On a low-attention Sunday, the Associated Press's Tom Raum put together a pretty good analysis ("US debt will keep growing even with recovery"), though not labeled as such, of the serious financial situation the country faces thanks to the mushrooming national debt.
But the AP writer ignored two critical warnings raised in a related item he filed over a year ago on Wednesday, January 7, 2009 ("Analysis: Deficit spending is tough medicine") that have contributed mightily to the dire situation he described. In that report, Raum claimed that there was a "consensus ... that some form of major stimulus — either new spending, tax cuts or a mix — is needed ... so long as it is short term and doesn't include permanent new spending programs." It is clear that the stimulus plan passed last year has flunked both key concerns he raised.
Raum also blithely assumed that White House and Congressional Budget Office forecasts assuming a huge increase in collections are accurate, when there is ample evidence that they are not.
Here are key paragraphs from the AP's Sunday sounding of the siren:
... For the U.S., the crushing weight of its debt threatens to overwhelm everything the federal government does, even in the short-term, best-case financial scenario - a full recovery and a return to prerecession employment levels.
The government already has made so many promises to so many expanding "mandatory" programs. Just keeping these commitments, without major changes in taxing and spending, will lead to deficits that cannot be sustained.
Take Social Security, Medicare and other benefits. Add in interest payments on a national debt that now exceeds $12.3 trillion. It all will gobble up 80 percent of all federal revenues by 2020, government economists project.
That doesn't leave room for much else. What's left is the entire rest of the government, including military and homeland security spending, which has been protected and nurtured by the White House and Congress, regardless of the party in power.
The U.S. debt crisis also raises the question of how long the world's leading power can remain its largest borrower.
... The budget he (the President) submitted to Congress this month proposes record spending of $3.8 trillion for 2011. Taxes in next year's budget will support only $2.5 trillion of that spending, leaving $1.3 trillion to be borrowed.
... It's not clear when the debt's day of reckoning will arrive. But the overall national debt over the next few years will rise to 100 percent of the gross domestic product - a level viewed as alarming by the International Monetary Fund and international economists.
The Social Security system, the biggest social spending program, has begun paying out more in benefits than it collects in payroll taxes. For the past quarter-century, Social Security had produced a surplus that helped finance the rest of the government.
Medicare, the health care program that now covers 45 million elderly and disabled people, is in worse shape. It's been paying out more than it takes in since 2008 and its trust fund is projected to run out of money in 2017.
Dealing with the two problems I raised earlier:
- As I pointed out on Thursday (at NewsBusters; at BizzyBlog), the Obama administration's latest budget artificially inflated the "baseline" level of spending by classifying hundreds of billions of dollars of items that were advertised as "temporary" last year as "permanent" (i.e., supposedly untouchable) parts of the baseline. Unwittingly or not, when Raum cited "mandatory" programs representing "commitments," he effectively let the administration get away with its baseline ruse.
- As to the concern Raum cited about the stimulus's short-term nature last year, the fact that Congress is even considering another one -- advertised as a "jobs bill" -- shows that the idea of Congress only going to the spending stimulus well one time was a pipe dream.
- Raum writes with certainty that "taxes in next year's budget (fiscal 2011) will support only $2.5 trillion of that spending." If only. As I noted last Tuesday (at NewsBusters; at BizzyBlog), the fact is that fiscal 2010 collections through four months are already over $85 billion behind fiscal 2009, even though the White House and CBO are assuming they will come in $60 and $70 billion respectively ahead of last year's total of $2.105 trillion.
- Expanding on the collections problem -- Even if receipts somehow recover to the point of matching last year, which seems less and less likely with each passing day (through nine business days, identifiable February 2010 federal receipts are trailing February 2009 by over 14%), they will have to rise by 19% in fiscal 2011 to get to the $2.5 trillion Raum cited. This gusher of money is somehow supposed to materialize even though the unemployment rate under the rosiest scenarios is expected to come down only gradually, and even though anyone who understands human behavior knows that the expected intake from next year's scheduled rise in marginal tax rates on high-income earners will be substantially less than the White House's and CBO's static analysis projections predict.
The final gripe I have with Raum's reportage is that he is admitting to something establishment press reports have avoided mentioning for decades, but most particularly during Bush 43's attempt to do something about Social Security in 2005, namely that "For the past quarter-century, Social Security had produced a surplus that helped finance the rest of the government."
What Raum is really saying is that Congress raided Social Security during all that time, leaving it with a cash shortage almost every month now that the demographic worm has turned. Thus, there is no "trust fund" with any kind of meaningful resources -- unless you consider about $2.5 trillion in IOUs from a government that is carrying over $10 trillion in other debt to actually be collectible. What was once predicted to happen in 2017 or 2018 is happening right now.
Still, the AP's writeup is sufficiently alarming that it gave rise to this comment (excerpted) at Media Bistro, where the online equivalent of a food fight erupts every time the site releases the daily cable news ratings:
Look who is agreeing with Glenn Beck. That right-leaning bastion - A.P.
It seems Glenn's warnings all these years are proving to be accepted by even part of the lame stream media.
Remember, all the lefties have been saying Glenn is Chicken Little when he started saying the same thing several years ago.
Cross-posted at BizzyBlog.com.