I agree with everything Conn Carroll wrote in response to Byron York’s column arguing that spending other than entitlements was creating our current deficits, and just wanted to make some further points.
To start, even if we were able to take discretionary spending back to pre-bailout, pre-stimulus 2007 levels, we’d still be running a deficit of more than $1 trillion this fiscal year.
In 2007, discretionary spending was $1.041 trillion, and according to the Congressional Budget Office’s March baseline, it is projected to grow to $1.361 trillion in 2011 — an increase of $320 billion.
So if we were to go back to 2007 levels of spending, we’d still be left with a $1.079 trillion deficit this year. In fact, if we brought discretionary spending down to zero — that is, not a penny even spent on defense — we’d still be running a small deficit.
It’s true that in an economic downturn, deficits increase for multiple reasons. One is that revenue takes a hit because there are fewer workers and a smaller tax base. Another is that certain “automatic stabilizers” kick in — such as more people collecting unemployment benefits. On top of that, there’s usually some sort of stimulus that increases deficits. All of these factors are inflating our current deficits.
However, if it weren’t for our massive entitlement obligations, we’d be in much better position to respond to economic downturns without incurring massive deficits.
The first Baby Boomers began receiving retirement benefits in 2008 (those who were born in 1946 and eligible for early retirement benefits at 62), and this year, the earliest Baby Boomers hit 65 — so over the next few years, we’ll be getting the first wave of full retirees.
Also, there’s another important point. Fixing entitlements is not merely about solving some problem that’s years or decades away — it’s about reassuring today’s markets that we have a plan to get things under control so that America is a safe place to park their money over time. So far, we’ve been able to get away with our wretched long-term fiscal outlook, even after a credit downgrade, only because investors see the rest of the world as being in even worse shape. But we cannot count on this forever, and at some point, they won’t be as willing to loan the U.S. money so cheaply. And that point will likely come before well before the entitlement crisis itself has fully bloomed.
The longer we wait to do something about entitlements, the more drastic and politically unpopular the choices become — and the more disruptive to our economy. That’s the whole reason why Rep. Paul Ryan, R-Wis., has been so vocal about needing to act now.
