The first
report is known as the "Financial Report of the United States
Government." The latest is for fiscal year 2005, which ended
on Sept. 30, and was published by the Treasury Department and
the Government Accountability Office on Dec. 15.
The summary
shows a gross federal debt of $9.9 trillion, offset by assets
of $1.5 trillion, for a net debt of $8.5 trillion. At the end
of fiscal year 2001, the comparable numbers were $7.4 trillion
for the gross debt, $926 billion for assets and a net debt of
$6.5 trillion. Thus we see that the national debt has increased
by $2 trillion on Bush's watch.
However,
because of accounting conventions, these figures greatly understate
the rise of national indebtedness. They include only Treasury
securities outstanding -- what most people think of as the national
debt -- plus federal employee and veterans' benefits payable,
environmental liabilities, insurance and loan guarantee liabilities,
accounts payable and some miscellaneous liabilities.
What is
completely left out are benefits payable for Social Security and
Medicare. In a separate table, one can find figures for the unfunded
liability of these programs -- what the accountants call "negative
cash flow" -- over the next 75 years, adjusted for the rate
of interest.
The total
indebtedness of these programs was $17 trillion in 2001: $4.2
trillion for Social Security, $4.7 trillion for Medicare Part
A and $8.1 trillion for Medicare Part B. In the latest financial
report, these debts have more than doubled. Social Security's
indebtedness has risen to $5.7 trillion, Medicare Part A is now
up to $8.8 trillion and Part B has grown to $12.4 trillion.
In addition,
there is now another Medicare program -- Part D for prescription
drugs -- that George W. Bush rammed through Congress. The unfunded
liability for just this one program is $8.7 trillion, for a total
of $35.6 trillion.
Thus we
see a grand total of increased indebtedness of more than $20 trillion
during the Bush presidency, of which more than 40 percent is accounted
for just by the Medicare drug benefit.
In another
report also published on Dec. 15, the Congressional Budget Office
looked at long-term spending and revenue projections. The numbers
are deeply depressing.
According
to CBO, spending for Medicare and Medicaid will more than double,
from 4.1 percent of the gross domestic product to 9.2 percent
over the next 25 years, and more than triple to 12.6 percent by
2050. But this assumes that Congress will show some restraint
and keep these programs from rising as rapidly as they have in
the past. Under CBO's high-spending alternative -- which I find
more likely -- spending for Medicare and Medicaid triples by 2030
and rises to 21.9 percent of GDP by 2050. Total federal spending
on all programs is now 20.2 percent of GDP.
By contrast,
Social Security, which President Bush concentrated so much effort
on, is no problem at all. Its spending only rises from 4.3 percent
of GDP this year to 6.6 percent by 2050 even under the high-spending
scenario. Instead of wasting so much time on a futile effort to
reform this program, he should have spent all of his time figuring
out how to reduce the growth of spending for Medicare. Instead,
he made its problem vastly worse.
If revenues
are held constant at their current level of 18.3 percent of GDP,
the debt explodes, causing the government's interest expense to
rise from 1.5 percent of GDP to 4.6 percent by 2030 and 12.4 percent
by 2050 under the lower-spending scenario. Under the high-spending
option, interest payments rise to 21.4 percent of GDP by 2050.
Under another
scenario, CBO assumes that taxes will rise by allowing the Bush
tax cuts to expire and Congress enacts no offsets to the growing
alternative minimum tax or bracket-creep. This would raise revenues
by 6.2 percent of GDP by 2050. Although this mitigates the rise
in debt considerably, interest costs still rise to 4.7 percent
of GDP by 2050 with lower spending and 13.6 percent with higher
spending.
Moreover, allowing taxes to rise this way lowers economic growth.
And because indebtedness still rises, more and more of the national
income must be sent abroad to pay foreign holders of Treasury
securities. The result is lower standards of living for all Americans.
Under a
worst-case scenario, failure to control the growth of debt by
cutting spending and raising taxes sharply could lead to an economic
crisis, with collapse of the dollar, sky-high interest rates and
hyperinflation. The longer Congress and the White House put off
corrective action on the budget, the more painful the ultimate
cure will be.
