Last week’s State of the Union dust-up, with both the president and congressional Republicans pledging their undying fealty to the sanctity of Social Security and Medicare, motivated me to check the numbers. Apparently, Washington, D.C., calculators contain different logic chips than the ones used by the rest of us.
Here’s a link to the president’s fiscal 2023 budget. Flip to page 121 and you’ll find this table:
The math is straightforward. Social Security represents 23 percent of budgeted Fiscal 2023 federal expenditures and Medicare a further 15 percent. So, Social Security and Medicare together comprise 38 percent of total 2023 federal expenditures, which are budgeted at $1.176 trillion more than projected revenue. To bring things into balance, either tax revenue would need to expand by 26 percent or spending would need to be cut by 21 percent. Or some combination of the two.
But, with Social Security and Medicare off the spending-cut table, all other federal expenditures need to fall by 33 percent to reach balance. Of course, Medicaid is probably just as sacrosanct as Social Security and Medicare. Given the recent debt ceiling drama around the risk of a federal debt default, interest expense, which will be rising steadily in the years to come, is untouchable as well. Including these two line items in the “do not touch” column increases the protected expenditure total to $3.1 trillion, thereby quarantining 54 percent of total spending. That means spending on everything else—defense, national parks, education, transportation, welfare etc.—would need to be cut by 45 percent to bring the budget into balance. Washington may not be a finely tuned machine, but I doubt there’s enough “waste, fraud and abuse” available to cover that tab.
So, why not just have the rich “pay their fair share”? Here’s a link to the IRS’ Statistics of Income Report on Individual Tax Returns for the 2020 tax year. On page 47 you’ll find the table below and you’ll see that individual taxpayers with incomes of $500,000 and above paid $753 billion or 44 percent of all personal income tax collected that year. Double their tax payments—under the tenuous assumption that they’ll continue to work just as hard for a significantly lower share of the total income created—and we’re still well short of covering the deficit. Admittedly, these are 2020 numbers. Tax collections in 2023 are likely to be somewhat higher. But high enough to reach balance? Not likely.
Geoff Rosenberger is retired co-founder of Clover Capital Management Inc. The Beacon welcomes comments and letters from readers who adhere to our comment policy including use of their full, real name. Submissions to the Letters page should be sent to [email protected].