Shared sacrifice has been the nice-sounding mantra of President Obama’s budget strategy. If Republicans give a little bit on taxes then we’ll give a little bit on spending and the United States will be a better place.
“If everybody took an attitude of shared sacrifice, we could solve our deficit and debt problem next week,” Obama said at a town hall in 2011.
“Simply put, it will take a balanced approach, shared sacrifice, and a willingness to make unpopular choices on all our parts,” he reiterated later that year in his Weekly Address.
It was a politically smart tack—after all, who doesn’t like the sound of a fair trade—but it was utter logical hogwash. Shared sacrifice only makes sense if each side of the equation – spending and revenues – is an equal part of the problem. But that’s just not the case.
In the year 2000, which doesn’t seem like all that long ago, the U.S. spent $1.8 trillion. By 2011 the budget had doubled to $3.6 trillion. And lest you fall into the trap of thinking that such growth was only seen because of one-time, anti-recession measures like the stimulus, that trend is slated to continue. Due to the ever-increasing costs tied up in our broken entitlement programs, the Congressional Budget Office projects that gross federal debt will rise to $26.1 trillion in the next decade. The biggest drivers of that are Social Security which will cost $11.2 trillion, Medicare which will cost $8.1 trillion and Medicaid which will cost $4.4 trillion.
And that doesn’t even include Obamacare, which the CBO calls a “source of great uncertainty.” Nevertheless, they do project that “[s]pending for major health care programs will be nearly 5 percent of GDP in 2013, and such spending is projected to grow rapidly when provisions of the Affordable Care Act are fully implemented by mid-decade.”
While the spending side of the ledger has soared dramatically in recent years, the revenue side is growing as well. With Obama’s latest tax hikes, revenues are projected to grow from 15.8 percent of GDP in 2012 to 19.1 percent of GDP in 2015 – a more than 20 percent increase. That’s also more than a full percentage point higher than the post-World War II average of 17.9 percent.
The question then is why spending cuts, which really haven’t even happened (at least not in the sense that we’re actually spending less money than the previous year) are garnering so much more angst and concern than the dramatic, and real, tax increases we’ve seen. JT Young writes for RealClearMarkets:
In fiscal year 2013 (concluded last October 1), the federal deficit fell from $1.089 trillion to $680 billion – a roughly 30% decrease. While still historically high at 4.1% of GDP, the general focus has been the fall, with particular scrutiny on federal spending cuts. Whether last March’s sequester, last October’s shutdown, or the recent budget deal, the focus is always on decreased federal spending and its impact.
However looking inside the numbers shows another story. According to the Congressional Budget Office, in FY 2013, federal spending fell $84 billion, while federal revenues – fueled by a series of tax hikes – increased $325 billion. Even at first glance, deficit reduction splits $4-to-$1 in favor of higher revenues over lower spending.
And although any spending reductions are a positive change they’ve mostly come from defense, agriculture, reduced interest payments and lower unemployment costs. Left relatively untouched are entitlements – the key drivers of long-term debt.
Given the mountain of evidence that shows that higher taxes has been Washington’s chosen solution to a spending problem, when will this phony call for “shared sacrifice” go away? At this point, sharing in the sacrifice would mean cutting spending to balance out the ratios of responsibility for deficit reduction. Nevertheless, expect to hear the drumbeat of painful anecdotes about the sequester continue while nary a word is said about the impact of historic tax increases.