Friday, April 22, 2011

Battling a Zombie Lie: We Have a Spending Problem (Update 1)

A favorite GOP talking point that gets bounced off the walls of the MSM, especially on Fox News (arguably not part of the MSM!), is that "America has a spending problem."  Not everyone agrees. I think a better way to put that is "America also has a spending problem."  But America has a much more serious revenue problem we need to tackle first. (Updated: Added table of Bush/Obama tax cuts showing $1.2 trillion in AMT relief)

Revenue Problem
Data from the CBO shows how significant this revenue problem actually is. You can see the trough of revenue from the peak in 2006 to now.  This is, by definition, a problem.

The Bush/Obama tax cuts left a huge revenue hole in the Federal budget.  And since the GOP don't feel that tax cuts have to be paid for (or worse, that they "pay for themselves"), this hole persists.

Discretionary Spending
So while America clearly has a revenue problem, we also have a (smaller) spending problem.  As you can see from the projections of the CBO, this is a short-term spending problem as a result of the recession and the policies the Obama administration and Congress implemented to stimulate the economy.  Their stimulus was mildly successful, but frankly, we could have used a lot more.

Additionally, note that defense represents the lion's share of the discretionary spend.  We need to seek low-hanging fruit within the Pentagon's budget before we even being to touch social welfare programs.

Mandatory Spending
Finally, we have the mandatory spending much of which is non-negotiable.

Humorous Aside - The Unserious Republican / Tea Party
However, there are some ways to trim in the mandatory area.  Here's one that the Tea Party shouted down in Summer 2009: The Public Plan Option

It makes me smile to think that the Tea Party pushed to spend an extra $17.4 billion so that UnitedHealth, BlueCross and the other private insurers could keep their cut of our publicly funded healthcare.

The GOP / Tea Party is completely unserious at this point.

Update 1: Table of the Bush / Obama Tax Cuts

Have a look at this table of the Bush / Obama Tax Cuts

Note the highlighted area entitled "AMT relief."  Guess who that $1.2 trillion benefits?  You got it.  That's the tax cut which mostly benefits the rich.  The AMT is designed to ensure that individuals and companies pay at least some minimum tax.  We see how well that works (see Revenue graph above).


  1. "Revenue Problem
    Data from the CBO shows how significant this revenue problem actually is. You can see the trough of revenue from the peak in 2006 to now. This is, by definition, a problem."

    No, the chart only shows the percent of revenue from GDP. GDP isn't constant.

    When the actual GDP numbers are used, the opposite is true. From the US Dept of Commerce, Bureau of Economic Analysis(in Billions of Dollars)
    the GDP in 2000 was 9,951.5 and the chart says revenue was 21% of it, 21% of 9951.5 = 2089.815.

    In 2006 (when the Republican's last controlled Congress) GDP was 13,398.9 and the chart says revenue was 18% of it, 18% of 13,398.9 = 2411.802.
    Therefore in 2006 the US Treasury had collected 321.987 more in revenue that they had collected in 2000.

  2. Thanks for the additional info, I will have a look.