The Debt Limit, Budget, Deficit and Debt: Framing the Picture

The talk of the town is the debt limit.  Raise it or not raise it; and what it would take TO raise it.

Reasonable people can agree on a couple of things:

  1. We are in debt and it’s getting worse.
  2. To balance the budget, there needs to be a combination of an increase in revenue and a decrease in spending.

I honestly feel that if you were to ask this question, hidden in such a way as to bypass the normal political partisanship, every single American would agree.  If the checking account is overdrawn, a second job becomes something to consider and a review of the household spending becomes a priority.

But, how do we agree on such a combination when the discussion changes from the household budget to the federal budget?  How can we get folks who demand that we raises taxes together with folks who demand we don’t?  How do we get people who refuse to cut spending to shake hands with those who feel we HAVE to cut spending?

I propose that we do it by doing neither.

Watch:

First, let’s take a look at the situation we’re in.

Using numbers taken from the Tax Policy Center, I have graphed the Receipts and Outlays below:

From the graph, it’s kinda tough to tell what the trends are.  The red line is year over year government outlays; spending.  The blue line is year over year receipts or revenue.   The graph starts in tax year 1950.  I’ve started the measurement here because it removes the massive spending and taxing related to the war.

Just looking at the graph tells a couple of stories.  One is that virtually every year we spend more than we make.  Two is that up until about the early 70’s we were pretty close in the whole spending and making thing.  After that, spending has trended upwards.This upward trend lasted until 1983; the high-water mark.  After that year, spending as a % of GDP fell virtually every year until 2001.  2002 represented the beginning of some pretty big spending.

Another important story is that described in the years from 1998-2001.  These years, these blessed years, represent a point in time when the US deficit wasn’t a deficit; it was a net gain in money.  The debt actually fell.  However, this didn’t last long and we saw massive spending occur in 2008-2009 and 2010.

But, what do the numbers really show us?

What they show is pretty clear.  We have a steadily increasing gap between what we take in and what we take out.  Additionally, the data shows that while our level of outlays has been increasing year over year, our receipts are remarkably consistent; the trend line is almost perfectly horizontal.

So, what to do with this problem?  Well, if you remember, I proposed that we neither raise taxes OR cut spending.  And I maintain, still, that I can accomplish this.  Look.

Year over year, since 1950 our receipts have increased by an average of 7.20%.  And, year over year, our outlays have increased by 7.83%.  And that little bit of an increase makes all the difference.  However, there is good news.  Just such a difference, and time, can work in our favor if we let it.

Consider:

Let’s let revenues increase each year at the normal average rate of 7.20% each year.  That is, we AGREE that we HAVE to INCREASE revenues years over year.  We could then simply reduce the RATE of growth and get to our goal of a balanced budget.  No taxes are raised.  And no spending has been cut.  Indeed, spending continues to grow, but at a, say, 1 percentage point rate less than revenues.  What’s that look like?

Year Projected Receipts Projected Outlays Delta Receipt Rate Outlay Rate
2011 2173.7 3818.8 -1645.1 0.072 0.062
2012 2330.21 4055.57 -1725.36
2013 2497.98 4307.01 -1809.03
2014 2677.84 4574.05 -1896.21
2015 2870.64 4857.64 -1987
2016 3077.33 5158.81 -2081.48
2017 3298.89 5478.66 -2179.76
2018 3536.41 5818.33 -2281.92
2019 3791.04 6179.07 -2388.03
2020 4063.99 6562.17 -2498.18
2021 4356.6 6969.03 -2612.43
2022 4670.27 7401.11 -2730.83
2023 5006.53 7859.97 -2853.44
2024 5367 8347.29 -2980.29
2025 5753.43 8864.82 -3111.4
2026 6167.67 9414.44 -3246.77
2027 6611.75 9998.14 -3386.39
2028 7087.79 10618.02 -3530.23
2029 7598.11 11276.34 -3678.23
2030 8145.18 11975.47 -3830.3
2031 8731.63 12717.95 -3986.32
2032 9360.31 13506.47 -4146.16
2033 10034.25 14343.87 -4309.62
2034 10756.72 15233.19 -4476.47
2035 11531.2 16177.65 -4646.45
2036 12361.44 17180.66 -4819.21
2037 13251.47 18245.86 -4994.39
2038 14205.57 19377.1 -5171.53
2039 15228.38 20578.48 -5350.11
2040 16324.82 21854.35 -5529.53
2041 17500.21 23209.32 -5709.11
2042 18760.22 24648.3 -5888.08
2043 20110.96 26176.49 -6065.54
2044 21558.95 27799.43 -6240.49
2045 23111.19 29523 -6411.81
2046 24775.2 31353.43 -6578.23
2047 26559.01 33297.34 -6738.33
2048 28471.26 35361.77 -6890.51
2049 30521.19 37554.2 -7033.01
2050 32718.71 39882.56 -7163.85
2051 35074.46 42355.28 -7280.82
2052 37599.82 44981.31 -7381.49
2053 40307.01 47770.15 -7463.14
2054 43209.12 50731.9 -7522.79
2055 46320.17 53877.28 -7557.11
2056 49655.22 57217.67 -7562.45
2057 53230.4 60765.17 -7534.77
2058 57062.99 64532.61 -7469.62
2059 61171.52 68533.63 -7362.1
2060 65575.87 72782.71 -7206.84
2061 70297.34 77295.24 -6997.9
2062 75358.75 82087.55 -6728.8
2063 80784.57 87176.97 -6392.4
2064 86601.06 92581.95 -5980.88
2065 92836.34 98322.03 -5485.68
2066 99520.56 104417.99 -4897.43
2067 106686.04 110891.91 -4205.87
2068 114367.43 117767.21 -3399.77
2069 122601.89 125068.77 -2466.88
2070 131429.22 132823.04 -1393.81
2071 140892.13 141058.06 -165.94
2072 151036.36 149803.66 1232.7
2073 161910.98 159091.49 2819.49

Hmmph.  Good, I guess.  But only barely kinda.  In this picture we hit the magical year of shrinking deficits in 2057, fully 46 years from now.  And we hit a surplus in 2072; 61 years out.  What if we change the numbers some?  Like, what if we limit spending increase to only 5.2% annually?

Year Projected Receipts Projected Outlays Delta Receipt Rate Outlay Rate
2011 2173.7 3818.8 -1645.1 0.072 0.052
2012 2330.21 4017.38 -1687.17
2013 2497.98 4226.28 -1728.3
2014 2677.84 4446.05 -1768.21
2015 2870.64 4677.24 -1806.6
2016 3077.33 4920.46 -1843.13
2017 3298.89 5176.32 -1877.43
2018 3536.41 5445.49 -1909.08
2019 3791.04 5728.66 -1937.62
2020 4063.99 6026.55 -1962.56
2021 4356.6 6339.93 -1983.33
2022 4670.27 6669.6 -1999.33
2023 5006.53 7016.42 -2009.89
2024 5367 7381.28 -2014.27
2025 5753.43 7765.1 -2011.68
2026 6167.67 8168.89 -2001.22
2027 6611.75 8593.67 -1981.93
2028 7087.79 9040.54 -1952.75
2029 7598.11 9510.65 -1912.54
2030 8145.18 10005.2 -1860.03
2031 8731.63 10525.48 -1793.85
2032 9360.31 11072.8 -1712.49
2033 10034.25 11648.59 -1614.34
2034 10756.72 12254.31 -1497.6
2035 11531.2 12891.54 -1360.34
2036 12361.44 13561.9 -1200.45
2037 13251.47 14267.11 -1015.65
2038 14205.57 15009 -803.43
2039 15228.38 15789.47 -561.1
2040 16324.82 16610.53 -285.71
2041 17500.21 17474.27 25.93
2042 18760.22 18382.93 377.29
2043 20110.96 19338.85 772.11

Wow.  Now THAT is getting better.  The year we hit shrinking deficits is in 2025!  That’s just 14 years away.  And we have a surplus in only 30 years; 2041.  But, hell, let’s get greedy.  Let’s go to 4% growth in spending.  That’s still more than inflation.  So, what does it look like if we allow government to grow at 4% year over year?

Year Projected Receipts Projected Outlays Delta Receipt Rate Outlay Rate
2011 2173.7 3818.8 -1645.1 0.072 0.040
2012 2330.21 3971.55 -1641.35
2013 2497.98 4130.41 -1632.43
2014 2677.84 4295.63 -1617.79
2015 2870.64 4467.46 -1596.82
2016 3077.33 4646.15 -1568.83
2017 3298.89 4832 -1533.11
2018 3536.41 5025.28 -1488.87
2019 3791.04 5226.29 -1435.26
2020 4063.99 5435.34 -1371.35
2021 4356.6 5652.76 -1296.16
2022 4670.27 5878.87 -1208.59
2023 5006.53 6114.02 -1107.49
2024 5367 6358.58 -991.58
2025 5753.43 6612.93 -859.5
2026 6167.67 6877.44 -709.77
2027 6611.75 7152.54 -540.79
2028 7087.79 7438.64 -350.85
2029 7598.11 7736.19 -138.08
2030 8145.18 8045.64 99.54
2031 8731.63 8367.46 364.17
2032 9360.31 8702.16 658.15

YOWZA!  Would’ja look at them numbers!  We see shrinking deficits right away; there is no waiting period to see the benefits.  AND the surplus is seen in 2030; only 19 short years away.

I’m sure it’s harder than this, but not much.  The awesome thing about math is that it works in Raleigh just as well as it works in DC.  This is pretty straight forward kinda stuff, not rocket surgery at all.

So, next time you’re debating your favorite liberal statist, just remember, we CAN balance our budget without raising taxes and without cutting spending.

3 responses to “The Debt Limit, Budget, Deficit and Debt: Framing the Picture

  1. You’re still assuming receipts will continue to grow at 7.2%. Take a look at the receipts graph since 2000, when major tax cuts were implemented. Run a best-fit slope on 2000-present, and figure out what the expected trend is if we don’t reverse course and raise taxes to pre-2000 levels.

    • Run a best-fit slope on 2000-present, and figure out what the expected trend is

      THIS is the conversation we have to have. This is how the debate should be framed. Maybe 7.20% may or may not be the desired year over year revenue gains. Maybe we need higher revenues; perhaps lower. Then we need to figure out how to get there. Is the tax policy that we have in place robust enough or is it lacking?

      These are the make-sense conversations that reasonable people would have when trying to solve a problem. MY beef with politicians in general, and this President in specific, is that he doesn’t have those conversations with us. Rather, he gives us nonsensical platitudes on having to tax the wealthy jet owners. By the way, that tax wouldn’t budge the revenue line even a little bit.

      I haven’t done much of any research into the bias, if any, of the Tax Policy Center. Further, I have no idea how correct they are, but they have projections for years 2011 through 2016. The revenues in 2012 continue to under preform but do improve over 2011 levels. By 2013 revenues are back to historical levels and in 2014-2016, they are exceeding those levels. This might suggest that the declines we have seen since 2000-2001 might have more to do with recessions than with tax policy.

      However, again, THIS is the debate we should be having. Reasoned individuals looking at data. I can resonate with you when we discuss how to get revenues back to ~18%. I can measure if we are doing a good job or a poor job. What isn’t measurable is the statement:

      “Millionaires and billionaires can afford to pay more; they aren’t paying their fair share.”

      But you’re right. We do have to keep an eye on taxes. There is such a thing as too low a tax rate. And we need to make sure we don’t hit that. But we should figure out how we know.

  2. Pingback: Spending: Obama vs Bush « Tarheel Red

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