In his state of the union address, President Obama proposed to build a high-speed rail network reaching 80 percent of Americans within 25 years. But he also proposed to freeze domestic spending for five years. These two goals are incompatible. We can build that rail network, but it will not lead to the economic revival Obama envisions; it will only make it harder to reign in government spending.
More than three-fourths of federal revenues go for just four things: social security, medicare, medicaid, and interest on the national debt. By 2020, those four things will consume more than 90 percent of federal revenues. By 2030, they will consume all of those revenues.
At least, that’s the projection made by a November 15, 2010 report from the Government Accountability Office. It has apparently become news now because the national debt exceeded $14 trillion for the first time on January 20.
One possible lesson from this is that, if you want to build an expensive high-speed rail network or some other costly project, you better do it now while the federal government is still solvent. A more responsible lesson should be that we shouldn’t expect the federal government to things for us that the market can do better (and at no cost to taxpayers). If private investors won’t build high-speed rail, maybe we don’t really need high-speed rail.
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More particularly, if you are interested in national forests, transportation, or any other subject, you better find ways to fund those things without federal tax dollars. Within a decade or so, there won’t be any federal tax dollars to fund those things, and anything other than social security that isn’t paying for itself will be toast.
Why is social security (and, to a lesser degree, medicare and medicaid) likely to be exempt? If you think AARP is powerful today, just wait until all the baby boomers retire and many of them join. Congress might be able to raise retirement age by a year or two, but it will have a hard time making significant reductions in benefits.
Of course, the accuracy of the GAO’s projections crucially depend on future revenues. If revenues grow faster than projected (as they did, briefly, in the late 1990s), deficits will be smaller and perhaps even disappear (as they did from 1998 through 2001). But the federal government won’t boost those revenues by blowing a few hundred billion dollars on high-speed rail or other expensive programs that won’t pay for themselves.
Obama predicts that his freeze on domestic spending will save about $400 billion over five years, or $80 billion a year. As an alternative to Obama’s proposal, Republicans propose to cut $2.5 trillion from the budget over 10 years, or roughly three times as much per year as Obama’s cuts. Notably, the Republican alternative specifically scraps high-speed rail. Yet even the Republican proposal is not enough to really solve the government’s fiscal problems over the next couple of decades.
The Anitplanner wrote:
If you think AARP is powerful today, just wait until all the baby boomers retire and many of them join.
Heck, AARP doesn’t wait until people retire to try and recruit them – they start at (or in some cases, before) age 50!
Regarding Baby Boomers (and BTW, I am one), we are largely to blame for the fiscal mess that we find ourselves.
Here is how you can convince the public to invest in high speed rail:
http://www.youtube.com/watch?v=jF_yLodI1CQ
All Presidents posture and signal in the SOTU. They rarely deliver concrete X, Y, or Z. BHO simply reinforced – via mixed messages and a weak sop to the GOP, tort reform – the Party position and some of the non-starter…um…”ideas” of the other Party.
What Randal failed to mention is that our budget is the Big 5, not big 4: include Defense and what are you going to cut? as 3 of the 5 are payments to the old, the majority of whom vote for the GOP. Fake, callow pretty boy at least got one thing right – both parties took a long time to get us in this mess. I don’t see a way off the path to Banana Republicism without a hard landing with this politics in place.
We cannot solve this problem of our inevitable decline with this system.
[/fatalist]
DS
“More than three-fourths of federal revenues go for just four things: social security, medicare, medicaid, and interest on the national debt… Yet even the Republican proposal is not enough to really solve the government’s fiscal problems over the next couple of decades.”
I think the SOTU address and the republican response covered this relatively well. No specifics were given, as they will no doubt be politically unpopular, but there seems to be bipartisan acknowledgment of entitlements and the fiscal problem they pose for our future.
C. P. Zilliacus says: “Regarding Baby Boomers (and BTW, I am one), we are largely to blame for the fiscal mess that we find ourselves.”
That is music to my ears. I’m a Gen Y’er. Maybe I’m being sensitive, but I feel that we are often blamed for our parents mistakes.
That’s always the problem with cutting entitlements, and the reason it’s important to fight a new entitlement before any beneficiaries sign up. Once you’ve got people dependent on the system, making meaningful cuts is next to impossible.
“These two goals are incompatible. We can build that rail network, but it will not lead to the economic revival Obama envisions; it will only make it harder to reign in government spending.”
I agree that the goals are incompatible. However, building the rail network will boost the economy by injecting more capital into the economy. This is the opposite of what Eire tried, and their economy imploded.
The more important question comes when it’s time to pay back the debt – “What are we paying for?” If it is trains that don’t make much sense, people will resent having to put their hands into the pockets to pay for it. If the trains benefit lots of people, then people won’t feel so bad about paying for it.
“A more responsible lesson should be that we shouldn’t expect the federal government to things for us that the market can do better (and at no cost to taxpayers). If private investors won’t build high-speed rail, maybe we don’t really need high-speed rail.”
I agree. If it proves difficult to attract investors without ruinously high levels of subsidy, that should tell us something about the viability of the project. In the UK we subsidise socially important buses – buses which can’t pay their way, but which are required by large numbers of people. So – if there are lots of people who need it, why the high level of subsidy? The costs are fixed, and with so many people needing to use it, shouldn’t it be highly profitable? As always, there are large number of people who need to use the bus, until they have to stick their hands in their pockets to pay for it.
“http://www.youtube.com/watch?v=jF_yLodI1CQ”
I like monorails. But, as with so much transport technology, it costs too much and does too little. 6-8 people per m2 sounds okay, until you try it on a square of carpet. It’s a good way to make close friends.
I agreed with almost everything President Obama said except for the trains. Instead of trying to upgrade obsolete, uneconomical 19th century technology we should invest in research for 21st century ground transport. Evacuated Tube Transportâ„¢ could be the fastest, safest, most economical and efficient transport of all. See http://www.et3.com.
Disclosure – I have a financial interest in et3.
“Regarding Baby Boomers (and BTW, I am one), we are largely to blame for the fiscal mess that we find ourselves.”
I’m one, too, and I’m really tired of bashing Boomers for every imagined ill of society as if we act as one great hive brain. People my age have acted like jackasses for decades and I had no more to do with their behavior than I did with starting the Viet Nam War. And besides, Harry Reid was born in 1939 and Nancy Pelosi in 1940. By your logic, the Greatest Generation still deserves some blame, too.
I’ll make sure my 86 year old mother gets a good talking-to tonight.
Not that I want to see hundreds of billions spent on rail but I can think of a good place where 400 billion dollars can come from. http://www.youtube.com/watch?v=fgWAxPUHDFY
How to forget all our troubles. Just one thing makes me forget………RED RED WINE.
bennett:
“That is music to my ears. I’m a Gen Y’er. Maybe I’m being sensitive, but I feel that we are often blamed for our parents mistakes.”
Supermegadittoes on that one from another Gen Y’er.
Antiplanner:
“More than three-fourths of federal revenues go for just four things: social security, medicare, medicaid, and interest on the national debt.”
Actually, its only around 44% right now. 20% to SS, 19% to Medicare/Medicaid, 5% to Interest.
Of course no mention is made of the comical nonsense that we “need” to spend 40% of the defense spending of the whole world combined (and our NATO/ANZUS/ASEAN/etc. allies spending another 35%), or that veterans deserve their own hundreds of billions in entitlements and early retirement pensions.
No sacred cows.
“A more responsible lesson should be that we shouldn’t expect the federal government to things for us that the market can do better (and at no cost to taxpayers).”
I don’t know if I agree with that. If the activity in question is a constitutional power of the US Government, it unquestionably should NOT be done by private markets in my mind, even if it could be done “better”.
“If private investors won’t build high-speed rail, maybe we don’t really need high-speed rail.”
You could say the same thing for almost every type of infrastructure. If we took this attitude, we wouldn’t have roads, railroads, airports, etc. There is a reason the constitution authorizes congress to “Establish post roads” and to “Regulate (make regular) … commerce (trade/transportation) among the several states”.
“Why is social security (and, to a lesser degree, medicare and medicaid) likely to be exempt? If you think AARP is powerful today, just wait until all the baby boomers retire and many of them join. Congress might be able to raise retirement age by a year or two, but it will have a hard time making significant reductions in benefits.”
Or maybe one day, the courts will force Congress to follow the Constitution with respect to these auto-pilot “entitlement” programs. You know, the clause that says “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law” (Article I, Section 9, Clause 7). Its a true mystery how hundreds of billions is spent on them every year from the US Treasury without appropriation.
LazyReader wrote:
“Not that I want to see hundreds of billions spent on rail but I can think of a good place where 400 billion dollars can come from. http://www.youtube.com/watch?v=fgWAxPUHDFY”
This presentation, by the Cato Institute, suggests cutting defence spending by about $40bn/year. I think that is only a small part of the reduction that could be made.
There are some tasks, for example, high speed combat airplanes, which require expertise. But most of the time, money is spent on ordinary combat soldiers, and their logistics, civil servants, and all the rest.
Sometimes it is claimed that these soldiers are defending their own country – but a militia could do that without the expense of a full time army. In Britain, before James II built a standing army, this is how the country was defended, and to an extent the Territorial Army still does represent this doctrine.
Sometimes it is claimed that these soldiers enable the country’s values to be projected overseas. Robespierre got it right, I think, when he said that nobody loves armed missionaries.
During the Peloponnesian War, 30 Spartan hoplites defeated an army of 10,000 Athenian hoplites. There was no mystery to this – the Spartans provided the organisational and leadership skills that the existing demoralised Syracusan army lacked. For a time, in Afghanistan, this same doctrine was used to support the Northern Alliance. It strikes me as strange that a country feels the need to send soldiers overseas to fight, when there are already millions of people living there who can also fire an assault rifle.
I would like to see the UK move to a militia system, so that we can a) spend more money on weapons and b) put more money back in our pockets.
Robespierre got it right, I think, when he said that nobody loves armed missionaries.
Absolutely. If the US didn’t have 700+ military bases around the world, it wouldn’t need a bloated military to “protect” us from the terrorists. Big cuts could be made here, but there are many special interests that depend on the military spending to line their pockets. Not to mention the idiots who think the military is a valid career path.
Francis King (also metrosucks):
“This presentation, by the Cato Institute, suggests cutting defence spending by about $40bn/year. I think that is only a small part of the reduction that could be made.”
An extraordinarily disproportionate amount of US defense spending goes into maintaining overseas military protectorates in Japan, Germany, South Korea, Poland, Italy, etc. There is no reason to station troops in any of those countries. Those troops should be returned home and demobilized and their equipment put into storage or redistributed to retire whatever equipment is oldest. The only overseas military base of any strategic value to us that is not US territory is Diego Garcia.
We could probably make do with 6 carrier groups instead of 11 – 1-2 at Pearl, 1 at San Diego, 2 at Norfolk, 1-2 forward projected at Diego Garcia/Guam. The 20 oldest Los Angeles subs could be immediately retired and decommissioned.
It seems highly improbable if the US were to a make a realistic evaluation of actual strategic threats that it requires a standing army of 10 divisions when we are protected by two oceans. The 2nd, 3rd, 4th, 25th, and 101st divisions should be decomissioned, as should one each of the Cavalry Regiments and Infantry Brigades. Similarly, the US Air Forces Europe and Pacific should be decommissioned, along with the stateside support infrastructure used for material logistics to support the military protectorates in Europe, the Middle East and Asia. Once this is done the Air Force could be folded back under the Army to reduce the topside overhead of an additional command structure and reorient the Army and Air Force to the defense of the US instead of the forward projection of force.
In all, that would probably represent a 40%+ cut in forces, which when combined with the elimination of logisitics and administrative costs should permit a cut of over 50% in the defense budget.
Once this is done and the military is reoriented towards the defense of the US and the actual protection of our interests (for example, destroying the nests of priates in Somalia and Indonesia which threaten world shipping), further cuts would probably be possible, so that we could hope to achieve a military structure up to 2/3 smaller than present and costing less than $250 billion.
That would represent a savings of $400+ billion in what is essentially pyramid building.
Much of the present military is simply a vast welfare scheme for various persons and businesses, along with a constant provocation of various foreign countries which pose no actual threat to us.
Much of the present military is simply a vast welfare scheme for various persons and businesses, along with a constant provocation of various foreign countries which pose no actual threat to us.
Because of the welfare component, it would be essentially impossible to cut the so-called defense budget by anything approaching the figures you have presented. I would be all for it, but it’s extremely unlikely.
Once this is done and the military is reoriented towards the defense of the US and the actual protection of our interests (for example, destroying the nests of priates in Somalia and Indonesia which threaten world shipping), further cuts would probably be possible, so that we could hope to achieve a military structure up to 2/3 smaller than present and costing less than $250 billion.
We just got rid of a regime that fetishized itself over the Project for a New American Century and fantasized about projecting power all over the world to “protect our interests”. They emplaced people all over to achieve these ends. It was their belief that imperial actions were in our best interest. They are still in power and running high-end lobbying firms on K St to push for continuing this money train. It is much harder than you think to wean ourselves off of the Merkin Exceptionalism teat and get off of the military money train.
Eisenhower’s caution came true and it will be decades before it is undone, when of necessity we’ll have to hunker down on our shores and watch the rest of the world bicker (and the military already has plans for this, making it even more problematic).
DS
Dan:
“We just got rid of a regime that fetishized itself over the Project for a New American Century and fantasized about projecting power all over the world to “protect our interestsâ€.”
When I voted for Bush in 2000, he was a candidate who was promising to get us out of “nation building” exercises overseas which Clinton-Gore had been so fond of (Somalia, Haiti, Croatia, Bosnia, Albania, etc.) and to make privatizing social security a top priority. How quickly all of that changed.
America can best project power around the globe by living up to its creed of being the friend of free people everywhere and otherwise leaving people alone to resolve their own problems in an equitable manner.
How absurd that our nation, started by an armed rebellion of people grown weary of domination by outsiders, cannot give the time of day to those who have accomplished the very same thing in places like Kurdistan, Abkhazia, South Ossetia, Armenia/Nagorno-Karabakh, Serbian Bosnia, Transnistria, Taiwan, by the simple moral suasion of recognizing their de facto independence de jure. Even worse, that we turn around and send foreign aid to governments that are well known for oppressing people and provoking fights with unwilling minorities.
America cannot be a friend of liberty everywhere by bowing down to the nebulous “International Community” and their worship of worthless and outright dangerous and provocative lines on maps drawn up by Whitehall and Quay D’Orsay in the 1800’s and following WWI. Following the dictates of the Anglo-French balance of power diplomacy game as if it was the Writ of Heaven has drawn us into multiple wars and lead to incredible misery in this world since 1914. Will we ever stop and learn?