Scruggs, Vassallo Debate: Entitlements and the Deficit

Dickie Scruggs: Our deficit is the result of too low taxes on the one-percenters, not federal spending, which has been flat for 50 years.

Richard “Dickie” Scruggs

Many doomsayers predict that America is headed for fiscal disaster because of runaway spending on social programs (including, of course, welfare, food stamps, Medicaid and housing subsidies). Others blame defense spending, foreign wars and porkbarrel projects.

The truth is that federal spending is the same now as it was 50 years ago as a percentage of GDP (Gross Domestic Product). GDP is considered to be the best single indicator of a nation’s economic health. To be sure, federal spending has risen in absolute terms. But—critically–no faster than our GDP. In 1969 all federal spending was 19.4 percent of GDP. In 2015 it was about 21 percent.

By comparison, Israel’s government spends 46 percent of its GDP, Great Britain spends 40 percent, Australia 25 percent, Switzerland 19 percent, Russia 26 percent and Canada 19 percent. America is about in the middle internationally in government expenditures as a percentage of GDP. Japan, who’s economy has stagnated for two decades, spends only 14 percent.

What has changed in the last 50 years is the allocation of government spending in America. Defense spending has gone down from 9.5 percent of GDP in the 1960’s to 4.3 percent during the Iraq and Afghanistan wars. Federal spending on America’s future has also declined, most dramatically in spending on basic research, which has fallen 75 percent since the 1960’s. Similarly, spending on education and infrastructure has declined, falling off by one-third to below 2 percent of GDP during the Reagan years and remaining there.

Spending has risen, however, to cover the costs of health care, the needs of an aging population, and the prescription drug benefit enacted during the Bush 43 administration. According to Forbes, all so-called government “safety net” programs (including welfare, food stamps and the like) eat up about 60 percent of the budget, or about 14 percent of GDP.

So, if overall government spending hasn’t increased, what’s the big deal?

The big deal is where the money comes from. Before the Reagan years, it came mostly from tax revenue. But tax cuts enacted in 1981, without spending cuts, resulted in the federal government having to borrow the money. Consequently, the federal deficit as a percentage of GDP doubled between 1981 and 1996, when the Clinton administration enacted tax increases that modestly reduced the deficit. Under Bush 43, however, taxes were cut again, requiring still more borrowing and causing the deficit to grow from 57 percent of GDP under Clinton to over 70 percent at the end of the last Bush term.

In dollar terms, the federal deficit increased 101 percent during the Bush 43 years. In other words, by cutting taxes without reducing spending, the deficit doubled under Bush’s watch. The deficit during the Obama years has increased at only half that rate.

It is hard to escape the conclusion that the deficit problem was not caused by a growth in spending, but, rather, by a sharp decline in tax revenue, particularly declines in taxes on the wealthiest among us. If the richest Americans paid modestly more in taxes, the deficit would be quickly erased.

The truth, then, is that both political parties want to reduce the deficit. The difference lies in who pays for it. Democrats want it to come from the wealthy in the form of higher taxes on the 1 percenters who have an amount approaching half of America’s money. Republicans want it to come from the poor in the form of reduced spending on social programs.

Steve Vassallo: With a national debt spinning out of control and soon to reach $21 trillion, spending has got to be substantially reduced in the next administration if the country is going to survive.

Steve Vassallo

Raising taxes is not the answer this time. The middle class cannot absorb anymore of the burden being placed upon it by those who continue to enjoy government subsidies. The current situation is bleak. Here are the hard and cold FACTS.

In fiscal year 2012, the cost of federal, state-means tested welfare programs reached $950 billion, an all-time high! Welfare spending has grown 16-fold since the 1960s war on poverty. Currently there are about 80 federal-means tested welfare programs. In 2012, more than 46 million Americans received food stamps every month. Food stamps increased from $24.8 billion in 2000 to $82.5 billion in 2012.

Dickie mentioned that the “wealthiest among us” by paying a modest increase in taxes would quickly erase the deficit. This is a Democrat’s pipe dream. I concur that this tax bracket should be reevaluated, but it is unrealistic to think that by playing Robin Hood in 2016 is a viable option to realistically reduce the deficit.

Holding entitlements in check is the best answer to reducing the debt while at the same time eliminating wasteful spending. Here’s one example that is unbelievable. The National Institutes of Health was reported to have spent $387,000 to study the effects of Swedish massage on rabbits. If this is in fact correct, before we start raising taxes on the rich (or anyone else), let’s reexamine all federal expenditures first.

Here’s more fuel for thought. The national debt already exceeds 100 percent of the GDP. Three major budget categories (healthcare programs, Social Security and interest on the debt) will account for 85 percent of nominal spending growth over the next decade. Entitlement reform is a must to curb the growth in spending. What is driving this growth are the following: 44 percent due to Obamacare subsidies; 43 percent to our aging population; and 13 percent due to rising healthcare costs. Healthcare spending is being projected to increase $1 trillion by 2024!

While at the same time, the interest cost on the national debt will almost triple in the next eight years.

In conclusion, funding the national defense remains the single most important item in the budget. In 1965, defense spending was 7.2 percent of GDP. In 2014, it had been reduced to 3.5 percent. This trend cannot continue. Discretionary spending as a share of the budget will fall from 2/3 in 1964 to less than 1/4 in 2024 as entitlements grow uncontrolled.

The deficit is being projected to increase 151% by 2024. A debtor nation cannot sustain itself, let alone safeguard the world. Spending our way into luxury while borrowing 14 cents of every dollar is no longer an option. With the national debt now exceeding $145,000 per American household, a new day must dawn quickly,

Dickie Scruggs is one of Oxford’s best-known former attorneys who now expresses his passion for adult education through the GED in a unique state-wide program he has developed, aptly called “Second Chance.” Scruggs is a well known Democrat and anchors the position of the Left in Point/No-Point. He can be reached at DickScruggs@gmail.com.

Steve Vassallo of Oxford is a frequent contributor to HottyToddy.com covering a wide range of subjects. An arch conservative, the popular columnist holds the political position of the Right in Point/No-Point. He can be reached at sovassallo@gmail.com.

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