Controlling federal spending is actually well under way

[shira]

Ezra Klein, in a column in Sunday's Washington Post, argues that the U.S. is actually making good progress on handling federal spending. His basic points:

• Congress has accomplished more than $3 trillion in deficit reduction since the start of 2011. These changes alone will stabilize the debt/GDP ratio.
• With expected cost cutting in Medicare and additional tax increases in the upcoming budget deal, the debt/GDP ratio will actually start declining.
• The GOP mantra, "We have a spending problem," is actually not true. What we have is a health care spending problem. Spending in the remainder of the Federal budget is actually stable.
• Since Obama took office, health care spending has slowed significantly - from about 6.5% annually to just 4%, and the cost-cutting measures in Obamacare haven't even kicked in yet.

So why all the hand-wringing by the GOP about overall spending, if we're already doing a pretty good job on controlling spending? Klein argues that arguing about total government spending is just a pretext - to fool the general public into going along with destroying Medicare and moving it to private insurers.

The real problem, he says, is jobs. And right now, that's been lost in the budget battles.

It's a long article, but it makes a number of very interesting points.

http://www.washingtonpost.com/blogs...ase-for-deficit-optimism/?tid=pm_business_pop

Here’s a secret: For all the sound and fury, Washington’s actually making real progress on debt.

Let’s do some quick math. Start the clock — and the deficit projections — on Jan. 1, 2011. Congress cut expected spending by $585 billion during the 2011 appropriations process. It cut another $860 billion as part of the resolution to the 2011 debt-ceiling standoff. And it added another $1 trillion in spending cuts as part of the sequester. Then it raised $600 billion in taxes in the fiscal cliff deal.

Together, that’s slightly more than $3 trillion in deficit reduction. After accounting for reduced interest payments — as there’s now less debt to pay interest on — it’s more like $3.6 trillion. That’s real money!

In fact, that’s about enough to stabilize the nation’s debt-to-GDP ratio over the next decade. If over the next few years, say, there’s another $800 billion in deficit reduction — imagine a new deal that cuts $400 billion from Medicare and other mandatory spending while raising $400 billion in taxes — then the country is put on a declining debt path.

But there’s bigger, better news than that. You might have heard about a recent spat in which House Speaker John Boehner told the Wall Street Journal that President Obama told him, “we don’t have a spending problem.” Cue the shock and horror from right!

In fact, what Obama said is that we have “a health-care problem,” not a spending problem. This is, in general, a fairly uncontroversial point on the right, at least when it’s not being made by Obama. Turns out, it’s also true.

Back in December 2011, I asked Rep. Paul Ryan, budget guru to the House Republicans, for his favorite chart of the year (yeah, I get down like that). He sent me one from the Bipartisan Policy Center showing four lines. One, labeled “discretionary spending,” was drifting down. Another, “mandatory spending,” was also falling. A third, denoting Social Security expenses, was rising a bit, but not by enough to worry anyone. The fourth, health-care spending, was shooting skyward. “Government spending drives the debt, and the growth of government health-care programs drives the spending,” Ryan explained.

So here’s the good news: The growth of health-care costs has slowed in recent years. Big time. From 2009 to 2011, which is the most recent data available, health-care costs have grown by less than four percentage points. That’s compared to typical growth of six or seven percentage points through most of the Aughts. And Medicare is following suit: Spending in 2012 grew by only 3.2 percent.

The $64,000 question — actually, it’s worth trillions of dollars more — is whether this slowdown is a recession-induced blip or the product, at least in part, of cost controls that will persist long after the economy has returned to health. At the moment, there’s evidence to support both views. And we have yet to really begin implementing the many cost control experiments in the Affordable Care Act. If we can get health-care costs under control, then our long-term budget picture is much better.

We can do more, and perhaps we should. Though the Affordable Care Act does much to bring Medicare to heel, there are policies left untried, including increasing deductibles and co-pays for wealthier seniors in Medicare. Similarly, taxes are going to have to go up by significantly more than they did in the fiscal cliff deal to support an aging population. One place to start is to limit the tax break richer Americans get on itemized deductions, as the Obama administration has proposed. Perhaps those two items can be the basis for a future fiscal deal.

But the truth is that deficit reduction is going better than you’d think from listening to the sniping in Washington. So why the continuous freaking out over the deficit? In part, it’s because deficits offer a convenient excuse for politicians to push policies that the American people wouldn’t support on their own terms. Republicans have long wanted to devolve Medicare to private insurers, for instance, but they didn’t get any traction with the idea until they cloaked it in the guise of deficit reduction.

In general, if someone says he thinks the deficit is the most important issue facing the country, but he doesn’t think it’s important enough to merit raising another dollar in taxes, he probably doesn’t really think the deficit is all that important an issue.

If you want to worry over the economy, don’t worry over future deficits, which we can and will get under control. Worry over the labor market, which is in worse shape than predicted a few years ago, and which exhibits fewer bright spots than the budget. The recession was deeper than expected, the recovery has been slower than predicted, and Washington has been feckless in its response than we would’ve hoped. Whereas in late-2011, the Obama administration was at least pushing a big jobs bill, now they and the Republicans have both fallen silent on the issue. At least the deficit has the two sides arguing and trying to act.

 

[ivwshane]

Another reason for single payer. Eliminate the middlemen and reign in the corrupt practices of doctors (unnecessary procedures, incentive based prescriptions, and over billing).

There are so many positive reasons for a single payer government run healthcare system that it's rediculous that we aren't even discussing it.

 

[Anarchist420]

That study is bullshit. The govt is still spending too damn much. It pisses me off that Congress and Obama spend 700 Bn on the military this year and then $680Bn on the military next and then call it a spending reduction.

We don't need govt spending welfare on people and we don't need a fucking empire. It pisses me off to no end. I'm so fucking sick of the god damned militarists and the bureaucrats!

 

[Incorruptible]

That study is bullshit. The govt is still spending too damn much. It pisses me off that Congress and Obama spend 700 Bn on the military this year and then $680Bn on the military next and then call it a spending reduction.

We don't need govt spending welfare on people and we don't need a fucking empire. It pisses me off to no end. I'm so fucking sick of the god damned militarists and the bureaucrats!

This is a major problem, This is not a spending cut but those morons in the government have the nerve to call this a cut and their lapdogs cheer them on

The welfare is a huge waste of money and only perpetuates poverty as well as the military spending which is a waste and makes us less safer

 

[themusgrat]

What a joke. You have your government break every record known to man on deficit spending, then you simply don't retain your record breaking pace, and you get to claim that federal spending is under control?

What a joke. I can't believe anyone believes this.

 

[Matt1970]

It’s healthcare, it’s social security, it’s defense, it’s everything. We either need to raise taxes on everybody, and that means everybody, and/or we need to cut every program. If it isn’t painfully clear now it will be soon enough when we start paying 20% of our total tax revenue on debt interest alone. We can keep spinning this number and that number with this statistic and that but we are just buying time. We will be at 20 Trillion in soon enough and that is one number nobody can spin. US Government spending is a catastrophe. We can blame the left and the right for past debt but we need to stop hemorrhaging money now. .

 

[fskimospy]

What a joke. You have your government break every record known to man on deficit spending, then you simply don't retain your record breaking pace, and you get to claim that federal spending is under control?

What a joke. I can't believe anyone believes this.

No, he's talking about a stable or shrinking debt/GDP ratio... you know the part about government debt that people should actually care about.

What's strange is that you should presumably be happy to hear the news, but you guys can't even take good news on the deficit because you are far more interested in cutting social programs/being outraged/whatever.

What does it say when good news is met with the same rage as bad news?

 

[BigBarney]

increase taxes, slightly cut spending, ALL IS UNDER CONTROL!

awesome.

 

[Moonbeam]

When you drop a pebble in a conservative pond you get rogue waves.

 

[themusgrat]

No, he's talking about a stable or shrinking debt/GDP ratio... you know the part about government debt that people should actually care about.

What's strange is that you should presumably be happy to hear the news, but you guys can't even take good news on the deficit because you are far more interested in cutting social programs/being outraged/whatever.

What does it say when good news is met with the same rage as bad news?

Is this good news? I'm sorry, hearing that we're in the same bad shape we were 5 or 6 years ago, only we were in way worse shape 2 years ago, doesn't sound like good news. I guess every cloud has a silver lining? That's fine, you can look at it that way.

The real problem is spending trilllions of dollars over what we take in. It doesn't matter if we only raise the national debt by 3-4tn instead of 6tn this next 4 years. It's unbelievable amounts of irresponsibility. That's one of the main reasons the Fed continues to inflate the dollar; because otherwise there's no way we can reasonably meet our debts and interests. Inflation is a direct tax upon savings and upon the poor. It's a great racket Congress has going, only I'm sure none of them realize what they're doing. They say they're just raising the taxes on rich people, but the truth is even before they had to raise taxes, they were punishing the poor when once again, they were raising the debt by 6 trillion dollars, over 4 years.

There is no rage here. There is only calm knowledge of what's happening. It is good that we are not barreling into a concrete wall at 90mph anymore. It's still bad that we're going into it at 60mph. There's nothing "good" about the situation at large. Anyone who tries to tell you federal spending is "under control" is only using the past 4 years as their reference point. When given any amount of perspective, the claim becomes laughable.

 

[themusgrat]

When you drop a pebble in a conservative pond you get rogue waves.

You know the funniest part about the fiscal cliff bill? We raised taxes, which was good, yes. But we cut 25bn of present spending, and added on another 335bn of new spending. Oh yes, that's America's answer to a "fiscal cliff." Spend more.

Our politicians are trolling us, only they probably don't know, and alot of the sheep definitely don't get it.

 

[TallBill]

Lmao that anyone is OK with current spending levels. Its disgraceful.

 

[fskimospy]

Is this good news? I'm sorry, hearing that we're in the same bad shape we were 5 or 6 years ago, only we were in way worse shape 2 years ago, doesn't sound like good news. I guess every cloud has a silver lining? That's fine, you can look at it that way.

The real problem is spending trilllions of dollars over what we take in. It doesn't matter if we only raise the national debt by 3-4tn instead of 6tn this next 4 years. It's unbelievable amounts of irresponsibility. That's one of the main reasons the Fed continues to inflate the dollar; because otherwise there's no way we can reasonably meet our debts and interests. Inflation is a direct tax upon savings and upon the poor. It's a great racket Congress has going, only I'm sure none of them realize what they're doing. They say they're just raising the taxes on rich people, but the truth is even before they had to raise taxes, they were punishing the poor when once again, they were raising the debt by 6 trillion dollars, over 4 years.

There is no rage here. There is only calm knowledge of what's happening. It is good that we are not barreling into a concrete wall at 90mph anymore. It's still bad that we're going into it at 60mph. There's nothing "good" about the situation at large. Anyone who tries to tell you federal spending is "under control" is only using the past 4 years as their reference point. When given any amount of perspective, the claim becomes laughable.

You realize that inflation has been extremely low over the last four years, right? Also we can most certainly meet our debts without inflating them away.

Regardless it wasn't massive irresponsibility, deficit spending in that situation was the only economically responsible way for our government to behave. To have massively cut government spending in the face of economic collapse would have been the height of irresponsible governance. We should all be glad that we didn't have someone so foolish as to try that. (and for the record I think that John McCain would have pursued similar policies to Obama.)

 

[werepossum]

You realize that inflation has been extremely low over the last four years, right? Also we can most certainly meet our debts without inflating them away.

Regardless it wasn't massive irresponsibility, deficit spending in that situation was the only economically responsible way for our government to behave. To have massively cut government spending in the face of economic collapse would have been the height of irresponsible governance. We should all be glad that we didn't have someone so foolish as to try that. (and for the record I think that John McCain would have pursued similar policies to Obama.)

So how many times is the left going to proclaim that Obama has fixed the economy before you'll agree to cut out the deficit spending?

 

[GreenMeters]

You know the funniest part about the fiscal cliff bill? We raised taxes, which was good, yes. But we cut 25bn of present spending, and added on another 335bn of new spending. Oh yes, that's America's answer to a "fiscal cliff." Spend more.

The result of the 2011 fight over the debt ceiling, the Budget Control Act, included the the creation of a bipartisan deficit commission charged with crafting a number of legislative proposals aimed at reducing the Federal deficit. To further motivate this panel, the BCA also included automatic budget sequestration that would go into effect if the panel could not come to an agreement. However, the panel could not come to an agreement, as Republicans rejected the 10-to-1 ratio of spending cuts to revenue increases, so the across-the-board sequestration would go into effect as scheduled, on Jan 2, 2013. This would coincide with the sunsetting of tax cuts for the middle class and the wealthy.

However, the economy had still not recovered from the Bush depression. It was no longer reeling, but it was still suffering from significant demand-side weakness. In this state, the combined effect from further reduced consumer spending (primarily by the middle class, who would be hardest hit by the expiring tax cuts) and the reduced government spending would drive the economy back into recession. This was the "fiscal cliff". That is, the "fiscal cliff" was concern, from Republican and Democratic economists, policy makers, and businesspersons (though not from Republican rabble-rousers, who intentionally mislead about the situation), for cutting the Federal deficit too quickly, not for cutting it too slowly.

Our politicians are trolling us, only they probably don't know, and alot of the sheep definitely don't get it.

Indeed, it appears the sheep didn't get it at all...

 

[themusgrat]

You realize that inflation has been extremely low over the last four years, right? Also we can most certainly meet our debts without inflating them away.

Regardless it wasn't massive irresponsibility, deficit spending in that situation was the only economically responsible way for our government to behave. To have massively cut government spending in the face of economic collapse would have been the height of irresponsible governance. We should all be glad that we didn't have someone so foolish as to try that. (and for the record I think that John McCain would have pursued similar policies to Obama.)

The tactic of spending tons of money to shorten a recession is certainly viable. I'm not really saying anything about that. What I'm saying is that when the US takes on 6tn of debt in 4 years, the only way to make the payment upon such a debt is to inflate the currency. First, the Fed doesn't really report accurate inflation numbers. Second, inflation is low for now, yes, but it cannot be in the near future.

Technically there is nothing to stop the US from printing endless money. This is a common misunderstanding of our monetary system. You even hear alot of politicians talking about "going bankrupt" and "defaulting" on our debt. Because we are the sole issuer, there is no reason for us to ever default, unless we want to start up a new currency. The real reason that taking on so much debt is a problem, is because the only way to deal with it in the long term is inflation, or ridiculous taxes. I think we all know that one of those 2 things will have to happen. And here inlies the problem with either, and thus the problem with taking on more debt than one can feasibly repay in any foreseeable amount of time. It destroys the confidence in the dollar. If nobody cared that we were inflating our dollar, or if nobody cared that Americans were spending very little money because they were being taxed for the sins of previous generations, and the dollar could retain its value in global trade, it would be viable.

However, people will be people. The mention of the debt ceiling causes the market to panic at times, and things like gold/silver to spike. For whatever reason, Americans, and really just people period, have no confidence in governments who cannot control their spending. And when you lose confidence in the dollar, it's only a matter of time before the fall of the currency, therefore the economy. A failing dollar would make the Great Depression look like a Sesame Street show where cookie monster runs out of cookies (actually that might be like every one of them now that I think of it).

Point being, in a roundabout way, that we can sit here and argue whether that 6tn was necessary all day long. What we cannot argue about is the fact that hard times are ahead for whoever foots the bill. It may be 10 years, it may be half a century, but one day, people will pay for the last 4 years. They'll pay for all the money we've borrowed from them.

Spending more money than you take in can seem like it doesn't have consequences in the heat of the moment. In the heat of the moment, we thought we "needed" all that extra spending (on top of what we were already overspending), but one day there will be alot of people who don't quite agree. I think time will definitely show it was very inefficient. Actually our current reality shows that.

Should we have cut spending? I don't think so. Were the bank/auto bailouts necessary? Absolutely. But the difference between those things and the stimulus for example, was that we made a deal with the bank/auto industry, and those companies either have paid us back already, or are working on it. That's not the problem. The problem was the 6tn we took up the ass. Do I have a solution? No. Could I if I was one of these idiot career politicians and spent my life working in government? I doubt it.

On a side note, I think it's the fact that average citizens have so much more perspective on the government that leads all of us to believe we could do a better job lol. In reality, most couldn't, but a fair few could.

Anyways now I'm just rambling. Before I go, let's get on the same page about the argument. We both agree some of that spending was necessary, and I don't want to argue about exactly what was, and what wasn't. I don't really know, and neither do you. Nobody can look at dollars pumped into the economy and tell you even 50 years later what exactly those dollars did, or how efficient they were. What I'm saying is that spending more than we take in is always, always bad. Even if it's necessary, it's bad. We all may die before we really see why, but one day, someone will.

Most great nations and empires saw an economic downfall far beyond a military downfall. In most cases, it was because they overreached. When you take on 6tn dollars of debt in 4 years, I think we can all agree we are overreaching.

 

[themusgrat]

The result of the 2011 fight over the debt ceiling, the Budget Control Act, included the the creation of a bipartisan deficit commission charged with crafting a number of legislative proposals aimed at reducing the Federal deficit. To further motivate this panel, the BCA also included automatic budget sequestration that would go into effect if the panel could not come to an agreement. However, the panel could not come to an agreement, as Republicans rejected the 10-to-1 ratio of spending cuts to revenue increases, so the across-the-board sequestration would go into effect as scheduled, on Jan 2, 2013. This would coincide with the sunsetting of tax cuts for the middle class and the wealthy.

However, the economy had still not recovered from the Bush depression. It was no longer reeling, but it was still suffering from significant demand-side weakness. In this state, the combined effect from further reduced consumer spending (primarily by the middle class, who would be hardest hit by the expiring tax cuts) and the reduced government spending would drive the economy back into recession. This was the "fiscal cliff". That is, the "fiscal cliff" was concern, from Republican and Democratic economists, policy makers, and businesspersons (though not from Republican rabble-rousers, who intentionally mislead about the situation), for cutting the Federal deficit too quickly, not for cutting it too slowly.

Indeed, it appears the sheep didn't get it at all...

Most of what you wrote isn't really worth responding to, but calling it the "bush depression" is. Does that mean you think it was his fault? Also, nobody really has any concerns over cutting the deficit too quickly. I know you probably misworded that, but maybe you didn't. If someone paid it off tomorrow, we'd be in good shape. The concern had nothing to do with the debt, and everything to do with taxes.

 

[ivwshane]

It's called the bush recession because it started under his watch. As for blame? There is plenty to go around for EVERYONE!

 

[GreenMeters]

Most of what you wrote isn't really worth responding to, but calling it the "bush depression" is. Does that mean you think it was his fault? Also, nobody really has any concerns over cutting the deficit too quickly. I know you probably misworded that, but maybe you didn't. If someone paid it off tomorrow, we'd be in good shape. The concern had nothing to do with the debt, and everything to do with taxes.

Yeah, I can see why you'd want to run away from the first part after you completely whiffed on what the fiscal cliff was.

As for the Bush depression, in some ways yes, he did cause it. Admittedly the seeds were planted before his time, as both Clinton and Phil Gramm were eager to deregulate the financial industry. However, Bush takes the blame for subverting the inherited surplus and running massive deficits in good economic times with his two unfunded wars, his unfunded tax cut, and unfunded Medicare drug fiasco, which along with his administration's incompetent handling of the unfolding crisis left the government unable to respond to the massive decline in private demand with an equal boost in public spending.

 

[themusgrat]

Yeah, I can see why you'd want to run away from the first part after you completely whiffed on what the fiscal cliff was.

As for the Bush depression, in some ways yes, he did cause it. Admittedly the seeds were planted before his time, as both Clinton and Phil Gramm were eager to deregulate the financial industry. However, Bush takes the blame for subverting the inherited surplus and running massive deficits in good economic times with his two unfunded wars, his unfunded tax cut, and unfunded Medicare drug fiasco, which along with his administration's incompetent handling of the unfolding crisis left the government unable to respond to the massive decline in private demand with an equal boost in public spending.

Show me where I ran away from not knowing what the fiscal cliff is..... Please, explain my words to me

Bush really didn't cause the depression at all. And the worst of it was during Obama's tenure. The guy above was right, it merely started during his term, and there is plenty of blame to go around. Most of the blame obviously lies with Congress and the Fed. Did Bush sign off on some things they sent him? Sure, but things like all the urban housing bills weren't really his fault. Again, sheep, if you'd like to attribute all those things to him, there are a ton of bad things that go under Obama's name. If you read, that's why I make sure I don't call even things like the 6tn Obama's fault. Because it was alot of people's fault. Did he push the stimulus package too much? Does he not really understand the economy? Sure, but he inherited a terrible situation, and you can't blame him for doing what everyone told him he should do. Save the economy Mr. Obama! He did a fine job.

 

[Matt1970]

Yeah, I can see why you'd want to run away from the first part after you completely whiffed on what the fiscal cliff was.

As for the Bush depression, in some ways yes, he did cause it. Admittedly the seeds were planted before his time, as both Clinton and Phil Gramm were eager to deregulate the financial industry. However, Bush takes the blame for subverting the inherited surplus and running massive deficits in good economic times with his two unfunded wars, his unfunded tax cut, and unfunded Medicare drug fiasco, which along with his administration's incompetent handling of the unfolding crisis left the government unable to respond to the massive decline in private demand with an equal boost in public spending.

Two wrongs do not make a right. Bush didn't cause the housing crisis and revenue was below expenditures before Bush put any tax/budget plan in place. The suprplus was bullshit anyways because we were borrowing against SS at the time.

 

[nehalem256]

Another reason for single payer. Eliminate the middlemen and reign in the corrupt practices of doctors (unnecessary procedures, incentive based prescriptions, and over billing).

Of course the 2nd part has nothing to do with single payer.

 

[ShintaiDK]

Nationalize the healthcare to fix the runaway cost. Rather than just pay the bills to greedy companies. US healthcare is way off the charts in cost compared to any other nation with public universal healthcare.

Right now you could cut the healthcare spending with 50% to truely nationalize it.

 

[Genx87]

Nationalize the healthcare to fix the runaway cost. Rather than just pay the bills to greedy companies. US healthcare is way off the charts in cost compared to any other nation with public universal healthcare.

Right now you could cut the healthcare spending with 50% to truely nationalize it.

We could cut 50% of the costs if we cut 50% of the service. To believe cutting 50% of the costs and keeping the same level of service is laughably naive.

 

[nehalem256]

Nationalize the healthcare to fix the runaway cost. Rather than just pay the bills to greedy companies. US healthcare is way off the charts in cost compared to any other nation with public universal healthcare.

Right now you could cut the healthcare spending with 50% to truely nationalize it.

So why didn't Obama do this?

Imagine if he came out and said everyone will have "free" health care and we won't have to raise taxes (50% of health care spending is already government) and in fact effectively most Americans will have more money to spend (no more health care premiums) and corporate profits will increase (no more health care benefits.)

Why if he had been able to do this we would probably be preparing Mount Rushmore for a 5th President.