Understanding the federal deficit is not easy. There is the confusion between the deficit – the annual shortfall between spending and revenue, and the debt, which is the sum of all accumulated deficits. Complicating matters are the incomprehensibly high numbers, not only billions of dollars, but trillions. This year our annual deficit is expected to be about $650 billion, with a total debt nearing $17 trillion.
UNDERSTANDING THE cause of the deficit is easier. The government spends more than it takes in. The government has been doing that, except for during the late 1990s, for more than 30 years. As a result, a total debt of just under $1 trillion in 1981 has now ballooned to nearly $17 trillion.
The nonpartisan Congressional Budget Office prepares an annual report that provides a more detailed explanation of federal finances. This year’s report includes a graph showing actual spending and revenue from 1962 to 2012, and projections until 2022. Spending and revenue are measured as a percentage of gross domestic product.
What is most startling about the data is that, over a span of 40 years, spending consistently averages 3 percent of GDP more than revenue. The dotted horizontal lines on the graph show spending averaging 21 percent of GDP and revenue averaging 18 percent. Through Democratic and Republican administrations and congresses, war and peace, tax cuts and increased spending, recession and prosperity, the 3 percent gap remains relatively stable. The two exceptions are the budget surpluses at the end of the Clinton administration, and the huge drop in revenue and increase in spending at the end of the Bush administration and the first Obama administration.
HOW DO WE close the gap? Republicans and Democrats could look at this and see simple answers. Republicans would say cut spending, and Democrats say increase revenues. Both solutions, by themselves, are wrong. Neither party’s leadership has the courage to tell the truth to the American public.
Recall that during the 2012 presidential election, President Obama proposed tax increases for those making more than $250,000 a year. Mitt Romney proposed unnamed spending cuts and elimination of tax loopholes while simultaneously lowering marginal tax rates. Both solutions were misleading.
The president’s tax increase was expected to increase revenues by about $700 billion over 10 years, a mere 10 percent of the expected $7 trillion increase in the debt over that period. He didn’t propose tax increases deep enough to close the fiscal gap because that would affect, and alienate, middle-class voters.
GOV. ROMNEY was equally disingenuous in his refusal to reveal the specifics of his plan. He knew that closing the fiscal gap only through spending cuts and closing of tax loopholes would be unacceptable to the middle class once they understood the depth of those cuts and the loss of treasured tax breaks.
Only a combination of revenue increases and spending cuts will close the gap. The electorate will not accept a deficit reduction plan that relies only on one or the other. It is that simple, and all politicians know this. But they continue to spew their brand of partisan babble in order to further their own re-election, while sidestepping the effect on the nation of the massive and expanding debt.
But the body politic is not only made up of the president and 535 members of Congress. We voters are the ones who elect them, and most thinking people understand that fixing the deficit requires both spending cuts and revenue increases. We also are responsible if we accept politicians’ simplistic denial of that fact.
The graph shows a fiscal deficit. But it symbolizes other deficits that haunt our national politics. It is a courage deficit to put one’s re-election ahead of the nation’s interests. It is a leadership deficit to not tell the voters that difficult steps must be taken. It is a trust deficit to not work with the opposite party to reach principled fiscal compromise.
And finally, when we voters tolerate politicians’ deception even when we know better, it is a citizenship deficit. That is a gap we can close.
(The writer is a retired U.S. Navy officer. He lives and writes in Savannah.)