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Policy: Budgets & Deficits

Philip Klein: CBO report settles budget debate in conservatives' favor

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Photo - A pile of cash on an American flag with a stethoscope on the money, inferring anything from medical costs to economic health and financial stability.
A pile of cash on an American flag with a stethoscope on the money, inferring anything from medical costs to economic health and financial stability.
Opinion,Philip Klein,Columnists,Campaign 2012,Politics Digest,Budgets and Deficits,CBO

Even as circumstances change, most budget battles boil down to the following dynamic: Liberals push to raise taxes and cut defense spending, while conservatives argue that entitlements are the true driver of the nation's deficits.

A new report by the Congressional Budget Office settles the debate, unequivocally, in conservatives' favor. Taking into account the flood of new tax revenue from the "fiscal cliff" deal that raised taxes on higher income earners, and assuming that scheduled deep defense cuts go into effect, the CBO still projects that the national debt will skyrocket over the next decade. The reason is that spending on programs such as Medicare, Medicaid and Social Security will soar, and in turn increase the burden of interest payments. Let's just take a look at the numbers.

Between 2014 and 2023, according to CBO estimates, annual tax receipts will soar by 65 percent. During that time period, revenue collected by the federal government will average 18.9 percent of the economy. That's 1 point higher than the 17.9 percent average from the end of World War II to the year 2000 (just before George W. Bush's first round of tax cuts was passed.)

At the same time, due to negotiated budget caps and automatic cuts known as the sequester, defense spending is projected to grow relatively modestly -- by about 20 percent over the next decade. By 2023, defense spending will account for only 12 percent of the overall federal budget. Not only is this well below the historical average, it's the lowest level since at least 1940, when the White House Office of Management and Budget data begin. (It's almost certainly the lowest level in history, given that the modern welfare state didn't begin until 1935 with the passage of Social Security). Previously, the lowest level recorded was in 1999, toward the end of the post-Cold War military drawdown, and even then defense represented 16.1 percent of the budget.

Despite the fact that new tax revenue will be drastically outpacing growth in the defense budget, the nation is still projected to accumulate an additional $7 trillion in deficits over the next 10-year period, bringing the public debt to $20 trillion. The cause of that debt, therefore, cannot be taxes that are too low or defense spending that's too high. In fact, by 2020, Congress could vote to eliminate all military spending and it wouldn't even be enough to cover interest payments on the national debt.

The true driver of the national debt has long been staring the nation in the face, and it's the skyrocketing cost of entitlement programs. Though the CBO expects annual defense spending to grow 20 percent over the next decade, it sees spending on Social Security growing at 67 percent and spending on government health care programs (led by Medicare, Medicaid and Obamacare) soaring by 94 percent.

All told, in 2023, the federal government is projected to spend $3.7 trillion on mandatory programs, representing 62 percent of the budget and more than five times what will be spent on defense.

These numbers, taken together, make it abundantly clear that the only reason for additional tax hikes at this point would be to chase skyrocketing spending on entitlements. Paying for this spending wouldn't be a matter of asking the very rich to pay a little more -- it would necessitate large tax hikes on the middle class that far exceed historical levels.

Sure, liberals could still make a case for raising taxes on all as their way of restraining the growth of the debt. But there should be no doubt what's driving that debt.

Philip Klein (pklein@washingtonexaminer.com) is a senior editorial writer for The Washington Examiner. Follow him on Twitter at @philipaklein.

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Philip Klein

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