Is the Current Level of Federal Spending Sustainable?
Over the last several years, the total amounts of federal spending have been rising sharply. Part of the reason for this, is because of the different entitlement programs (such as: Social Security and Medicare). While at the same time, Defense spending and the costs associated with the War on Terrorism, have been having an impact upon these levels. A good example of this can be seen by looking no further than a report released by the National Commission on Fiscal Responsibility and Reform. They found that federal debt has risen from: 33% of the gross domestic product (GDP) in 2001, to 62% of the GDP in 2010. While, federal spending (in 2010) encompassed the greatest portion of the economy at 24% of the GDP. Only World War II shares this same distinction of: federal spending comprising the most of economic activity. ("The Moment of Truth," 2010) According to the report, "The escalation was driven in large part by two wars and a slew of fiscally irresponsible policies, along with a deep economic downturn. We have arrived at the moment of truth, and neither political party is without blame." ("The Moment of Truth," 2010) This is significant, because it shows how the current levels of federal spending are unsustainable. To fully understand the overall scope of this issue requires examining: the recent history of deficit spending and its possible impact. Together, these elements will provide the greatest insights as to if the current levels of spending are sustainable.
The Recent History of Deficit Spending
The old adage, "You have to spend money to make money," does have its limits. With the current recession, people discovered that sometimes money needs to be saved and not spent as soon as it is received. When discussing federal government's spending and what is an appropriate budget, there are a range of ideas. Evidence of this can be seen in article from the Economist. It compares the small government ideology of: Bill Clinton and the big government philosophy of George W. Bush's. ("Leviathan Stirs Again," 2010) What it indicates, is that state-run entities became privatized at an exponential rate during the Clinton Administration. The actions of the Bush Presidency of: increasing the size of the Defense budget, adding a new drug entitlement program for Medicare, establishing the Department of Homeland Security, and controlling more of the education system have caused the bureaucracy to grow. All of this contributed to increasing size of the federal government the most since the 1960's. This is when Lyndon Johnson, greatly expanded the various entitlement programs with: the implementation of Medicare and Medicaid. ("Leviathan Stirs Again," 2010)
Once President Barack Obama took office, the size of government did not shrink like in the times of: Clinton Administration. As, spending continued to increase at an exponential rate. The reason why is because, the federal government acquired assets in: the banking and automobile industries (which: collapsed during the Great Recession). Evidence of this can be seen in the Economist where it states, "As global markets collapsed, governments intervened on an unprecedented scale, injecting liquidity into their economies and taking over, or otherwise rescuing, banks and other companies that were judged 'too big to fail." ("Leviathan Stirs Again," 2010) The uncertainty of whether the government would be able to continue, if banking institutions and major corporations collapsed, caused anxiety about the loans to these failing private businesses.
Under the Bush administration, the federal government bailed out banks in the amount of: $250 billion and $17.4 billion from the TARP (Troubled Asset Relief Program). This assisted: Chrysler, General Motors and various financial institutions. ("September Oversight Report: The Use of TARP Funds in the Support and Reorganization of the Domestic Automotive Industry," 2009) The billions of dollars of bailout funds were deemed necessary in: order to prevent a further collapse of the financial system. Moreover, federal expenditures in this area were from of the American Recovery and Reinvestment Act. This is where $787 billion was distributed to stimulate the lagging economy. ("September Oversight Report: The Use of TARP Funds in the Support and Reorganization of the Domestic Automotive Industry," 2009)
The popularity of: the stimulus funds, bailouts, and other federal sponsored-programs; continues to wane as jobs remain scarce. At the same time, budgets are being slashed from: the state to the local level. When a proposal from The National Commission on Fiscal Responsibility and Reform suggested cuts to programs like: Social Security and Medicare. It created a tremendous amount of controversy. At which point, the public and members of Congress voiced their displeasure with this analysis ("Leviathan Stirs Again," 2010) Evidence of this can be seen with observations from the Economist. This says, "A banner at one of those tea-parties sums up the confused attitude of many of the so-called anti-government protesters: 'Keep the government's hands off my Medicare.'" ("Leviathan Stirs Again," 2010) There appears to be some confusion on: what the people want and how they expect these services to be provided to them. In order to deliver these services, the federal government must decrease spending. As, better management of: entitlement programs will go further and assist more (when they are handled responsibly).
One example of the mismanagement of federal funds is represented in the Defense budget. In the article, Less Could Be More, Tom Colburn assesses that: the Defense budget is in disarray. This meant that an audit was unattainable. (Coburn, 2010) As a result, his dissatisfaction with other budgets, is evident as he writes, "In almost every area of the government there is a tremendous amount of duplication, waste and barely any metrics or measurements for success (Coburn, 2010) Evidence of this can be seen with Welfare. As, 70 different bureaucracies, contained in six agencies are: not measured or analyze whether these programs are working. (Coburn, 2010) This is significant, because it shows the overall amounts of waste inside the different entitlement programs. As there is no way to: monitor or adjust them to changes that are taking place in spending levels. Over the course of time, this can be problematic, as it will create large bureaucracies that have no accountability. Once this occurs, it makes it difficult to: control or understand how the money is being spent in these areas.
As a result, the ineptitude of both political parties (Democrats and Republicans), has showcased how to add to the national debt through: the mismanagement of federal spending. Charlie Cook in the article Spinning Our Wheels, critiques that both parties are guilty of determining that federal funds are not wasted, when they are going to a lawmaker's area of representation. As Cook says, "There seems to be little payoff for lawmakers to try to rise above their immediate political self-interest and do the right thing for the country." (Coburn, 2010) The unwillingness of lawmakers to look beyond their district; increases the demand on: federal funds and whether or not they are available. In most cases, they are available and are contributing significantly to the national debt.
The Possible Impact
An escalation of spending is apparent in all facets of the budget (even when Defense spending is not calculated). Coburn explains that the budget, when inflation is not taken into consideration, has doubled since 1999. As spending on: health care, the environment, and education has rose 50% (Coburn, 2010) Furthermore, 90 thousand earmarks have been approved by Congress since 1994 (Coburn, 2010). The concept of increasing spending to rejuvenate the economy has yet to bear any positive results. As the additional distribution of federal funds on unsuccessful programs including: pork-barrel earmarks and other lavish expenditures are increasing the national debt even more.
With such wasteful use of taxpayers' funds, the threat of the debt rising even higher is a realistic possibility. As the older population is expected to increase and demand for services (like Medicare / Social Security) are anticipated to parallel what is happening. This issue can be argued that this is not: mismanagement or wasteful spending of federal dollars (because these programs work so well) ("Leviathan Stirs Again," 2010) A good example of this can be seen in the Economist where it says, "In America more than 10,000 baby-boomers will become eligible for Social Security and Medicare every day for the next two decades." ("Leviathan Stirs Again," 2010) This growth in the aging population is a warning of a fiscal disaster if: taxes are not increased to compensate for the additional demand on Medicare and Social Security. ("Leviathan Stirs Again," 2010) One remedy would be removing funding from programs that are unsuccessful; to help offset the need for these entitlements.
What has not been accounted for by the federal government is: that many American families have already dug deep and are committed to making painful cuts. As they are finding areas in their budgets; where, funds were being unnecessarily spent. The National Commission on Fiscal Responsibility and Reform suggests that the federal government live within their means. As politic quarrels should…