Politics: Tax and Spend - the numbers as percent GDP

Lots of data at usgovernmentspending.com

Here are two charts I generated at their site that shows Federal tax as a percentage of GDP and Federal spending as a percentage of GDP while I have been alive.

As you can see taxes have been around 17.5% of GDP.

As you can see spending has been around 20% of GDP. However, currently, and for the next five year, it is projected to be consistently above 20% while taxes consistently below 20%.

It isn't rocket science: we want more government services than we are willing to pay for with taxes leading to deficits. We have to either cut services or raise taxes or some combination of both.

And so what are the government services?

See the pie chart.

Est for 2011 (total = $3.8 trillion)
Defense $928.5 billion
Health Care $898 billion
Pensions $787.6 billion
Welfare $464.6 billion

Its nice to get tough on "earmarks" and "pork projects" but these four areas are where the pots of money are.

We either cut back on them, raise taxes or both.

We either decide we aren't going to be the policeman of the world or we raise taxes and start selling war bonds to explicitly link our global security commitments to our pocketbooks.

Health Care:
We either have to ask the senior citizens to pay more in premiums and co-pays in the Medicare program or raise taxes on everyone else to pay for it or both. Ditto for Medicaid. But since Medicaid is for the poor, we really can't ask them to pay more in premiums so we need to raise taxes to help fund it. I do wonder if "voucherizing" the program will make it more efficient?

We have to look at raising the retirement age another year or two. We have to look at lowering the cost-of-living increases going forward and maybe even reduce benefits. We have to look at raising taxes on current workers to sustain the solvency of the fund.

We either have to raise taxes to cover these costs or we cut back on the benefits.

As the saying goes, "there is no free lunch."

A family can't buy steak if they only have a budget for hamburgers.

The Democrats want to tax the rich to pay for these programs but in the end there isn't enough money there to pay for all the programs so we run deficits.

The Republicans talk about cutting budgets and holding the line on taxes but in the end they don't really cut budgets and thus saddle future tax payers with the deficits.

Reason.com says the magic number is cuts of 3.6% per year which will bring things in line in 10 years. They use a pork tenderloin roast to illustrate.