Monday, July 13, 2009

Robert Samuelson:
For the past half-century, federal spending has averaged about 20 percent of GDP, federal taxes about 18 percent of GDP, and the budget deficit 2 percent of GDP. The CBO's projection for 2020 -- which assumes the economy has returned to "full employment" -- puts spending at 26 percent of GDP, taxes at a bit less than 19 percent of GDP, and a deficit above 7 percent of GDP. Future spending and deficit figures continue to grow.

What this means is that balancing the budget in 2020 would require a tax increase of almost 50 percent from the last half-century's average. Remember, that average was 18 percent of GDP. To get from there to 26 percent of GDP (spending in 2020) would require another 8 percent of GDP in taxes. In today's dollars, that would be about $1.1 trillion, a 44 percent annual tax increase.
Indeed, bringing down the deficit would seem to require, as President Obama said in his opinion column yesterday, "tough choices." Thus far, however, those choices have been for a brand new government health care insurance option -- a rather popular move -- with a minority of the population handed the tab (probably also popular).

What isn't on the table -- the subject that no one is really willing to broach -- are genuine cuts to place our expenditures in line with our revenues. Now that would require some real tough choices.

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