What's Really Causing The Long Term Debt

Brian Riedel assumes that the occupation of Iraq and Afghanistan really will end soon and shows that Bush's tax cuts, Medicare splurge and wars are "only" responsible for one third of the deficit over the next decade (although the Medicare Prescription entitlement will never end and continue to add to debt thereafter and was never budgeted in any serious way). But this is the important point:

A better way to diagnose the cause of long-term deficits is to measure taxes and spending against their historical averages. This more comprehensive methodology shows that long-term deficits are overwhelmingly driven by runaway entitlement spending. By 2020, the CBO-based budget baseline projects that federal spending will reach 26.0 percent of the economy (5.3 percent of the economy above the 40-year spending average).

Revenues will settle at 17.7 percent of the economy (just 0.6 percent of the economy below the revenue average) – and even that assumes all tax cuts are extended. So as deficits expand by 5.9 percent of the economy, nearly 90 percent of the growth will come from higher-than-average spending, and just over 10 percent from lower-than-average revenues. Virtually all of this new spending will come from surging Social Security, Medicare and Medicaid costs (driven primarily by 77 million retiring baby boomers), as well as net interest on the national debt. These four expenditures will cost $26 trillion over the next decade – surging from $1.6 trillion this year to $3.6 trillion in 2020. That is causing the massive budget deficits over the next decade – and must be the focus of any serious effort to reduce the budget deficit.

2006-2011 archives for The Daily Dish, featuring Andrew Sullivan

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