COMMENTARY | The job of debt reduction is nearly done, or so says President Obama. But how can anyone consider reducing the Federal deficit from $1.089 trillion in 2012 to a future 10 year goal of roughly $700 billion to be close to balanced by any measure?
“Over the last few years, Democrats and Republicans have come together and cut our deficit [over the next decade] by more than $2.5 trillion through a balanced mix of spending cuts and higher tax rates for the wealthiest Americans. That’s more than halfway towards the $4 trillion in deficit reduction that economists and elected officials from both parties say we need to stabilize our debt.”
In order to this 10-year $4 trillion target, or $400 billion per year, Congress needs to cut spending by another $1.5 trillion, or $150 billion per year. The automatic sequester, which slashes both the military and entitlement programs by $1.2 trillion, was originally supposed to be avoided with Fiscal Cliff deals but now some are suggesting to let it just happen.
Bill Clinton claims that “[Obama] has offered a reasonable plan of $4 trillion in debt reduction over a decade,” but Senator Kent Conrad (D-ND), the Democrat who chaired the Senate Budget Committee until the end of last year, says the goal of $4 trillion is not nearly enough according to the Washington Examiner:
“To get us on a path that is declining in terms of debt as a share of gross domestic product requires a package of about $5 trillion total. If you look at [the Congressional Budget Office’s] most recent numbers, that’s about the size of the package that we need, somewhere in about the $5 trillion range, to get this debt going down as a share of the economy. And we’re still going to have debt, at the end of this period, publicly held debt of 70 percent of GDP. That’s 100 percent of GDP as gross debt.”
Glenn Kessler of The Fact Checker previously pointed out these debt reduction plans are “counting some $1 trillion in cuts reached a year ago in budget negotiations with Congress” and “the administration is also counting $848 billion in phantom savings from winding down the wars in Iraq and Afghanistan, even though the administration had long made clear those wars would end.” The biggest whopper is that “the administration also counts $800 billion in savings in debt payments (from lower deficits) as a ‘spending cut,’ which is a dubious claim.”
10 year budgets also happen to be moving targets that Congress will suddenly change on a whim. So let’s ignore all this 10 year talk and focus on the year-to-year numbers. As previously reported by The Inquisitr, the 2012 Federal Deficit was estimated by the White House to be $1.089 trillion over the $2.5 trillion income for 2012, which means they spent around $3.6 trillion in total.
The Congressional Budget Office (CBO) is notorious for underestimating how much spending the Federal government will actually do, but they are saying that in 2013 the Federal deficit should drop to $845 billion. The extra taxes of the Fiscal Cliff deal helped drive the deficit down. March 1 should see another $85 billion in automatic spending cuts, but Obama wants more tax increases instead. The CBO also projects that the Federal deficit will fall to $430 billion by 2015, but that’s entirely based upon the assumption that Congress doesn’t increase it’s spending habits, again, and the economy grows (some experts believe the Federal debt crisis could trigger a double-dip recession or even a depression).
So let’s ignore estimates that change dramatically based upon future political decisions and instead focus on the facts. The Federal deficit in 2012 was $1.089 trillion. The 10-year goal is $4 trillion, or $400 billion per year, in spending cuts. That’s a $689 billion deficit before including potential future factors like the economy growing/slowing and tax increases. The overall Federal debt is currently $16.547 trillion. Assuming the the deficit fluctuates around an average of half a trillion dollars, we’d be at $20 trillion in debt within seven years, or 2020. Or, in 10 years, we’d be at around $21.5 trillion.
Obviously the real numbers of the future will be quite different, but do you think President Obama is right in saying that only $4 trillion in cost cutting will get the job done?