Washington Fiddles While The Budget Deficit Continues To Burn

GR2009032100104Continuing a trend that stretches back nearly two years, the monthly federal budget deficit hit another record in April:

The Treasury Department said Wednesday that the federal deficit for April soared to $82.7 billion, the largest imbalance for that month on record. That was significantly higher than last year’s April deficit of $20 billion and above the $30 billion deficit that private-sector economists had expected.

The government generally runs surpluses in April, as millions of taxpayers file their income tax returns. But income tax payments were down this April, reflecting the impact of the recession, which has pushed millions of people out of work.

Total revenue for April was down 7.9 percent from a year ago, dipping to $245.3 billion.

The Obama administration forecast in February that the deficit for this year would hit $1.56 trillion, surpassing the record of $1.4 trillion set last year. Many private-sector economists think that this year’s imbalance will be closer to the $1.4 trillion set last year and that deficits will remain high for years to come.

(…)

Analysts estimate that roughly one-third of the increase in deficits over the past two years can be attributed to lost revenue — the result of fewer people working and lower corporate profits. Another third was from increased government spending that normally occurs in a downturn, such as higher payments for unemployment benefits and food stamps. The final third reflects added government spending on the $787 billion stimulus bill and the $700 billion financial bailout.

Despite all of this, there’s very little indication that anyone in Washington is actually serious about reigning in spending and bringing down a budget deficit that, if it continues at this level is clearly unsustainable. Democrats seem to think the problem will take care of itself despite the fact that they’re proposing budgets that would give us trillion dollar deficits for the foreseeable future.

And Republicans, well, all they’ve got up their sleeves right now are pointless gimmicks. Take, for example, YouCut, a program announced yesterday by House Minority Whip Eric Cantor:

Two weeks ago, I wrote on BigGovernment that the GOP Today is much different than the party was a few years back. I was glad that my post generated attention, and very pleased to read through the different responses — both positive and skeptical. Today I write again for two reasons. First, to announce an exciting new project devised by the House Republican Economic Working Group. Second, to take another step in earning your trust by showing you that we understand that actions speak louder than words.

(…)

Today, we are launching YouCut — a first-of-its-kind project designed to defeat the permissive culture of runaway spending in Congress. It allows YOU to vote, both online and on your cell phone, on spending cuts that you want to see the House — YOUR HOUSE — enact. That’s right, instead of Washington telling YOU how THEY will spend YOUR money, YOU can tell THEM how to save it. After several days of voting, on Monday, May 17th, we will announce the first winner and later that week House Republicans will call for an up-or-down vote on the spending cut. We will repeat this cycle every week for the rest of the year.

The problem ? Well, even if all five of the programs listed on the YouCut website were eliminated, it would amount to a savings of a mere $ 5,961,000,000 over five years, or just around .03% of the total expected Federal expenditures over the same period. And that’s not even what Cantor is proposing, he wants people pick just one project a week.

This isn’t serious budget-cutting, it’s gimmickry, and gimmickry is probably all we can expect until it’s too late.

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Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010. Before joining OTB, he wrote at Below The BeltwayThe Liberty Papers, and United Liberty Follow Doug on Twitter | Facebook

Comments

  1. john personna says:

    Let’s play a game. The rules:

    1) pretend we have a steady-state economy
    2) pretend our deficit came from a steady-state economy
    3) project future deficits based on a steady-state economy.

    Finally:

    4) assume that anyone modeling deficits based on a business-cycle economy is just a liar.

    It’s fun, any pundit can play.

  2. john personna says:

    From your linked story:

    “It’s very important to understand, we won’t be able to bring down this deficit overnight given that the recovery is still taking hold and families across the country still need help,” Obama said Monday.

    Let’s just assume that’s a lie, and of course it is possible to do something overnight, and in the middle of a severe contraction, eh?

  3. TangoMan says:

    The problem ? Well, even if all five of the programs listed on the YouCut website were eliminated, it would amount to a savings of a mere $ 5,961,000,000 over five years, or just around .03% of the total expected Federal expenditures over the same period. And that’s not even what Cantor is proposing, he wants people pick just one project a week.

    Why is that a problem? Is it because you’re making perfect the enemy of good?

    Is this gimmick the entire Republican platform on how to deal with the fiscal situation of the Federal Government for the next 10 years?

    Is this an opening salvo, an modest exercise to get people thinking about how to cut, getting people used to seeing cuts, and a prelude to more ambitious cuts which target wider constituencies?

    Direction of initiative is just as important as the vector length. Republicans are taking on the mindset of reducing the size of the government and being responsible stewards of public finances while the Democrats are burdening us with trillion dollar deficits throwing more fuel onto the entitlement fire and seeking to further depress economic activity by imposing new taxes to pay for their irresponsible entitlements.

  4. I’ll believe the GOP is serious on cutting spending when they start calling for cuts in farm subsidies. Based on what they say their principles are, this should be near the top of their list of things to cut.

    Of course, they don’t really mean what they say and aren’t going to cut anything that might cost them votes. Which, of course, means they aren’t going to cut anything substantial.

  5. Steve Plunk says:

    I believe the way to cut is across the board. All programs take a hit since all programs have a constituency supporting their goals. Make the cuts, freeze the growth, and then let the economy catch up and eventually provide surplus revenues to pay down the debt. Hell, I’m suggesting cutting my own future Social Security benefits but if it saves us from collapse that’s a smart thing.

    I would also suggest ending state and local aid programs. It hides the source and use of funds which is poor tax policy. Let each part of government pay for itself.

  6. john personna says:

    If this graph is good, medicare is the long-term problem.

    We obviously need to means-test it, immediately.

    Bush’s means-test on agricultural subsidies should have passed, but even with a high bar ($1m?) it was politically impossible.

    Heh:

    In the study cited by Obama, the GAO found that 2,702 subsidy recipients had adjusted gross income above $2.5 million and derived less than 75 percent of their income from farming – criteria that should have made them ineligible. The IRS provided the GAO with access to the tax returns of the farmers, on the condition that the names would remain private and not be shared with the USDA.

    “USDA does not have management controls, such as reviewing an appropriate sample of recipients’ tax returns, to verify that payments are made only to individuals who do not exceed income eligibility caps and therefore cannot be assured that millions of dollars in farm program payments it made are proper,” GAO concluded.

    Play that fiddle Obama, it’s all on you.

  7. Everything I’ve seen on this suggests that in the future our taxes will be raised, and considerably. I’ll probably do a post on it this weekend, but in the mean time, suffice it to say that a value added tax is probably in our future and the growth of spending in social security will have to be curtailed.

    Medicare is the elephant in the room: without significant reform — massive, really — it’ll bankrupt us. Rather than raising taxes to such massive levels, the government will probably (and has already started) get involved enough in health care that it can slow the growth of costs by itself.

  8. john personna says:

    Everything I’ve seen on this suggests that in the future our taxes will be raised, and considerably. I’ll probably do a post on it this weekend, but in the mean time, suffice it to say that a value added tax is probably in our future and the growth of spending in social security will have to be curtailed.

    VAT is way too invasive. By taxing at multiple levels it increases overhead and inefficiency across the board. To me it’s upside-down world that conservatives love it.

    If you have to tax, and can’t just means-test everything, why not something as simple as a telepurchase (internet) sales tax? One level. Simple. Cleans things up.

    Charge 5% sales tax on any transaction purely by phone or wire, with no in-store pickup, regardless of whether you call down the street or across the country.

    (If you can’t do that, there’s no reason you should be doing VAT.)

  9. john personna says:

    (Possibly people love VAT because it is distant and unlikely. Any real tax, like an internet sales tax is more immediate, and therefore must be opposed.)