash that seems to be left is those Social Security benefits that we thought we were paying payroll contributions for. Every time this GOP crew talks about Social Security “reform” – hold onto your wallet. You might think they were talking about the sensible stuff we see from Andrew Samwick but if that’s all they are going to do, the total Federal debt will continue to rise relative to GDP. No I suspect their real game plan is to slash your benefits but leave those payroll taxes quite high. Or maybe they’ll pass the buck to the state & locals so regressive sales taxes will have to be raised.

Now I began this by asking a question to Dana Perino, but I should know better. She’ll never give an honest and intelligent answer to this question. After all, she works for George W. Bush. So might I get a straight answer from the Siamese triplet known as Rudy McRomney or its clone – Fred Thompson? I’m not holding my breathe waiting for it.