That’s just one illustration of how politicians’ past promises end up costing more than they ever expect. And it’s chump change when you ponder this…
This comes courtesy of Gene Steuerle, author of a column appropriately entitled “The Government We Deserve.” It’s a complicated metric, but it works like this: Take all the federal spending deemed “mandatory” (Social Security, Medicare, Medicaid, interest on the debt). Then measure it as a percentage of all the tax revenue Uncle Sam rakes in each year.
The percentage actually went negative last year for the first time. Yes, it returns to positive territory under Steuerle’s projections, but that assumes a more-or-less normal postwar recovery. And even with that, so much of this mandatory spending is baked into the cake that the figure goes negative again later in the decade.
“Both Democratic and Republican presidents and Congresses have presided over this shocking decline,” writes Steuerle in USA Today. They’re “fighting mainly over which downward path we’d take: by cutting revenues without reducing spending or increasing spending without raising revenues commensurately.”
Steuerle was the founding vice president of the Peterson Foundation, working alongside our friend David Walker. At a dinner we held during the festival release tour of I.O.U.S.A., during the height of the campaign season, Steuerle told me he had spoken to a number of Democrats who were feeling their oats about strong poll numbers. “They have seen the Republicans running huge deficits for years,” we paraphrase his comment, “now they feel like it’s their turn.”
Any real discussion of spending cuts is still a couple years of serious fiscal crisis away.
Addison Wiggin is the executive publisher of Agora Financial, LLC, a fiercely independent economic forecasting and financial research firm. He's the creator and editorial director of Agora Financial's daily 5 Min. Forecast and editorial director of The Daily Reckoning. Wiggin is the founder of Agora Entertainment, executive producer and co-writer of I.O.U.S.A., which was nominated for the Grand Jury Prize at the 2008 Sundance Film Festival, the 2009 Critics Choice Award for Best Documentary Feature, and was also shortlisted for a 2009 Academy Award. He is the author of the companion book of the film I.O.U.S.A.and his second edition of The Demise of the Dollar, and Why it's Even Better for Your Investments was just fully revised and updated. Wiggin is a three-time New York Times best-selling author whose work has been recognized by The New York Times Magazine, The Economist, Worth, The New York Times, The Washington Post as well as major network news programs. He also co-authored international bestsellers Financial Reckoning Day and Empire of Debt with Bill Bonner.
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