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How Congress Lost Control of Government Spending

July 14, 2014 in Economics

By Richard W. Rahn

Richard W. Rahn

Did you know that the portion of the federal budget that Congress actually votes on (the discretionary budget) has been falling for years?

The so-called “entitlements,” such as Social Security, Medicare, Medicaid, food stamps and Obamacare, take a larger and larger portion of the total federal budget each year. Former U.S. Treasury economist Eugene Steuerle, now at the Urban Institute, has created a Fiscal Democracy Index, which measures “the extent to which past and future projected revenues are already claimed by the permanent programs that are now in place.” In 1965, these programs claimed about 35 percent of the federal budget; now they claim about 85 percent of the budget, and they will soon claim more than 100 percent of total tax revenue.

Incremental expansion of programs now drains off almost every dollar.”

Mr. Steuerle is now out with a new book, “Dead Men Ruling,” which explains how we got into the budget mess and the consequences of it. He writes: “In recent decades, both parties have conspired to create and expand a series of public programs that automatically grow so fast that they claim every dollar of additional tax revenue that the government generates each year. … Unlike reaching the moon, rejuvenating the economy, winning a war, or curing a disease, none of these permanent programs are designed to achieve goals or solve problems once and for all. Almost all of them simply maintain, and often perpetually increase, subsidies for some pattern of consumption — overpriced health care, more years in retirement, or bigger McMansions.”

Government is growing not only in absolute terms, but also in relative terms. Much of this growth in spending has little to do with reducing poverty. Total government spending for social welfare tops $30,000 per household, but the poverty line for a family of three is $19,500. “So, as a nation we already spend far more than necessary to give everyone incomes well above the poverty line, if we wanted to do so,” Mr. Steuerle notes. By reducing the discretionary fiscal budget as a share of total government spending, policymakers now have less ability to fight emergencies. Elected officials have created their own “prisoner’s dilemma” where they rightly conclude they may be defeated if they either impose the necessary spending cuts or raise taxes. The income tax was created in 1913, Social Security in 1935, and Medicare and Medicaid in 1965 — and these actions created the current mess. Rather …read more

Source: OP-EDS

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