Article below is a slightly revised version of a letter I submitted on October 11 to the Bernardsville News for publication. I have added a Chart.
An excellent and related column by Paul Krugman appears in the NY Times today. Go to column.
Bill Allen, October 11, 2010
EDITOR:
You published a letter from me on September 30 in which I made the factual case that, during the period from 1976 to 2008, the federal deficit as a ratio of Gross Domestic Product (GDP) grew under Republican administrations and declined under Democratic ones. A writer on October 7 accepted the factual argument, but said we should look at what has happened under President Obama.
Let’s do this with numbers from the Congressional Budget Office (CBO), and compare the deficit for the 2010 fiscal year that ended in September with fiscal 2007, the last year before the recession. The deficit increased by $1.4 trillion, an alarming amount by any standard. Major components follow.
- A full 40% of the deficit increase was in two items: reduced revenue (29%) and increased unemployment payouts (11%). Both stem from the worst economic downturn since the 30s.
- Defense and veterans services accounted for 16% of the deficit increase.
- Medicare and Social Security also accounted for 16%. These continue to grow and must be dealt with.
- Stimulus spending is sprinkled throughout the budget and not identified explicitly. It and everything else totaled $396 billion, 28% of the deficit increase,
Components above are displayed in the attached Chart.
Note that the first component above, that includes two items resulting directly from the poor economy, is larger than the fourth component, that includes stimulus spending in the 2010 fiscal year and other things. This underscores the importance of assigning first priority to economic recovery.
The CBO projects budgets forward. It shows the deficit as 9.1% of GDP in 2010, declining to 2.5% in 2014, and resuming a steady rise to 3.0% in 2020.
It is essential to stress that the CBO numbers are projections. They are not a plan that any sane person is proposing. We must do things that will change the projections and balance the federal budget over the long term.
The largest growth component is Medicare. The healthcare bill passed this year is a step on the way to control of this component. The non-partisan CBO is the official scorekeeper for this kind of thing. It projects that the bill will reduce the deficit by a small amount, not increase it as the letter of October 7 claims. But much more must be done.
Health insurers will no longer be able to profit from denial of coverage for people who most need it. They can do constructive things, like providing better service and reducing administrative costs.
With no more fear and agony from not having coverage, we as a people can move calmly and rationally to build a healthcare system we can afford.
The healthcare bill was a critical first step. We must go forward from it, not backward.
Bill Allen, October 11, 2010