How Do We Pay?

Something to ponder, via Cosmic Variance:

The number being tossed about for post-Katrina reconstruction is $200 billion. That’s a lot of money, even for a cosmologist. If you spent a dollar per month throughout the entire existence of our observable universe, you’d only get up to about $164 billion.

How can we possibly pay for it? Mark Schmitt points to two ideas: a bad one and a good one. The bad one is a project being organized by Glenn Reynolds and N.Z. Bear to point the finger of shame at wasteful pork in the discretionary budget, in hopes that Congress will be moved to slice away this excess fat and free up funds for more important things. The germ of the idea is okay — wasteful pork is bad, why not trim it away — but the idea that they’ll reach $200 billion is fantasy-land. (At the moment they’ve reached about $14 billion, using an expansive definition of “pork” that includes, for example, all federal domestic-violence programs.) That’s because the part of the federal budget that they would even consider trimming is only about $500 billion. Schmitt quotes Stan Collender in the National Journal, who explains that “Social Security, interest on the debt, most other federal mandatory spending, the Pentagon, the costs of activities in Iraq and Afghanistan, homeland security and foreign aid'’ are off the table. The remaining $500 billion, by the way, includes all spending on science, education, and wasteful stuff like that. Rail against pork all you like, but it doesn’t make up 40% of the discretionary budget.

The good idea comes from the Center on Budget and Policy Priorities. They point out the obvious thing: the reason the government is having trouble paying its bills is because its revenues, as a fraction of GDP, are lower than they have been in decades. But even better, they home in on two tax cuts scheduled to kick in during 2006, which represent a particularly egregious example of benefiting the rich. One deals with personal exemptions, and the other sets the values of allowed itemized deductions, both applying to couples making over $218,950 or individuals making over $145,950.

Some interesting features of these tax cuts:

• President Bush didn’t even ask for them; they were inserted by Congress during the budget reconciliation process.
• 54% of the money from these cuts will go to households earning over one million dollars per year, the wealthiest 0.2% of households.
• 97% of the money from these cuts will go to households earning over $200,000 per year, the wealthiest 3.7% of households.
• The total cost of the cuts, including interest on accrued debt, is $197 billion over ten years.

Hmmm.