Debt Debate Highlights a History of Spending Problems

The debt ceiling debate is a reflection of a much bigger problem: Government that keeps promising more than it can pay for. And some analysts say fixing that problem over the longer term is critical if the U.S. is to remain solvent.

So, the current debate between Congress and the president is just the latest skirmish in a long, long war against steadily increasing government spending.

"Irrespective of what they decide, it's the first step in a long march to restore fiscal sanity," says David Walker of the Comeback America Initiative, which seeks solutions to spending problems.

The problem is this. According to calculations from the American Enterprise Institute’s Bureau of Economic Analysis, total government spending at all levels was 27 percent of the nation’s gross domestic product (GDP) in 1960. It is now 37 percent of GDP and headed to 50 percent by the year 2038. That means more and more of the economy will be run through and by government.

"This makes us completely indistinguishable from a country like France," says Arthur Brooks, the President of AEI, a conservative Washington think tank. Brooks says the U.S. is moving in the direction of a European-style government with high tax rates and more people receiving benefits than paying taxes.

"Today 51 percent of working Americans have no federal income tax liability," Brooks says. "Today almost 70 percent of Americans take more from the tax system than they actually pay in. Americans are shocked when they learn that and they don't like it at all.”

Walker says the practice can’t continue. “You can’t allow that to happen in increasing rates, over an extended period of time, without having a day of reckoning," he said.

That makes cutting spending difficult because people who don't have to pay for those benefits, see no need to trim them. And it’s why economists argue most people should pay some taxes, if only a little, so they know government benefits are not free.

"That changes peoples perspective and it changes their behavior a lot. It makes them a lot more sympathetic to the government doing the reforms that we need."

But some lawmakers say the budget cannot be balanced, as they put it, on the backs of seniors and the poor.

"[w]hen we cut Medicare, we really do a disservice to the senior citizens in this country,” said Rep. Edolphus Towns, D-N.Y. “When we look to save money by cutting Medicare and Social Security, senior citizens have worked all of their lives, putting a good portion of their paycheck into a system that paid for the well-being of their parents and grandparents.”

But people haven’t paid in nearly enough to cover the cost of the programs. Social Security and Medicare would need $46 trillion in today's dollars to cover future payments.

Many Democrats insist that the wealthy should pay more in taxes, but even that wouldn't come close to covering all the government's promises.

"Based upon our current path, if we try to solve the problem on taxes alone, we would have to double total federal taxes. by 2035 to close the gap," Walker said.

So the choices are stark: A European style government with high taxes and low growth, one like Greece that promises benefits it cannot pay for or, a painful but necessary process of trimming the promises the U.S. government made, but refused to impose the taxes to cover.

All are difficult choices, but one of them seems inevitable.