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The 2020 budget

CBO Director Doug Elmendorf gave a presentation (pdf) at the American Association for the Advancement of Science's 35th annual Forum on Science and Technology Policy. If you want to spend some time freaking out about America's rising deficit, check out the ninth slide. But I was more interested in the very clear graphics showing the projected budget breakdown for 2020. First, the top-line view:

Budget_2020_forBlog.png

And in case you're wondering what "other spending" actually refers to:

otherspending.jpg

A couple of things worth noting. First, none of the big-ticket items here are easy to cut. They may be wasteful (though in most cases, they actually aren't), but they sound good. Second, you'll notice that the Affordable Care Act, despite being fully in place by 2020, isn't obvious on these charts (though it is a contributor to Medicaid). That's because it's not projected to be very big in comparison to total government spending. Third, foreign aid isn't present in any serious way, either.

Elmendorf's conclusion: "The United States faces a fundamental disconnect between the services that people expect the government to provide, particularly in the form of benefits for older Americans, and the tax revenues that people are willing to send to the government to finance those services." Yep.

By Ezra Klein  |  May 17, 2010; 12:01 PM ET
Categories:  Budget  
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Comments

Why isn't defense spending in "other programs" since it is not an entitlement or interest on the debt.

That would make defense spending more than 2/3 of all discretionary spending, which is immoral and a waste of our precious resources.

First, shouldn't VA benefits be included in the Defense budget, since they are benefits only available to the military.

Second, how much of the energy dept budget is related to defense research?

third: what amount of the defense budget currently and in the future has to do with the two invasions we are managing? How much for replacement of military hardware? How much for continuing therapy (physical and mental) that vets are going to need.

Without this organization and info, we can't get an accurate picture of how much we really spend on defense.

Posted by: srw3 | May 17, 2010 12:20 PM | Report abuse

The disconnect is between what POLITICIANS are willing to collect as revenue and the services they are willing to give the people.

If we had an honest discussion about our budget, the wealthy would be paying far more in taxes and the government would be providing more public services. However, the wealthy have disproportionate political power and keep pressure on politicians to keep their payments low and patronage for the wealthy special interests high. This is the primary tension in our political system.

Posted by: bakho | May 17, 2010 12:40 PM | Report abuse

Wealth=political power! Who knew??? /snark

Bakho is totally correct.

The problem isn't just that congress is for sale. The problem is that congresscritters are so cheap that any oligarch or major corporation can bribe (oh sorry, contribute) and own one of their own. See oil companies and Landrieu, for example. In fact, most large corporations and oligarchs own several, just for backup.

Posted by: srw3 | May 17, 2010 12:52 PM | Report abuse

I am not sure where slide #9 is scary... we are definitely middle the pack and even with the extension of the tax cuts and AMT, we are still not the worst of the worst... manageable not hair-on-fire.

What was the more meaningful picture for me was the side-by-side comparison of revenue and deficit with expenditures... proving the point that even if you cut everything that was discretionary non-defense, you can't get to balanced. I believed it, but I had never seen it conveyed so compellingly (and super-simple) - slide 12. I wish they would have included an additional bar for "tax expenditures" like mortgage interest deduction. It would be interesting to see how far closing a few loop holes would get us. Also, for argument's sake, a bar for revenue without tax cut and AMT extensions.

Posted by: kcar1 | May 17, 2010 1:34 PM | Report abuse

"The United States faces a fundamental disconnect between the services that people expect the government to provide, particularly in the form of benefits for older Americans, and the tax revenues that people are willing to send to the government to finance those services." Yep.


Yep? After months of pushing a bloated healthcare law on us, now you're agreeing that there's a big gap between what people want, and what they can pay for?

Now, will you at least admit that some folks will get less (ie/"rationing") as you admit more and more non-payers into the system that is already unaffordable?

Yep? You're just a little shape-shifter politically advocating economic analyst, eh?

Posted by: Mary42 | May 17, 2010 1:35 PM | Report abuse

"If we had an honest discussion about our budget, the wealthy would be paying far more in taxes and the government would be providing more public services. "

Probably. Although I'd like to see the government do less, generally. Though I'd like us to spend as much or more on defense, I'd like to see us use the military less. While I think the rich can both afford to pay more, and to incrementally increases their taxes would not torpedo the economy, I don't think the problem is a shortage of income to Washington.

The problem is that governments, local, state and federal, are populated with people, and behave like them. If you make $40,000 a year, you usually learn to live on about $45,000 a year. But you think you'd be set if you made $65,000 a year. Then, if you find yourself making $65,000, you find yourself spending about $75,000 a year on your lifestyle. Not everybody does this, but more than enough do--look and credit card debt across income levels.

Governments do the same thing. There is both waste and over-purchasing in government spending, and always will be. As with most people, this strategy works pretty well when times are good, but becomes a big problem when times are lean. We are very slow to acknowledge the fact that, yes, we can actually cancel cable, or do without that morning espresso, even as the bills mount.

The problem isn't HCR or Medicare or Social Security or Defense Spending--the devil is in the details. I believe in a strong national defense, a strong standing army, new weaponry, etc. That doesn't mean I believe in $500 hammers or $1000 toilet seats. That doesn't mean I believe in repeated investments of billions of dollars in weapons technologies that end up getting nowhere. And so forth.

I may not think the Affordable Care Act is the way to go, but you may. However, chances are that if most people dove down into the full costs of the Affordable Care Act (over time), they'd be unhappy that so much money was being spent on things that didn't involve delivering care (or coverage) to the people who need it.

So what's the answer? Get rid of it? Cut the budget? The problem is, there are no easy solutions. Cutting budgets doesn't magically increase efficiencies. Cutting programs, while sometimes the best idea, is extremely difficult, if not impossible to do.

Bakho: Most politicians are part of the wealthy/super-wealthy classes. Pressure isn't being applied to them, so much as they don't want to seriously pursue any approach that will hurt their lifestyles.

They may pose as proletarians (ahem, John Edwards, ahem), but they are only superficially interested in having the government take more of their own money, and usually only truly support taxes that will prevent the middle and lower classes from elevating themselves, or taxes that would impact their substantial ongoing wealth.

Posted by: Kevin_Willis | May 17, 2010 1:48 PM | Report abuse

No no Mary42, you're not getting what Ezra's saying. He's not saying there's a gap between what people want, and can pay for, he's saying there's a gap between what people want, and WANT to pay for. If you poll Americans about whether they want the services the government provides, they say they want all of those services, and even want some expanded. However, they also want their taxes lowered at the same time. This have your cake and eat it too attitude has crippled California, and it may yet cripple the rest of the country.

The picture is even more complicated than that. People have a very skewed vision of how much everything costs. Most Americans believe foreign aid is 5% of the budget, and medicate is around 15%, when in reality each is less than 2% of the budget.

And on a final not, when you show people the entire budget and ask them to balance it, their usual response is to cut defense spending by a third.

Posted by: Testudo001 | May 17, 2010 1:51 PM | Report abuse

In 2020 if nothing is done, interest on the debt is a bit less than 20% of total spending with no tax increases. If bush tax cuts on those making over 150k or 250k, and the AMT either eliminated or raised again, how much would the interest on the debt go down? How much would lifting the payroll deduction cap raise? If these things are done, what does the future look like?

@mary42, passing health care reform has accelerated a problem that was there in any case. Dealing with it sooner rather than later is a good, not bad, thing. Ezra made no secret that the cost controls in the bill were inadequate and that he would have wanted more. Single payer saves a bunch of money. VA style socialized medicine saves even more. As the crisis approaches, maybe these ideas will get some traction...

Posted by: srw3 | May 17, 2010 2:01 PM | Report abuse

kevin willis: yes, the problem is a shortage of revenue.

i credit you for being honest enough to admit that there aren't many huge areas to cut the budget, which means, by definition, that the problem is on the revenue side.

(as it happens, i think there is considerable scope for cutting defense spending as it exists today, but most of the cutting there i would repurpose to, in your formulation, more effective programs and not to pure reduction, so i can't honestly say that i see much room for budget reduction.)

since there isn't a single politician of note willing to make the case for higher taxes, though, it's hard to see how we get there. i personally favor a return to reagan's best moment: close loopholes, broaden the base, simplify the code, combined with a commitment to higher progressivity, but that makes me alone in the body politic right now.

Posted by: howard16 | May 17, 2010 2:02 PM | Report abuse

"If we had an honest discussion about our budget, the wealthy would be paying far more in taxes and the government would be providing more public services."

If we had an honest discussion, the wealthy and everyone else would be getting fewer redistributions from government and the wealthy and just about everyone else would be paying more taxes.

Taking money from me and giving it to someone else is not a public service. In the budget breakdown above, over 60% of the budget is taking money from one person to give to someone else. With 30 yr treasuries, some of that money is being taken from people who haven't even been born yet.

Few things are spent more carelessly than other people's money.

Posted by: staticvars | May 17, 2010 2:24 PM | Report abuse

He's not saying there's a gap between what people want, and can pay for, he's saying there's a gap between what people want, and WANT to pay for. If you poll Americans about whether they want the services the government provides, they say they want all of those services...

So he's saying Americans wanted the healthcare passage? Wanted it, just didn't understand they would be asked to pay for it?

What poll numbers are you smoking? Maybe the libs like these things, but everybody who understand how pricetags work -- at the time, not months later after the "victory" celebrations wear off -- was saying No No No. And they're getting rid of the Yes voters in now and in November...

Posted by: Mary42 | May 17, 2010 2:44 PM | Report abuse

And on a final not, when you show people the entire budget and ask them to balance it, their usual response is to cut defense spending by a third.

That's because today's young whippersnappers honestly believe America has the coin, and the gumption, to stand by Israel no matter what troubles she courts.

If we've got money to spend like that, we're spending too much money on ... "defense", so the thinking goes...


Posted by: Mary42 | May 17, 2010 2:50 PM | Report abuse

Mary42, the poll numbers that we're "smoking" are right here: http://www.economist.com/blogs/democracyinamerica/2010/04/economistyougov_polling

According to The Economist's poll from last month, only one part of the government has more than 29% of the public's support for cutting its budget to reduce the deficit: foreign aid (which represents less than 1% of spending). This post is not predominantly about the health reform law, no matter how much you want it to be, because even if you believe that it will add to the deficit, it is a drop in the bucket compared to our other long-term budget problems that existed long before "ObamaCare" passed.

Furthermore, the public supports raising taxes on the rich in order to reduce the deficit (see this Bloomberg poll from December):

http://www.bloomberg.com/apps/news?pid=20601070&sid=awkrRPMONDW8

Posted by: vvf2 | May 17, 2010 3:00 PM | Report abuse

The so-called "entitlement" programs in the United States of America are actually extremely limited when compared to other industrialized nations, and the "structural deficit" they create is not going to be resolved with spending cuts without setting up an intolerable destruction of the basic social safety net. And there is no need to even consider solving the problem with cuts.

Earnings which are taxable for Social Security is limited to $106,800. All earnings above that level are not taxed. That's crazy. Remove the earnings cap (or just raise it by a significant amount), and the fund has a surplus again. Why should the millionaire CEO only be asked pay Social Secuity taxes on 10% of his or her income, while the struggling clerk at the bottom of the company pays taxes on every dollar of income earned?

A progressive taxation approach to Medicare would likewise make that program solvent.

I am all in favor of reducing military spending, but of course that must begin with an open-minded zero-based review of real world strategic needs for America's military in the future; it is not merely a budget balancing exercise.

Posted by: Patrick_M | May 17, 2010 4:11 PM | Report abuse

@howard16: "i think there is considerable scope for cutting defense spending as it exists today"

And one has to reflect on the overall impact of certain programs. The DoD pays for cancer research, virus research, vaccination studies, and on and on. They spend a lot of money on things where the primary long term benefits are not specifically to the military. When cutting, lets not throw the baby out with the bathwater, as they say.

Posted by: Kevin_Willis | May 17, 2010 4:18 PM | Report abuse

Interesting how Social Security and Medicare become "on budget" when explaining-away costs, yet become "off-budget" during voting. Convenient!

Posted by: rmgregory | May 17, 2010 4:43 PM | Report abuse

Thanks for this link. I think that most Americans don't realize how the government spends our money, or where the money comes from. This is one reason why it's so hard to have rational discussions about how best to balance the budget.

It would be great if this information could be provided annually in a standard format to every household by each level of government (federal, state and local). If the mutual fund companies have to do this for their investors, surely those who tax us should be held to the same level of accountability. Yes, I know that there are websites where this can be found, but an annual notice in a standardized format would be more effective if sent in the mail (e.g. in CA, the DMV prints a set of pie charts for revenue/expenditures on the back of the envelope holding the annual bill for car registration). Just a thought..

Posted by: Beagle1 | May 17, 2010 7:06 PM | Report abuse

kevin willis, i agree with your 4:18 and thought i made the point: i think there are areas of defense spending you could cut, but i'm planning on upping the spending, so to speak, in other areas.

absolutely there are effective and ineffective programs (assuming we share a belief that "effective" means "advancing the common good"): that's why your own logic suggests the problem most assuredly is the revenue side.

Posted by: howard16 | May 17, 2010 9:50 PM | Report abuse

Mary42: "After months of pushing a bloated healthcare law on us, now you're agreeing that there's a big gap between what people want, and what they can pay for? Now, will you at least admit that some folks will get less (ie/"rationing") as you admit more and more non-payers into the system that is already unaffordable? "

Health care reform is one of the few items that is paid for; so sayeth the CBO. You may not like it, but it is paid for.

And we already ration. We just do it horribly inefficiently, and by income. Most of our peer nations get as good or better results as we do, while we spend 50% to almost 100% more. They show that less spending need not result in less care (even dramatic disparities in the US among populations with similar demographics show that).

Kevin_Willis: "chances are that if most people dove down into the full costs of the Affordable Care Act (over time), they'd be unhappy that so much money was being spent on things that didn't involve delivering care (or coverage) to the people who need it."

That's true under the present system, which does a lousy job allocating care.

staticvars: "Taking money from me and giving it to someone else is not a public service. In the budget breakdown above, over 60% of the budget is taking money from one person to give to someone else."

By that reasoning, you'd have to oppose public schools, or even vouchers for private schools, since they constitute "taking money" to provide education to those who would not be able to afford it. (Same with police and fire protection, or just about every other government program.) And it seems to me that you'd have to oppose even a flat tax to pay for anything, since the more you make the more you pay, which would subsidize those who pay less.

Posted by: dasimon | May 18, 2010 12:40 AM | Report abuse

I have always been opposed to the Medicare drug benefit (although I am 72), because it gives a benefit to those who don't need it. Many people over 65 are able to pay for most of their medications. Those of us who would not feel the cost of a few thousand dollars in drug costs per year should not be given this benefit. It should be needs based. I cynically thought, when the bill was passed, that it was an effort to break medicare!

Posted by: ritapolicarpotexas | May 18, 2010 12:11 PM | Report abuse

I have always been opposed to the Medicare drug benefit because it givess a benefit to those of us who don't need it or want it. It should be nedds based. I cynically thought, when the bill was passed, that it was an effort to bankrupt Medicare.

Posted by: ritapolicarpotexas | May 18, 2010 12:16 PM | Report abuse

"Many people over 65 are able to pay for most of their medications. Those of us who would not feel the cost of a few thousand dollars in drug costs per year should not be given this benefit."

One can make exactly the same argument for means-testing all of Medicare, and Social Security too, so why single out the prescription drug benefit if you favor only extending benefits to those who truly need them?

You are truly blessed that spending thousands per year in drug costs would not present any serious financial drain on your savings. You certainly can go ahead and pay cash for your prescriptions and not claim the benefit, if you feel strongly that you don't need it.

For many others such expenses would be devastating. If your means test is really whether a retiree will "feel the costs of a few thousand dollars in drug costs per year," I suspect that a rather large majority of retirees would still qualify for the benefit.

Posted by: Patrick_M | May 18, 2010 12:48 PM | Report abuse

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