Tuesday, May 02, 2006

"Fiscal Wake-Up Tour" Summary: Part 1

The "Fiscal Wake-Up Tour" came to Delaware yesterday, compliments of Representative Mike Castle and Senator Tom Carper. They each began the session with some opening comments, followed by Robert Bixby, Executive Director of the Concord Coalition who presented "Federal Budget Basics".

The first page of Mr. Bixby's presentation displayed the actual federal expenditures of 2.47 trillion in 2005. The biggest part of the budget for 2005 was for Social Security, Medicare, and Medicaid, which together weighed in at 1.03 trillion, followed by defense spending at 494 billion. Other dramatic details revealed during his presentation included the fact that our current outstanding debt is $8.4 trillion and that foreigners presently hold 45% of our national debt. Please view the rest of his presentation at the provided link.

David Walker, Comptroller General of the United States of the Government Accountability Office (GAO) spoke next. His entire Power Point presentation, Saving our Future Requires Tough Choices Today, is also accessible for those who were unable to attend the meeting. Of particular note, on the second page, Mr. Walker displayed pie charts comparing the composition of federal spending in 1964, 1984, and 2004. The most striking changes were in the percentage of federal expenditures for defense from 1964 to 2004. In 1964, 46% of federal spending went to defense, as compared to 27% in 1984 and 20% in 2004. Medicaid and Medicare did not exist in 1964; now they are 19% of total federal expenditures. Social Security has jumped from 14% in 1964 to 19% in 2004. Check out the pie charts mentioned above, as visuals are more compelling than a string of words and numbers.

The next page, showing federal spending for mandatory and discretionary programs, was equally disturbing. Mandatory programs are those that are on autopilot. There is a formula in place for how much will be spent year by year, adjusted for inflation and whatnot. These include Social Security, Medicare and Medicaid. At this time, politicians have little leeway to modify this part of the budget. In 1964, 26% of the budget fell in the mandatory category as opposed to 54% in 2004. That means that 54% of the budget is currently off the table when budgets are drawn up and discussed. If the situation continues on its present course, our debt per capita could exceed our gross domestic product (GDP) per capita by 2030. Between 2005 and 2030, each of the three main entitlements, SS, Medicaid and Medicare, is expected to outpace economic growth by two to four times. Our current fiscal policy, therefore, is unsustainable.

Isabel Sawhill, Senior Fellow of Brookings Institution, also gave a Power Point presentation. Most notable to me from her presentation was the growth in spending under President Bush at 4.9%, second only to growth under Lyndon Johnson at 5.7%, with Jimmy Carter a close third at 4.1%. One example of spending growth under President Bush is the prescription drug plan, which while a nice thing to do, has cost a tremendous amount. Sawhill had several proposals to bring the federal budget under control. The most promising suggestions included the suspension of the indexing of programs for inflation, the implementation of pay as you go budget rules, and strong bipartisanship in efforts towards fiscal responsibility.

To be continued...

1 Comments:

At 5/02/2006 4:08 PM, Anonymous Andy said...

Scary information. It's interesting to see some of the breakdown of why we have such issues with national debt.

 

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