Rick Holmes: Where the money went
Politics is mostly about identity and emotion. Government involves a lot of bookkeeping.
But politics doesn't end when the votes are counted, so even when the facts are as clear as the numbers in an unbalanced checkbook, we ignore them in favor of familiar ideological arguments.
The government is out of money because liberals are chronic overspenders, we say, or because conservatives favor the rich. Federal debt is at record levels because of Jimmy Carter, or Ronald Reagan.
I get it. Philosophy and personality politics are more fun than math. But with Washington politicians playing a game of chicken over the debt ceiling, maybe we should pause in the political argument for a little bookkeeping. Knowing how we got here is a step toward learning how to get out.
The story of America's latest debt crisis is actually pretty easy to tell, because it has a clear starting point: In January 2001, the federal budget was in surplus, to the tune of $128 billion. That month, the Congressional Budget Office - the nonpartisan bookkeepers who are as good as anyone at knowing where the money's going - reported that, under laws in effect at that time, the federal debt would be paid off in 2006.
By now, the CBO projected, the government would be in the black by upwards of $2.3 trillion.
It didn't work out that way, and we shouldn't be surprised. Laws were changed, conditions changed, assumptions changed. In the 10 years that followed, the CBO updated its debt projections more than 30 times. The number-crunchers at the Pew Fiscal Analysis Initiative used those CBO updates to paint a useful picture of what happened.
Pew's charts tell the story better and in greater detail than I can. Note that they don't include Social Security, which is officially outside the federal budget and a topic for another day. The broad outlines of what drives the federal government's debt are pretty obvious to those who can drop their political blinders:
- 41 percent of the debt generated in the past decade comes from spending increases unforeseen in January 2001: two wars, the Medicaid prescription drug benefit, the stimulus program, the Department of Homeland Security, the TARP bailout and much more, including interest on public debt unanticipated in 2001.
- 27 percent came from tax cuts passed in 2001 and 2003, extended in 2010.
- 27 percent came from what the CBO calls technical and economic factors, the biggest of which is the Great Recession. Recessions depress tax revenue and boost spending on programs like unemployment compensation.
To the logical, bookkeeper's mind, these numbers point to how we can dig out of this hole. Growing the federal debt was a matter of spending money we don't have and extending tax cuts we can't afford, and it will take reduced spending and increased revenue - and a stronger economy - to get square again.
That's why the more serious proposals to close the deficit and pay off the debt include some combination of revenues and spending cuts. The Simpson-Bowles commission called for three dollars of spending cuts to one dollar of new revenue, a formula President Obama has endorsed.
The Senate "gang of six" - or five - is working toward a similar ratio, Sen. Mark Warner, D-Va., one of its members, said Friday, but since close to a buck of the spending cuts is money saved by lower interest payments, it's closer to a 50/50 proposition.
Then there are the less-than-serious proposals, like the Ryan House budget, which wouldn't balance the budget until 2040. GOP presidential hopeful Tim Pawlenty balances the budget through wishful thinking, assuming an unprecedented 10 years of 5 percent annual growth in the economy. Their problem isn't an unwillingness to cut spending, but a stubborn commitment to cutting taxes even more for the wealthy and corporations.
But that's politics, where one succeeds by telling people what they want to hear: lower taxes, unlimited spending for all kinds of good ideas, more pay, more benefits, bear any burden to defend American values in every country in the world. As Dire Straits sang, "money for nothing and chicks for free."
At this moment, with Congress paralyzed in the face of a federal default and the economy sliding toward a double-dip recession, the American people need to hear less from the politicians, and more from the bookkeepers.
Rick Holmes, opinion editor of the MetroWest Daily News, blogs at Holmes & Co. He can be reached at email@example.com.