I sometimes feel like a broken record about entitlement programs. How many times, after all, can I point out that America is on a path to become a decrepit European-style welfare state because of a combination of demographic changes and poorly designed entitlement programs?
But I can’t help myself. I feel like I’m watching a surreal version of Titanic where the captain and crew know in advance that the ship will hit the iceberg, yet they’re still allowing passengers to board and still planning the same route. And in this dystopian version of the movie, the tickets actually warn the passengers that tragedy will strike, but most of them don’t bother to read the fine print because they are distracted by the promise of fancy buffets and free drinks.
We now have the book version of this grim movie. It’s called The 2017 Long-Term Budget Outlook and it was just released today by the Congressional Budget Office.
If you’re a fiscal policy wonk, it’s an exciting publication. If you’re a normal human being, it’s a turgid collection of depressing data.
But maybe, just maybe, the data is so depressing that both the electorate and politicians will wake up and realize something needs to change.
I’ve selected six charts and images from the new CBO report, all of which highlight America’s grim fiscal future.
The first chart simply shows where we are right now and where we will be in 30 years if policy is left on autopilot. The most important takeaway is that the burden of government spending is going to increase significantly.
Interestingly, even CBO openly acknowledges that rising levels of red ink are caused solely by the fact that spending is projected to increase faster than revenue.
And it’s also worth noting that revenues are going up, even without any additional tax increases.
The bottom part of this chart shows that revenues from the income tax will climb by about 2 percent of GDP. In other words, more than 100 percent of our long-run fiscal mess is due to higher levels of government spending. So it’s absurd to think the solution should involve higher taxes.
This next image digs into the details. We can see that the spending burden is rising because of Social Security and the health entitlements. By the way, the top middle column on “other noninterest spending” shows one thing that is real, which is that defense spending has fallen as a share of GDP since the mid-1960s, and one thing that may not be real, which is that politicians somehow will limit domestic discretionary spending over the next three decades.
This bottom left part of the image also gives the details on built-in growth in revenues from the income tax, further underscoring that we don’t have a problem of inadequate revenue.
Here’s a chart that shows that our main problem is Medicare, Medicaid, and Obamacare.
Last but not least, here’s a graphic that shows the amount of fiscal policy changes that would be needed to either reduce or stabilize government debt.
I think that’s the wrong goal, and that instead the focus should be on reducing or stabilizing the burden of government spending, but I’m sharing this chart because it shows that spending would have to be lowered by 3.1 percent of GDP to put the nation on a good fiscal path.
Some folks think that might be impossible, but I’ll simply point out that the five-year de facto spending freeze that we achieved from 2009-2014 actually reduced the burden of government spending by a greater amount. In other words, the payoff from genuine spending restraint is enormous.
The bottom line is very simple.
We need to invoke my Golden Rule so that government grows slower than the private sector. In the long run, that will require genuine entitlement reform.
Or we can let America become Greece.
[…] times, I’m not overly optimistic. Given the growth of dependency, the expansion of government, and demographic decline, I fear there may be 22nd-century videos discussing how the United States […]
[…] I realize that hotel guests probably don’t want that message right before […]
[…] all, we desperately need “draconian spending cuts” in […]
[…] for our economy, though, when foreigners buy government bonds. But that’s the fault of our ever-expanding welfare state, not […]
[…] Dans un billet de 2013, je recommandais l’Australie comme meilleure option pour ceux qui envisagent de trouver un nouveau lieu de résidence en cas d’effondrement budgétaire à la grecque aux États-Unis. Je précisais que l’Amérique n’était pas en situation de danger immédiat, même si je comprenais pourquoi certaines personnes s’intéressent à la question compte tenu de nos sombres perspective de long terme. […]
[…] the dismal long-run outlook for the United States and most other developed nations, this is not just a theoretical […]
[…] basically warn people that many western nations (including the United States) are doomed to suffer Greek-style fiscal collapse. Depending on the type of speech, this is where I […]
[…] Government spending on pensions will decline even though the population is getting older. Too bad that’s not what’s happening in […]
[…] the routine corruption and reckless spending in Washington, I frequently get asked how I keep my […]
[…] And it goes without saying that big-sized welfare states are doomed to collapse. Think Greece and extend it to Italy, France, Japan, and other developed nations (including, I fear, the United States). […]
[…] And it goes without saying that big-sized welfare states are doomed to collapse. Think Greece and extend it to Italy, France, Japan, and other developed nations (including, I fear, the United States). […]
[…] trend isn’t limited to the nest 10 years. CBO’s latest long-run forecast, which I discussed last year, shows a never-ending deterioration of America’s fiscal […]
[…] own charts make this abundantly clear (click on the image to see the original column with the full-size […]
[…] and Hong Kong, but amending the Constitution is hardly as easy task. So my best guess is that we’ll become Greece at some […]
[…] I fear the United States is slowly but surely heading in that direction. I elaborate about the problem of government spending – and the […]
[…] if you look at the data I shared from the Congressional Budget Office’s long-run forecast, you would see that these same […]
[…] if you look at the data I shared from the Congressional Budget Office’s long-run forecast, you would see that these same […]
[…] if you look at the data I shared from the Congressional Budget Office’s long-run forecast, you would see that these same trends […]
[…] if you look at the data I shared from the Congressional Budget Office’s long-run forecast, you would see that these same […]
[…] if you look at the data I shared from the Congressional Budget Office’s long-run forecast, you would see that these same trends […]
[…] if you look at the data I shared from the Congressional Budget Office’s long-run forecast, you would see that these same […]
[…] more spending and more dependency is not a good recipe for long-run economic health. Republicans understand that and I despise them for putting politics […]
[…] If you really want to be depressed, keep in mind that Republicans also are dropping the ball on “entitlements,” which are programs that are designed to automatically increase every year (such as Social Security, Medicare, and Medicaid) and are largely responsible for America’s very grim long-run fiscal outlook. […]
[…] isn’t that wonderful. The politicians will spend us into a fiscal cul-de-sac, and then use that spending crisis as an excuse to seize more of our […]
[…] showing federal taxes and revenues as a share of economic output. As you can see, America’s real fiscal problem is government spending. The tax cut being considered on Capitol Hill only causes a small – and completely temporary […]
[…] America’s long-run fiscal problems are entirely caused by excessive government spending, politicians who claim to be concerned about fiscal balance should […]
[…] certainly true that America faces very worrisome long-run fiscal problems, but those challenges are entirely due to a rising burden of government spending. And since the GOP plan is only a tax cut in the first 10 years, it’s absurd to say the GOP […]
[…] Second, if Ms. Marcus genuinely cares about deficits, then I’ll forgive her for her past hypocrisy and instead simply ask her to look at the Congressional Budget Office’s most recent long-run fiscal forecast. […]
[…] Second, if Ms. Marcus genuinely cares about deficits, then I’ll forgive her for her past hypocrisy and instead simply ask her to look at the Congressional Budget Office’s most recent long-run fiscal forecast. […]
[…] I pointed out that America wasn’t in any immediate danger, though I can understand why some people are interested in the question since our long-run outlook is rather grim. […]
[…] I pointed out that America wasn’t in any immediate danger, though I can understand why some people are interested in the question since our long-run outlook is rather grim. […]
[…] in the future, that kind of welfare state is a recipe for a Greek-style fiscal crisis because demographic trends will be even less favorable. To be blunt, there won’t be enough […]
[…] in the future, that kind of welfare state is a recipe for a Greek-style fiscal crisis because demographic trends will be even less favorable. To be blunt, there won’t be enough […]
[…] Office’s forecast for the next 10 years shows revenues averaging 18.1 percent of GDP (or the 30-year forecast that shows revenues becoming an even bigger […]
[…] if we leave policy on auto-pilot and there’s a substantial increase in the burden of government spending, it’s simply a […]
[…] spend a lot of my time fretting about how federal spending is going to become an ever-larger (and unsustainable) burden in the […]
[…] spend a lot of my time fretting about how federal spending is going to become an ever-larger (and unsustainable) burden in the […]
[…] nails it. I made this same point earlier this year. Indeed, because the tax burden is projected to automatically increase over time, […]
[…] there’s an even bigger long-run problem with Medicare and Medicaid. Which helps to explain I relentlessly push for genuine entitlement […]
[…] spend a lot of my time fretting about how federal spending is going to become an ever-larger (and unsustainable) burden in the […]
[…] Based on CBO’s long-run forecast, Trump also should reconsider his views on old-age entitlements and support Medicare reform and […]
[…] The fundamental problem, which I pointed out in a different interview, is that there’s not a governing majority for smaller government. And that has some very grim implications. […]
[…] I expressed pessimism yesterday about Trump’s tax plan. Simply stated, I don’t think Congress is willing to enact a large tax cut given the nation’s grim fiscal outlook. […]
[…] if Trump and congressional Republicans at some point decide to fight for much-needed spending restraint (a naive hope, I realize), then I’ll be the first to cheer if that battle leads to a […]
[…] Republished from International Liberty. […]
I think the numbers are worse than what chart #1 is showing..,,
We know for a FACT (go to the treasury website natonal debt to the penny) that FY 16 borrowing was $1.4 Trillion, not the announced 587 Billion.
Also, any pie chart will show that entitlements made up 70% of the budget, defense 15% and other discretionary spending 15%.
So obviously CBO has some strange book keeping that makes things not look as bad as they really are…
And Mitch, you should point that out every time you repeat their lies, or better yet, write an article explaining how the CBO “COOKS the Books”….
[…] Mitchell. Six charts that might have enough visual impact to worry a few people about the fiscal future of the US. Welfare fraud stories. Tax reform. End the bias of debt over […]
Well done- will distribute to our team
We’ll done- will distribute to our team
What’s really depressing is that with Republican control of both houses and the Presidency, it looks like business as usual.