Every Presidential election year has its economic themes. In 1992, James Carville famously coined the expression, “It’s the economy, stupid!” I’d like to propose a theme for the 2004 election: “It’s the spending, stupid!”
The federal budget has gone from a surplus of $127 billion in 2001 (and a surplus of $236 billion in 2000) to this year’s Congressional Budget Office projection of a $477 billion deficit–a flip of $713 billion in just four years.
Congress is now debating next year’s budget, which is expected to show a huge increase in both spending and the deficit. Plus Congress is working on a highway bill that adds more than $256 billion. Politicians of both political parties are trying to buy our votes with our own tax dollars.
But don’t blame this year’s tax cuts for the deficit. The tax cuts–everything from the top tax rate to the dividend tax cut to the ending of the marriage penalty and increasing the child credit–lowered tax receipts by only $164 billion this year. The rest of that $477 billion deficit is being created by new spending.
And don’t blame the Iraq war and post-9/11 anti-terrorist measures for all that extra spending. A new study by Brian Riedl of The Heritage Foundation shows that defense spending and all 9/11-related spending amounts to less than half of the increase in government spending last year. The rest comes from a wide variety of programs passed by Congress.
Want some examples of outrageous spending? They’re not hard to find. In recent years federal budgets have included money such as $725,000 for the Please Touch Museum in Philadelphia; $200,000 for the Rock and Roll Hall of Fame in Cleveland; $26,000 for a tattoo-removal clinic; and $293,000 to combat “goth culture” (kids dressing in black) in Blue Springs, Missouri. The list goes on.
These are programs pushed by both political parties, but obviously the voters aren’t getting the message. And those cute little projects don’t include the estimated $8.1 trillion future un-funded cost of the Medicare drug-benefit bill over the next 75 years.
You’d never know it, but there’s actually a surplus in the main Social Security trust funds.
A significant Social Security tax increase, passed in 1983, increased both the percentage of salary paid in FICA and the wage base on which payroll taxes are paid. That tax increase was supposed to build up surpluses in the trust fund for baby boomers’ retirement.
And it worked.
On an accounting basis, there are supposed to be huge surpluses in the Social Security trust fund–about $152.8 billion in 2003, and a combined total surplus of $1.5 trillion over the past 20 years.
But don’t count on seeing that money in your Social Security check when you retire. All of that surplus has been borrowed out of the fund to offset the federal budget deficits we’ve been running. That practice started in 1983 and has continued every year–even when the federal budget showed a surplus.
All that money in the Social Security trust fund has been borrowed, and spent. When they open that great Social Security shoebox as the baby boomers retire, they’ll find it’s stuffed full of IOUs.
Spending Our Future
The current Congress is spending our present taxes and our future retirement funds, and creating a huge national debt on which we’ll pay interest for years. The federal government is spending more per family than at any time in this century except for the three years of World War II when government commanded all of our national resources.
You bet, “It’s the spending, stupid.”
And if we don’t remind politicians of both parties that they can’t buy our votes with our own money, they’ll keep on spending. They’re digging a huge hole for us and our children.
You know the solution to that: When you’re in a deep hole, stop digging! That’s the Savage Truth.
Chicago Sun-Times columnist Terry Savage, a registered investment advisor, is on the board of the Chicago Mercantile Exchange. She can be reached at http://www.terrysavage.com. This article was first published by the Chicago Sun-Times on April 1, 2004. © 2004 Terry Savage Productions