United Liberty

The Treasury has released the 2009 Financial Report Of The U.S. Government, which is full of facts, charts and figures on the fiscal health of the country. Let me tell you, if you even have the slightest understand of basic economics, this report should trouble you.

I’ve pulled a couple of the charts to give you an idea of how screwed we really are. Let me be clear in saying that I am not blaming this on the current administration. They are, however, doing nothing to deal with the problem. In fact, they are doing what previous administrations have done…building on past fiscal irresponsibility with more fiscal irresponsibility.

This first graph shows that without major policy changes, debt as a percentage of gross domestic product (GDP) will exceed 200% in the next 35 years. It gets even worse as you can see below. Part of the reason is demonstrated in the next chart.

As you can see here (click to enlarge for better detail), interest on the national debt becomes more of a problem than entitlements, which is what many fiscal conservatives often talk about. This is a financial burden that cannot be solved by simply raising taxes, because with that economic growth is put at risk.

Over the last few decades, annual government spending as a percentage of GDP has been around 20%. However, In the next 20 years, spending as a percentage of GDP will hit 30% and it will just continue to grow.

Here is a look, thanks to Matt Welch over at Reason, at government spending over the long-term. The standard of government spending, until the last couple years, has been 20% of gross domestic product (GDP).

Thanks to booming entitlement spending, specifically in Medicare and Medicaid, the future does not look bright for taxpayers.

Economist Greg Mankiw offers his comments on President Barack Obama’s new commission to tackle budget deficits and what conservatives should hope to accomplish, which the Wall Street Journal calls the “VAT Commission”:

[L]et’s suppose that you are a conservative and you want the fiscal commission to succeed.  You will have to agree to higher taxes as part of the bargain.  But what should you aim to get in return?  Here is my list.

Over at Reason, Peter Suderman hammers Republicans for pandering on Medicare during the health care “reform” debate:

Congressman Paul Ryan’s Roadmap for America’s Future—his sweeping entitlement and budget proposal—would cut Medicare. It would cut Medicare by a lot—more, as Paul Krugman notes, than even ObamaCare would cut it. Indeed, that’s exactly the point, and the virtue of the proposal: In its current form, Medicare is unsustainable. Unlike ObamaCare, Ryan’s proposal would fix that. And unlike ObamaCare, it would not plow funds generated from those cuts back into propping-up and expanding a failing, third-party-payer, employer-provided insurance system that pretty much everyone dislikes. But yes, it would cut Medicare significantly.

That’s a good thing, except that the Republican party is going to have a tough time fully embracing it. The problem is that by using opposition to Medicare cuts to build opposition to ObamaCare, the GOP has rendered itself unale to seriously deal with the program’s long-term problems.

As entitlement spending skyrockets over the next few decades, the Heritage Foundation shows us that these “obligations” alone will surpass the tax base in 40 years.

That may seem like a long way off, and I suppose it is, but Congress failing to act on these unfunded liabilities today will cause economic heartache in the future, and unfortunately, no one is showing leadership.

The so-called party of fiscal conservatism is fighting spending cuts in one of the most bloated social welfare programs in the Federal Budget:

After years of trying to cut Medicare spending, Republican lawmakers have emerged as champions of the program, accusing Democrats of trying to steal from the elderly to cover the cost of health reform.

It’s a lonely battle. The hospital associations, AARP and other powerful interest groups that usually howl over Medicare cuts have also switched sides. Last week, they stood silent as the Senate Finance Committee debated a plan to slice more than $400 billion over the next decade from Medicare, the revered federal insurance program for people over 65, and Medicaid, which also serves many seniors.

With the Finance Committee set to resume deliberations Tuesday, cuts to government health programs are expected to account for at least half the funding for its health-care reform package. A competing bill drafted by House leaders would cut spending even more sharply.

AARP and other groups say the cuts are small enough to be absorbed without affecting services, and many health policy analysts tend to agree. But the size of the cuts is less relevant than the widespread calculation that health-care providers and their most frequent patients have much to gain from President Obama’s overhaul of the nation’s health system.

“Social Security trust funds are a misnomer, and in fact they’re an oxymoron. They shouldn’t be trusted and they’re not funded.” - Peter Peterson

Over at Hot Air, Ed Morrissey has posted a report from the Congressional Budget Office (CBO) on the fiscal health of Social Security that was sent to members of Congress during the summer. The report contains some not so good news:

Four years ago, George W. Bush attempted to reform the entitlement program Social Security, warning that the system was accelerating into collapse and would soon run deficits.  Democrats scoffed and claimed the Social Security system was solid and wouldn’t have problems for at least 50 years, as Harry Reid told PBS’ Jim Lehrer in June 2005.  Just last year, the CBO — under the direction of Peter Orszag, now budget director in the Obama administration — claimed that the first cash deficits in Social Security would not come until 2019.

Now, however, the CBO has determined that Social Security will run cash deficits next year and in 2011, and by 2016 will be more or less in permanent deficit mode.  Hot Air has exclusively obtained the summer 2009 CBO report sent to legislators on Capitol Hill but not yet made public, which shows that outgo will exceed income for the first time since the 1983 fix on an annual basis in 2010[.]

The world was greeted on Saturday with Barack Obama’s announcement of a massive public works program to “save or create at least 2-1/2 million jobs so that the nearly 2 million Americans who’ve lost them know that they have a future,” as Obama put it in his weekly radio address (yes, he’s already doing this, even before the inauguration). A detailed article at Politico.com opens with the following:

President-elect Barack Obama added sweep and meat to his economic agenda on Saturday, pledging the largest new investment in roads and bridges since President Dwight D. Eisenhower built the Interstate system in the late 1950s, and tying his key initiatives – education, energy, health care –back to jobs in a package that has the makings of a smaller and modern version of FDR’s New Deal marriage of job creation with infrastructure upgrades.