How come we are so far in the red? Where’s all our money going?

Taxation Without Cessation

How come we are so far in the red? Where’s all our money going?

Redacted from an editorial by Jeffrey H. Anderson

The Weekly Standard Editorial
January 21, 2013

While the press was distracted by the misnamed “fiscal cliff” we began the New Year with a 13-figure deficit and a 14-figure national debt-the result of today’s Americans borrowing vast sums of money and putting it on future Americans tab. The two parties offer rather different explanations for the cause of this unsustainable transfer of wealth from the young and the unborn to the old, which the “fiscal cliff deal — at least on paper— only made worse.

President Obama and the Democrats suggest that federal tax revenues have fallen, while federal spending has generally proceeded at reasonable levels. Republicans suggest that tax revenues have more or less flatlined, while spending has skyrocketed. Neither explanation is fully accurate. In truth, taxes have risen substantially. Yet these substantial increases in federal taxation have been dwarfed by an explosion in federal spending.

According to White House, Congressional Budget Office (CBO), and U.S. Census tallies, when John F. Kennedy was in the White House in 1962, federal tax revenues were $534 per capita or $4,178 in today’s dollars. Last year, according to those same sources, federal tax revenues were $7793 per capita. So, from 1962 to 2012, taxes rose 87 percent even after accounting for inflation and population growth. In other words, across the past 50 years, real (inflation-adiusted) per-capita taxes have nearly doubled.

Of course, this 87 percent increase in per-capita taxation hasn’t remotely kept the federal government from racking up higher deficit spending. With JFK in the White House in 1962, the federal government spent 7 percent more than it had available to spend-$1.07 going out for every $1 coming in. With Obama in the White House, it has spent $1.56 for every $1 available.

…What are we spending such colossal sums of borrowed money on? Well, we’re clearly not spending them on defense. According to official White House and CBO tallies, from 1962 to 2012, the share of total federal spending that went to national defense fell from nearly half (49 percent) to less than a fifth (19 percent). Where, then, is all of the borrowed money going? Here’s a hint: Medicare and Medicaid—and now Obamacare—didn’t exist in 1962.

… Over the past 50 years, defense spending has essentially flatlined, taxation has nearly doubled, total federal spending has far more than doubled, and nondefense spending has quadrupled. In that light, only the most stubborn ideologue could blame our mind-boggling deficits on insufficient taxation or excessive defense spending.

… Just days after the 40th-anniversary celebration of the Declaration of Independence, Thomas Jefferson wrote that “private fortunes are destroyed by public as well as private extravagance.” He warned that “public debt” is the “fore horse” of the “frightful team” of public mismanagement that leads to the “misery,” “suffering,” “wretchedness,” and “oppression” of private citizens.

As we begin 2013, we would do well to start heeding Jefferson’s warning. The only way to escape our worsening fiscal calamity is by substantially reforming Medicare and Medicaid to make them affordable, replacing Obamacare (which will require having a 2016 Republican presidential candidate who can persuasively advance a replacement), enacting pro-growth policies, and—most simply—cutting federal spending almost across the board. A half-century during which we’ve nearly doubled our taxes and quadrupled our non defense spending is a sufficiently lengthy experiment in gross fiscal mismanagement. It’s time for overdue leadership and meaningful reform.

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