Experts: U.S. is spending its way to
By Kevin G. Hall
Knight Ridder Newspapers
November 6, 2005
WASHINGTON — Congress this week is likely to trim federal spending and
insist with a straight face that government spending is under better
"The facts are not partisan, and they're not ideological," said David
Walker, the nation's comptroller general. He should know. He's the nation's
chief accountant and signs off on the government's balance sheet. America's
fiscal future, he said, "is worse than advertised."
Even though the White House and Congress pledge to trim $35 billion to $50
billion in spending over five years, that's chicken feed. The government spends
more than $2.5 trillion every year. Congress' savings would trim less than half
of 1 percent of annual spending.
Walker, along with budget experts from across the political divide, believe
Congress is shifting deck chairs on a sinking financial ship. Lawmakers are
making symbolic spending cuts while skirting the real drains on the federal
In addition, Republicans intend to make tax cuts permanent, which would
drain $70 billion in revenues through 2010 — more than the spending cuts
Congress is struggling to find.
And that's only the tip of the iceberg. The real problem is that the
government's unfunded liabilities — items that include everything from
public debt to promised Medicare and Social Security benefits — are
growing at staggering rates.
Those liabilities totaled $20.4 trillion in 2000. They reached $43.3
trillion by 2004, after President Bush and Congress increased spending and cut
When the government next reports these numbers Dec. 15, the total is
expected to reach $46 trillion to $50 trillion.
How much is $50 trillion? About $166,000 for each of the almost 300 million
This imbalance between what government takes in and what it spends is the
federal budget deficit. It totaled $319 billion in fiscal 2005, which ended
To bridge that shortfall, the government takes on additional debt, 46
percent of it now held by foreigners, especially the governments of Japan and
The gross national debt is now more than $8 trillion. The government owes
itself much of that in accounts such as the highway trust fund. When IOUs in
those accounts come due, the government just issues itself some more debt.
The net national debt — the amount that must be financed by borrowing
in capital markets, which affects interest rates and the economy — is a
mind-boggling $4.6 trillion.
"Unless the situation is reversed, at some point, these budget trends will
cause serious economic disruptions," Federal Reserve Chairman Alan Greenspan
told Congress' Joint Economic Committee on Thursday.
Think of America's financial future this way: A large family goes to a
restaurant and stuffs itself on a full-course meal with drinks and dessert. The
waitress then hands the bill to the babbling infant in a high chair. Budget
deficits make today more enjoyable, but future generations of Americans will
have to pay the bills.
Most economists, including Greenspan, believe American taxpayers won't be
able to pay for the retirement and health-care promises that the government has
made to the baby-boom generation — those born between 1946 and 1964
— which begins retiring in 2008.
"We owe it to those who will retire over the next couple of decades to
promise only what the government can deliver," Greenspan said Thursday.
Undisciplined government spending has done the unthinkable: It's united
experts from two rival think tanks with great influence in Washington —
the left-leaning Brookings Institution and the conservative Heritage
Foundation. Both accuse Congress and the White House of a "leadership deficit,"
punting when it should be tackling issues affecting the nation's financial
"It's very obvious that something has to give. It's as simple as that," said
Stuart Butler, vice president of economic policy for the Heritage
Congress is struggling over modest proposals — such as whether to nick
all spending by 2 percent across the board, trim Medicaid, pinch food stamps
and farm subsidies — but ignoring big-ticket spending on tax cuts,
defense, homeland security, Medicare and Social Security.
Douglas Holtz-Eakin, director of the nonpartisan Congressional Budget Office
(CBO), said current congressional efforts to trim spending won't make much
"It doesn't change our outlook substantially at all over the long haul,"
said Holtz-Eakin, who formerly worked for Bush.
"The most important thing about the number this year is not the number, but
Congress shows no interest in halting a Medicare drug benefit scheduled to
take effect next year. It will cost $700 billion over 10 years, and more after.
It's one reason why spending on Medicare, the health-care program for the
elderly and disabled, is projected to explode.
Medicare benefits promised to 40 million seniors will cost $2.7 trillion
more over the next 10 years than what it costs now, according to Heritage
Left unchanged, Medicare promises will cost $30 trillion over 75 years. That
would consume all federal revenues, leaving nothing for national defense
— or anything else.
"It's like falling off a 30-story building. For the first 20, it doesn't
seem so bad," Heritage's Butler said.
Congress displays no appetite for curbing the biggest expenses in the
federal budget — automatic "entitlement" spending, especially Social
Security and Medicare.
In 1985, spending on such entitlements took 45 percent of the federal
budget. It now takes 56 percent. A decade from now, it will take 62 percent,
according to the CBO.
It gets worse from there, as the first wave of boomers reaches full
retirement age in 2011.
"If there's one thing that could bankrupt the country, it's health care,"
Comptroller General Walker said.
But it's not just health care and retirement, not just war and homeland
security. Congress is spending lavishly on everything, said Brian Riedl,
Heritage's top budget analyst.
Spending has grown twice as rapidly under Bush than it had under Clinton.
Remove defense and homeland security costs and spending still jumped 22
"Everything is going up well past inflation" rates, Riedl said.
Since 2001, spending on education is up more than 100 percent, international
programs 94 percent and housing and commerce up 86 percent.
"We need a spending cap that helps lawmakers say no," Riedl said. He pointed
to the 1990 agreement between Congress and the first President Bush called
Pay-Go, which capped discretionary spending and required new spending to be
offset with cuts elsewhere.
Sen. Kent Conrad, D-N.D., the ranking Democrat on the Senate Budget
Committee, recently introduced an amendment to return to Pay-Go. "There is an
old-fashioned idea," he said on the Senate floor.
"Pay for it."
Copyright © 2005 The Seattle Times Company