Back to Work - Bill Clinton [31]
So where does all this leave us with the debt? The Simpson-Bowles Commission says that if nothing changes in the way we now tax and spend, the return of normal economic growth will give us more revenues and lower costs for unemployment-related expenses. Today our annual spending is about 24 percent of GDP, and we’re taxing at 15 percent, the lowest percentage in sixty years. If we had normal growth of 2.5 to 3 percent, the numbers would be more like 22 and 17 percent, leaving us with a “structural” deficit of $650 to $700 billion a year, not $1.2 trillion.
Unfortunately, over the next few years, the deficit reductions brought by the return of normal growth will be more than offset by dramatic increases in annual outlays for Social Security and health care, and over the decade, a fourfold increase in interest payments on the debt. These factors are projected to increase the debt another $9.5 trillion by 2020.
The Simpson-Bowles Commission recommended shaving $4 trillion off that over the next decade by reducing spending by $3 trillion, with more than two-thirds coming from discretionary cuts and reduced interest payments on the debt, less than a third from Social Security, health, and other mandatory programs. The other $1 trillion in debt reduction in the commission plan comes from new tax revenues.
If you assume that we could get another $1 to $1.5 trillion over ten years by making health-care delivery changes and implementing more of the GAO report’s recommendations (most people don’t think we can, but I do) and that if the antitax forces prevail in preventing any new revenue, the debt could still increase another $5 trillion by 2020, and the budget couldn’t be balanced. Even with new revenues, the Simpson-Bowles Commission plan doesn’t balance it until 2035.
Also, the big cuts in discretionary spending may well not be achievable, and in some areas would be a big mistake. Even before the budget agreement, defense was projected to be 15 percent of the federal budget by 2016, the lowest percentage since the onset of the Cold War. Much more troubling is that our nondefense discretionary spending will fall to its lowest level as a percentage of the overall economy since 1960. That’s hardly good news if you agree that nondefense discretionary spending, investments in education, infrastructure, clean air and water, are critical to our future growth and our quality of life.
In Chapter 3, I mentioned some of the discretionary cuts in the GAO report that we should make, but a good portion of that money should be reinvested by the government to further increase our economic productivity, our quality of life, and America’s impact beyond our borders. First, for our own national security, we should be making larger, not smaller, investments across the world to reduce poverty, improve health and education, and advance freedom and democracy. Our military leaders, including Admiral Michael Mullen, the recently retired chairman of the Joint Chiefs of Staff, often remind us that making friends is cheaper than fighting wars. The politicians like to cut foreign aid, as I said earlier, because Americans think we spend a lot more on it than we do, and, unlike Medicare or farm supports, those who get it don’t vote here. Second, the defense cuts are pretty steep unless the Pentagon fully implements the GAO recommendations, gets a better deal on the huge number of contracts it signs every year, and becomes more energy efficient and less dependent on imported oil. It’ll do a better job of implementing these changes if it knows it can keep at least some of the money it saves to meet legitimate security needs. Even though we are winding down our involvement in Iraq and Afghanistan we can’t assume we won’t be involved in other conflicts in the future.
Third, and most important to our daily lives, if we’re going to stay ahead of our wealthy competitors and rapidly growing nations like China, India, and Brazil, we’re going to have to invest more in twenty-first-century