Yesterday the CBO rocked the news cycle by releasing new estimates on our future fiscal situation. It wasn’t pretty, though that shouldn’t come as a shock to you. The CBO released what is being referred to as a more “politically-realistic alternative scenario.” So these numbers are based on what the CBO expects to happen in the future: the Bush tax cuts will be extended and Medicare spending will not be cut.
So what was the result of these new numbers?
Federal debt as a share of our GDP will be 109% by 2021. By the year 2035, it will be closer to 190% of GDP.
Wow. How in the world did we get to this point? Well Barack Obama surely didn’t help. His own stimulus plan managed to nearly DOUBLE our debt. The Washington Examiner reports:
The 2011 Long-Term Budget Outlook, released Wednesday morning, reports that the “the combination of automatic budgetary responses” and Obama’s stimulus “had a profound impact on the federal budget.” According to CBO projections, before Obama’s stimulus became law, federal debt equaled 36 percent of GDP and was projected to decline slightly over the next few years. Instead, thanks in large part to the stimulus, debt reached 62 percent of GDP by 2010.
So in the wake of this news about our debt, what are the Democrats planning to do? They have two ideas.
#1: Spend more money. No, this is not a joke. A headline from Reuters, not from the Onion, reads: Democrats call for new spending in US debt deal. Yesterday, Democrats in the Senate called on Joe Biden to include “new economic stimulus spending” in his deficit reduction talks. You just read the information above … Barack Obama’s grand stimulus plan nearly DOUBLED our debt, and what do we have to show for it?
#2: Increase taxes. Because the CBO numbers assume that the Bush tax cuts will be extended, the Democrats immediately claim that if it wasn’t for the Bush tax cuts, these CBO estimates wouldn’t be nearly as dire. Guess what, they would be. According to the CBO’s own alternative scenario, even if the Bush tax cuts are extended along with the Alternative Minimum Tax, “federal revenues as a share of GDP will still exceed the post-war average by the decade’s end.” Even if the Democrats managed to repeal the Bush tax cuts, therefore increasing taxes on millions of Americans … would that solve our debt crisis? Of course not! I’ve shared the following information with you before, but considering this latest push to repeal the Bush tax cuts, it is worth sharing again …
In a static world repealing these tax cuts would get you about $3 trillion over ten years. Our federal deficit is almost one half of that every year. Static world? That’s the wonderful world of liberalism where you operate on the assumption that nobody ever changes their economic behavior when tax rates go up or down. History shows that when tax rates go some people reduce their economic activity, and other simply shift their earnings around to avoid the higher taxes … and they do it legally.
But don’t believe me; believe the experts at the Heritage Foundation. I’d highly recommend that you read this column in the Wall Street Journal by Brian Riedl:
The Bush Tax Cuts and the Deficit Myth. I’ll give you just a few of the highlights:
… the much-maligned Bush tax cuts .. caused just 14% of the swing from projected surpluses to actual deficits (and that is according to a "static" analysis, excluding any revenues recovered from faster economic growth induced by the cuts). The bulk of the swing resulted from economic and technical revisions (33%), other new spending (32%), net interest on the debt (12%), the 2009 stimulus (6%) and other tax cuts (3%). Specifically, the tax cuts for those earning more than $250,000 are responsible for just 4% of the swing. If there were no Bush tax cuts, runaway spending and economic factors would have guaranteed more than $4 trillion in deficits over the decade and kept the budget in deficit every year except 2007.
Why are Democrats pushing the repeal of the Bush tax cuts? Because they can’t stand the idea that you can spend your money better and more efficiently than they can. And by “better” I mean that you have the power of choice to spend your money wherever you see fit, without the point of a gun. It takes politicians out of the equation, thereby diminishing their power over you.