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Return to 2001 spending levels


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Opinion 8:18 p.m. Tuesday, December 14, 2010

Return to 2001 spending levels

By Jeffrey Dorfman

The U.S government is currently running an unprecedented $1.3 trillion budget deficit. Regardless of the recent pronouncement from the deficit commission, there is no plan to do much in the way of addressing the deficit. President Barack Obama’s budget projections show the current level of spending continuing as far as the eye can see. The Republicans, who are about to control the House, have no interest in raising taxes.

Republicans continue to claim that the problem is out-of-control spending. They are calling for cancellation of the remaining stimulus spending and further cuts in federal spending. Democrats blame the deficit on President George W. Bush’s tax cuts. They want to increase income taxes at least on the high-income earners.

It is possible that they are both correct. Perhaps a little historical context can help us see what has truly transpired.

In January 2001, we were at the end of the Bill Clinton presidency. The budget had a $160 billion surplus, and the government had been split for six years between a Republican Congress and a Democratic president. We will soon have a similar split government. But can we expect to see a surplus any time soon? Not unless government makes big changes in the current budget.

So what has changed since Clinton’s term ended?

To examine this, I compared the current federal spending and tax receipts to those at the start of 2001. The latest figure for U.S. government spending in 2010, based on the pace of spending through the third quarter, is $3.75 trillion. At the start of 2001, federal spending was $1.94 trillion.

To be fair, we need to adjust the 2001 spending to account for inflation since then, which has amounted to about 23 percent, and for population growth, which has been 9.5 percent. So to spend the equivalent amount per person today would take $2.63 trillion. That means we are currently spending $1.12 trillion more per year than what we were spending at the end of the Clinton administration, even after adjusting for population and inflation.

On the revenue side, the latest 2010 number is $2.42 trillion. The 2001 number was $2.10 trillion. When I adjust the 2001 revenue for inflation and population growth, the equivalent revenue today would be $2.84 trillion. Thus, revenue is $420 billion lower today than it was in 2001 once we make the adjustments for inflation and population.

So in comparing the changes to revenues and expenditures, we find that federal government revenues have dropped by 15 percent since 2001 on a constant dollar, per capita basis (with half the drop due to the just-ended recession and half having occurred before the recession). Meanwhile, federal spending has increased by an astonishing 43 percent over the same period, again after the adjustments for inflation and population growth.

These numbers suggest that the deficit has been caused much more by out-of-control spending than by a shortage of tax revenues.

So for a start, Congress should reduce spending to an amount equivalent to the end of President Clinton’s term adjusted for inflation and population growth. That would shrink the current federal deficit to a fairly manageable $230 billion.

The tax receipt data from 2007 suggest that as we continue to recover from the recession, tax revenues should rise by about $200 billion without needing to raise taxes. That would balance the budget.

Returning government spending to the equivalent of 2001 levels would be difficult politically. Both bureaucrats and politicians will protect their favorite programs. But it would balance the budget.

Jeffrey Dorfman teaches economics at the University of Georgia.

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'Let's cut spending'. Yes, let's. Thanks for the help, Mr. Economist.

Everyone agrees on that principle. Few people agree on what to cut.

I think his point was a bit broader than "lets cut spending." One option (that a whole lot of Republicans would oppose) would be to look at where spending increased after 2001 and start cutting there. And I think he acknowledge the political reality of cutting spending, namely, that people on both sides of the aisle still want to protect the rice bowl.

I also didn't read him as ruling out tax increases to solve the problem so much as saying increasing taxes will not accomplish as much as cutting spending, since spending is the real problem.

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'Let's cut spending'. Yes, let's. Thanks for the help, Mr. Economist.

Everyone agrees on that principle. Few people agree on what to cut.

It would be nice to see a %10 across the board budget cut bill. The problem with this is the same problem with ideas like the flat tax or fair tax: It is asking Congress to give back power.

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It would be nice to see a %10 across the board budget cut bill. The problem with this is the same problem with ideas like the flat tax or fair tax: It is asking Congress to give back power.

Do you honestly think that the members of Congress enjoy having the budget deficit so high? Do you really think they consider that 10% some sort of power?

I just think that's very cynical. It's much more likely to me that they are entwined in a web of deals and favors that they've entered into with the interests of their electorate at heart from which they can't ever free themselves.

I'm tired of the constant vilification of every elected official.

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Do you honestly think that the members of Congress enjoy having the budget deficit so high? Do you really think they consider that 10% some sort of power?

I just think that's very cynical. It's much more likely to me that they are entwined in a web of deals and favors that they've entered into with the interests of their electorate at heart from which they can't ever free themselves.

I'm tired of the constant vilification of every elected official.

Those deals and favors are what have created power for the elected officials. What do you think would happen in Washington state if the republican senator told his constituents (cough-Boeing-cough) that they wanted to cut the defense budget by 10%?

Now, let's drop Washington state, and insert:

Iowa - ethanol subsidies

Texas - oil exploration tax breaks

Ohio, Michigan, Pennsylvania: pro-Union policies

Every single state has some serious craptastic spending that is completely unnecessary...and every bit of it is because some elected official somewhere wanted to bring home the bacon to their "constituents."

You can call that cynicism if you want to. But it's the ****ing truth.

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Do you honestly think that the members of Congress enjoy having the budget deficit so high? Do you really think they consider that 10% some sort of power?

I just think that's very cynical. It's much more likely to me that they are entwined in a web of deals and favors that they've entered into with the interests of their electorate at heart from which they can't ever free themselves.

I'm tired of the constant vilification of every elected official.

Yea, I do. Of course they do not consider it in that perspective, but whether its a defense project or pork for their home district they all have a pet project that 'couldnt possibly withstand cuts.' I dont mean it in some dire warning of diabolical intent. Its very matter of fact. They went to Congress to acquire the power to enact whatever it is that they are there to do. Just like most people think poorly of Congress but not of their congressman, members of Congress see the budget as able to withstand cuts, but not their projects. So, as a body Congress protects its power to tax and its power to spend.

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Those deals and favors are what have created power for the elected officials. What do you think would happen in Washington state if the republican senator told his constituents (cough-Boeing-cough) that they wanted to cut the defense budget by 10%?

Now, let's drop Washington state, and insert:

Iowa - ethanol subsidies

Texas - oil exploration tax breaks

Ohio, Michigan, Pennsylvania: pro-Union policies

None of those people would get reelected, and people who DID provide for their constituents would be elected.

That's part of my complaint...Americans claim to want spending cuts and honesty, but what we really want (judging by our actions) is more stuff, more money and more excess.

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None of those people would get reelected, and people who DID provide for their constituents would be elected.

That's part of my complaint...Americans claim to want spending cuts and honesty, but what we really want (judging by our actions) is more stuff, more money and more excess.

And THAT is why we need elected officials to do it unanimously, instead of playing politics and putting their careers over the health of the nation.

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And THAT is why we need elected officials to do it unanimously, instead of playing politics and putting their careers over the health of the nation.

You want thousands of elected officials who have countless competing missions to do something unanimously that we can't even do on a message board with a few dozen people?
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You want thousands of elected officials who have countless competing missions to do something unanimously that we can't even do on a message board with a few dozen people?

Thats the trick in politics isnt it. You dont so much get everyone to agree as much as you get them to sign on. I dont think that the 10% cut thing is likely to happen but if it did it would have to manifest itself by way of someone taking the initiative to challenge Congress to vote against it. Short of a Speaker of the House or the President pushing for something like this, its not going to happen. For it to work, the President or Speaker would have have to hold the Congress hostage with public opinion or do something similar to this Congress and ramrod it through with political power. Unanimous in action is practically impossible and unanimous in intent is just plain impossible.

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I like how the republicans voted to ban earmarks. And what happens to the first major bill put in front of them??? Lots and lots of earmarks. Do you think they will vote against it?

$7 Billion in earmarks in the Senate version of the bill. And while the Democrats had the most total earmarks, the individual Senators with the most for their states were both Republicans, with the top one being Thad Cochran of Mississippi. According to Washington reporter Jamie Dupree, Cochran has 230 earmarks in this bill.

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And people wonder why neither party has any credibility.

Link

Those Pesky GOP Earmarks

11:15 am December 15, 2010, by Jamie Dupree

While Republicans denounced the 1,924 page Omnibus budget bill that was unveiled by Senate Democrats yesterday, their arguments against earmarks ran into some trouble during a news conference today.

Sen. John Cornyn (R-TX) joined Sen. John Thune (R-SD) in the Senate Radio-TV Gallery in what was billed as a news conference to blast the move by Democrats to bring up this $1.1 trillion Omnibus in the waning days of this session of Congress.

"There is no reason other than political expediency to try to jam this bill through," said Cornyn, accusing top Democrats of ignoring the message sent by voters in November, that they wanted less spending, not a bill filled with home-state budget earmarks.

But if advisers to the Senators thought the opening statements of Cornyn and Thune would set the theme for this news conference, they were wrong, because the fine print of the Omnibus showed many Republican Senators at the pork barrel trough as well.

My review found 45 earmarks for Cornyn and another 26 for Thune. Those examples didn't get ignored by reporters.

"The bill contains many earmarks that you requested," said one reporter, starting the Q&A.

"Pardon me?" said Cornyn.

"I intend to vote against those earmarks because the American people sent a message on November 2nd," said the Texas Republican.

"Senator Thune, I was just looking at the list of earmark requests that you requested this year and it adds up to over a hundred million dollars," said another reporter, asking the South Dakota Republican - who has been talked about as a Presidential hopeful - if he would strike those earmarks.

"I support those projects, but I don't support this bill," Thune answered.

Time for another question.

"Going through this bill, there is earmark after earmark from the both of you, millions of dollars in earmarks," asked another scribe with a jab.

"Why do you have any credibility on this?"

"Because we're going to vote against the bill," answered Cornyn.

"It appears like you're saying one thing and doing another," another reporter pressed.

"Not at all," said Cornyn, as Thune also stepped in to defend their stance on the Omnibus.

"We've got to leave it there - we've got to get going," a GOP aide said, trying to end the press conference and quickly get the Senators out the door.

"Were you wrong when you put these earmarks in?" asked one reporter, ignoring the staffer.

"You're missing the story if you think it's just about earmarks," Cornyn protested, trying to turn the focus back to Democratic leaders bringing this huge bill to the floor with little time for review.

"Thank you guys. Thank you very much," the same staffer quickly interjected as Cornyn finished his answer, trying again to end the news conference.

"Is that an acknowledgement that it was wrong to put the earmarks in in the first place?" a reporter asked.

"You've asked the question about five times and I've tried to answer it to the best of my ability," said a somewhat irked Cornyn, who then zipped out the door.

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I don't know how the system works, but from my understanding many of these earmarks that made the way into this bill were put forth months ago before the election. So its not exactly how it looks.

I don't think it could look any worse. Politicians out on the campaign trail railing against the out of control spending in Washington, all the while loading earmarks into a bill. And now that the election happened, and the "message" was sent, they still refused to remove their sponsorship on the earmarks.

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step 1. laugh at those that want to cut spending to 2001 levels

step 2. cut spending to 1901 levels

step 3. profit?????????

this article gives an idealistic concept with no tangible plans on how to do it. it's not as simple as pull up 2001's budget and match it, a lot has happened since then (2 wars, heck the creation of a whole new department (homeland security))

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step 1. laugh at those that want to cut spending to 2001 levels

step 2. cut spending to 1901 levels

step 3. profit?????????

this article gives an idealistic concept with no tangible plans on how to do it. it's not as simple as pull up 2001's budget and match it, a lot has happened since then (2 wars, heck the creation of a whole new department (homeland security))

I'd settle for 2006 levels, that would get it done in 2 or 3 years or freeze spending levels, implement the Fair Tax and it'll be done in 5 years...

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