Shared Sacrifice for the Budgetary Mess

Chuck Sheketoff

What’s wrong with this picture? The country has gone from a projected surplus to deficit in just four years. The $9.4 trillion swing from surplus to deficit threatens significant budget cuts in a range of domestic programs — from health care to housing — that tens of millions of Americans rely on every day.

A number of factors have brought us to this point. Starting in 2001, the nation underwent the largest peacetime budgetary deterioration in its history, from an annual surplus of over $200 billion to annual deficits that were (and still are) even larger. The economic downturn caused part of this budgetary damage, but so did tax cuts and spending increases enacted by Congress. And of those actions by Congress, by far the costliest was the tax cuts Congress passed in 2001 and 2003.

When the tax cuts are fully in effect, their annual cost will roughly equal everything the federal government spends on housing, veterans’ programs, agriculture, and homeland security combined.

The tax cuts helped push federal revenues down to historically low levels when measured as a share of the economy. This year, revenues are rebounding somewhat but are still expected to be below their average level during any of the last four full decades (1960s-1990s). And this year’s deficit, while smaller than had been predicted, will still top $300 billion.

Policymakers are beginning to acknowledge that the deficit is a serious problem. But the Administration and congressional leaders want to address it entirely by cutting spending. They have rejected the idea of reconsidering the recent tax cuts, and in fact are calling for new ones.

Most notably, Congress is considering permanently eliminating the tax on large estates, or shrinking it so much that it would bring in only about a tenth as much revenue. Repealing the tax would cost more each year than the federal government spends on homeland security or K-12 education, yet would benefit only a very small group of the nation’s wealthiest households.

At the same time Congress continues its tax-cutting binge, it is considering reductions in key government programs. Under Congress’s budget plan, Medicaid, which provides health coverage to roughly 50 million Americans, faces up to $10 billion in cuts. Food stamps and agriculture programs are slated for $3 billion in cuts. The part of the budget that includes education, environmental protection, veterans’ health care, and many other programs would be cut by growing amounts in each of the next five years, with the cuts reaching more than 11 percent (after inflation) by 2010.

If these don’t sound like the right priorities for our government, they aren’t. What’s lacking is the concept of shared sacrifice, the central ingredient of the successful deficit-reduction efforts of the early 1990s. Both in 1990 (under a Republican Administration) and in 1993 (under a Democratic Administration), the federal government adopted balanced plans to reduce the deficit through a combination of higher revenues and lower spending.

That approach could work again, once our leaders acknowledge that unaffordable tax cuts have helped create our budgetary mess and that new revenues need to be part of the solution.

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Chuck Sheketoff is the executive director of the Oregon Center for Public Policy.   You can sign up to receive email notification of OCPP materials at

  • Bailie (unverified)

    Interesting. The greatest bubble in the economic history of the world, popped. The underlying problems were already in place, but masked, for the duration of the bubble. We were close to economic collapse as the bubble broke. Among the only stimulants that the government has at its discretion, are the lowering of interest rates, deficit spending and the lowering of taxes. All were necessary to avoid an imminent meltdown. It appears that they worked. However, I agree, as soon as stabilization is achieved, spending for the programs everyone seems to like, needs to be reigned in.

  • Sid Leader (unverified)

    Poor Bailie, blaming Clinton. That's SO last century!

    W and the Chickenhawk Brigade have poured $250,000,000,000 down two rat holes, making Iraq Terrorism HQ. DOD and BNH say putting arms and legs back on our boys will cost as much as $2,000,000,000,000 over the next decade, at $50,000 an arm, plus medicine, plus therapy.

    Then, to make matters worse, W became the ONLY PRESIDENT IN US HISTORY to cut taxes in a time of war. W gave away the store, to his BIG DONORS, like future felon Kenny Boy Lay, who gave W a ride on Enron Air to the inaugural. W sure did cut taxes, no, he SLASHED them for the richest of the rich and how many jobs have been created? Zero.

    Maybe Bailie can help me with my new book, "1,001 Things George W. Bish Has Done Right", but I'm stuck at number... one.

  • Ruth Adkins (unverified)

    And of course here in Oregon, it's all those dang teachers' faults that we don't have enough money for schools and the public services that everyone wants. Pay no attention to the fat cats and corporations getting away with larceny, folks--just get mad at those overpaid, lazy teachers and their unfair health benefits. (You don't have health care or a decent pension, so why should they?)


    Pardon the sarcasm, I've been (finally) reading "What's the Matter with Kansas" and am in despair. Is there no hope for our country?

  • RUNuts (unverified)

    Can I ask where in Heaven's name do you find the numbers you are using? I have studied the direct liabilities of the government for a long time and I'm always amazed how people believe we had a federal surplus in the 90's. The last fiscal year in which the liabilities of the government decreased was in 1960. The closest the government got to a single year of surplus since was a $18 billion deficit in the 2000 budget. If you don't believe my numbers, visit the Treasury Dept. or Bureau of the Public Debt. For a quick view of the numbers, go here:</font></div></body></html>

  • Jesse (unverified)

    I think what you should clarify is that a surplus and a growth in public debt are two different things. As the file linked to here shows, from 10/01/99 to 9/30/00 the federal government received $236.132 billion more than it had a commitment to spend.

    And, this page shows that the end of Federal Fiscal year 2000 shows a reduction in the public debt of $22 billion compared to a year before. But, as you can see scanning other months, this annual comparison during Clinton's surplus years vascillates month to month. So, yes, on the table that RUNuts points to, it looks like the debt grew $18 billion in 2000 despite surpluses, but look a month ahead and it's untrue, look to Nov 2000 and its true again, look at December and it's back to being not exactly right.

    What is easy to pinpoint is that as you move into the later years with Bush in the White House, this vascillation doesn't happen. Just increase after increase in the public debt that, if policies are not corrected, will soon become a very big problem.

    Hope that helps clear things up.

  • Sid Leader (unverified)

    I'd like to thank Jesse for clearing up the numbers, as Chna eats our lunch, hand fed by W and boyz.

    Folks like Bailie make a career out of "cherry picking" numbers from government spreadsheets to back their views.

    I was taught in grad school to look at the numbers FIRST, and then make the conclusion.

    Which is what this site a bit more HONEST than some others.

  • Bailie (unverified)

    Ruth, It is nice that you understand our dire situation in Oregon. You say, "And of course here in Oregon, it's all those dang teachers' faults that we don't have enough money for schools and the public services that everyone wants."

    Although I wouldn't necessarily blame the teachers, as you do. The evolution of the process probably catches most of the blame. Which political groups were pushing this unsustainable situation? Wouldn't $500 million extra, each year go a long way in solving the K-12 funding problem. And that would be without touching the 13th highest salaries in the U.S.

  • RUNuts (unverified)

    If you believe that the debt is $7,868,642,129,876.28, then you can't use any other numbers than the ones I presented. You can't add and remove specific numbers, like a social security surplus, to formulate a deficit or surplus. The government is a single entity and it either has a single line items surplus or deficit that directly changes the total debt. I hate to say it Jesse, but you're just using fuzzy math.

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