The Deficit Is Worse Than We Think

Lawrence B. Lindsey:

Underestimating the long-term budget situation is an old game in Washington. But never have the numbers been this large.

There is no way to raise taxes enough to cover these problems. The tax-the-rich proposals of the Obama administration raise about $700 billion, less than a fifth of the budgetary consequences of the excess economic growth projected in their forecast. The whole $700 billion collected over 10 years would not even cover the difference in interest costs in any one year at the end of the decade between current rates and the average cost of Treasury borrowing over the last 20 years.

Only serious long-term spending reduction in the entitlement area can begin to address the nation's deficit and debt problems. It should no longer be credible for our elected officials to hide the need for entitlement reforms behind rosy economic and budgetary assumptions. And while we should all hope for a deal that cuts spending and raises the debt ceiling to avoid a possible default, bondholders should be under no illusions.

Unpleasant, but important. Read it all.

And go ahead and blame the Congressional Republicans who did such a poor job managing the budget between 2002 and 2006. They deserve plenty of blame. Blame George W. Bush, who didn't stop them from over-spending, or push hard enough for Social Security reform. He deserves it, too.

And then realize that, as badly as the Republicans performed over that stretch, the Democrats have been much, much worse since they took back control of the House in the 2006 elections. And President Obama has pushed everything in the wrong direction. If you were to set out to intentionally destroy the United States financially, there's not much that you would have done differently over the two and a half years. (Do I think he's intentionally trying to destroy the United States financially? No, I think he doesn't have a clue about what his policies are doing. If he were doing it intentionally, he's have screwed up somewhere, and we'd be better off...)