Tuesday, February 14, 2012

We Can't Fix the Budget Without Fixing Entitlements

After Obama released his disastrous budget yesterday, I was looking through some of the historical budget data and came upon something interesting which really hit the importance of entitlement reform home.  If you look at outlays as a % of GDP, you see that discretionary spending (everything from wars to the Department of Education) has actually fallen over the last 50 years and is clearly not the source of government largesse, at least in terms of spending (regulations are a different story).  What really is busting the budget are the "mandatory" items like social security and medicare.  Just take a look:

With taxes as a % of GDP expected to be at 15.8% in 2012, this means that even if we give up our entire military and shut down almost every federal agency (other than the IRS, CMS and SSA), we will just be meeting our obligations, not even running a surplus.  Some on the left would suggest we need to increase taxes, but given the recessionary nature of taxation (1% of GDP in increased taxation would decrease GDP by 3%), that is just not realistic, not given the levels of additional taxes we would need to collect.   It is just simply impossible for us to balance the budget again without reforming medicare and social security.   We just can't afford to ignore the problem any longer.

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