The Ticking-Debt Time Bomb And Obama

Posted: April 13, 2009  Author: Dr. Moss

Deficits and debt have become iconic words of late connoting the general dysfunction of a government and political leadership that has given up all pretense of fiscal plausibility, with deficit spending verily mushrooming into uncharted waters.  It is frequently accompanied by another catch phrase, devastating in its implications, that being "unsustainable," as uttered regularly say by the non-partisan, Democrat controlled Congressional Budget Office or CBO, when referring to current spending levels, and, particularly, in regards to projections on Obama budget proposals for 2010-2019.  That means, in simple English that the nation cannot afford it, that the deficit to Gross Domestic Product or GDP or debt to GDP levels are extreme if not hazardous to the financial health of the Republic. 

And yet little about this is heard from Congressional lords and barons who allegedly "control" the government's purse strings, and certainly not from the denizens in the White House who seem intent on transforming their country from a nation founded on individual liberty into something else, say, a European social-democratic nanny state with Obama as first Prime Minister - or, perhaps, worse. 

The President, after all, does seem rather chummy with sworn enemies of the state and rather interested in getting on with various and sundry dictators and other unsavory characters from around the globe (Chavez, Castro, Ahmajinidad, Kim Jong Il, the Taliban,  all of whom he professes a keen interest in having a dialogue with).  Perhaps, he envies them their absolute rule and freedom of action, absent the inconvenience of opposition parties, a ponderous legislative branch, and customary democratic procedures as spelled out in that pesky and now dated document, the Constitution.  Perhaps, we can even speculate that for some on the left who thrive best in "crisis," the financial ruin of their nation is a blessing in disguise that they, in a back handed sort of way, wish to bring about, so as to justify any further augmentation of power they deem necessary enroute to delivering on their utopian visions.

But deficits were  important to Democrats only when Bush was in the White House.  Then, the caterwauling was endless over the "fiscal irresponsibility" of the Republican President, which, by the way, I would not disagree with.  They decried his "tax cuts for the wealthy" and the costs of the War in Iraq, a war, by the way, that 27 Democrat Senators voted to authorize including Senators Kerry, Edwards, and Clinton, who could not wait to show their toughness on national security so soon after 9/11.  But Obama's "stimulus package" for a measily $787 billion, the largest spending bill in our nation's history, has easily eclipsed the Iraq War with a good deal of change left over.   Even that, however, appears to be a mere down payment on Mr. Obama's ambitions for his nation.

Furthermore, a deficit in 2006 under Bush of 2.8% of GDP or $247 billion in comparison with the current $1.85 trillion deficit fiasco or 13.5% of GDP for 2009 is a far cry from those ruinous, "irresponsible" Bush years. 

That is not to mention the $410 billion "Omnibus" bill with its 9000 ear marks and 8% increase in discretionary spending, far outstripping the rate of inflation, or the $33 billion increase in children's health insurance, and a $3.5 trillion 2010 budget proposal.  Nor does it include Democrat plans for a new $1 trillion middle class health care entitlement.  What a difference a change in administration makes.  Now the former Democrat deficit hawks are all on board with the horrendous spending, deficits be damned.  And this is but a pittance of what is to come.  

But let us return to the main topic, which is the ruinous spending of our elected leaders.  Indeed, the current crew overseeing the legislative function are nothing if not compelling advertisements for the blessings and wisdom of term limits.  For the fatal flaw of democracy is this: at some point legislators realize they can indemnify their political careers, which is to say guarantee their continued reelection by simply taking from those who do not represent a formidable voting bloc and bestowing on those who do.  In other words, extreme wealth redistribution, which becomes an effective tool for commandeering the elective process, until, of course, its ill effects become better known.  But even then, perhaps not, given the corrosive effects on individual will that accompanies government dependency, not to mention an idolatrous and partisan media that has long downgraded its primary duty from that of overseeing government to that of actively promoting a liberal agenda, and specifically, to shill for the Obama administration, itself no small threat to the well being of the nation. 

The dynamic leads irrevocably to a shrinking productive element in society, a gradual decline of the private sector.  The habit of taking more and more from fewer and fewer for the benefit of so many that have now fallen into soporific entitlement causes the apparatus to become top heavy and unwieldy, eventually tumbling and, perhaps, shattering, as the stubborn numbers refuse to add up, and the nation falls into permanent decline.  And with that decline, the loss of a system and economic engine, mind you, that had heretofore provided so well for so many through the Republic's two hundred odd years, a beacon and model of freedom and prosperity for those suffering under less generous polities. 

It is a frightening specter, but not inconceivable, for legitimate questions are now being raised over the financial solvency of the nation, what with horrendous deficits looming in the horizon as far as the eye can see, the inevitable crack up of entitlements as the baby boomers begin retiring, the grand and vulgar promises given out to so many by cynical politicians that cannot possibly be met, and the bill for the inexorable collapse of the various government run Ponzi schemes and services comes due.  The outcome: confiscatory tax rates, reduction in government services, social upheaval, economic stagnation, and, who knows, perhaps real calamity: bankruptcy, a breakdown in law and order, government failure, banana republic status, Mexico - north and south of the border.  Or perhaps, it is all blended by then, Amexica.

On the issue of deficits and debt.

Basic definitions: The US government debt, or public or national debt, is the amount of money owed by the federal government to holders of US debt instruments, in other words, bonds, treasury bills, notes, TIPS (treasury inflation protected securities), and savings bonds.  It may be held by states, corporations, individuals, and foreign governments but does not include intragovernmental debt or obligations held by the Social Security Trust Fund. 

The total US federal debt is upwards of $11 trillion dollars.  This includes both the public debt (the amount of debt instruments outstanding) and the intragovernmental debt or obligation (ie: Social Security).  This comes to about $36,ooo per capita.  The public debt was nearly $7 trillion.  The total debt is 65% of the GDP.  The public debt is 37% of the GDP.  I take it that the public debt is more worrisome because that has to be paid or else the country defaults with all sorts of terrible repercussion, basically that the dollar becomes worthless, hyperinflation ensues, and collapse of trade since no one will trust the US dollar.  Yet the intragovernmental debt represents an obligation or promise made to the American people in terms of benefits owed such as Social Security or Medicare, the two greatest entitlements about which more later.  Can the nation ignore or default on them?  And what would the repercussions be of a nation that is suddenly unable to provide the services promised to citizens on so grand a scale: social upheaval and calamity.  It is fine to separate out the two kinds of debt but in truth both should be counted together as "debt" because both represent obligations owed.

When Bush took office, the national debt stood at $5.7 trillion.  When he left, it stood at $10.7 trillion (that's total debt, that is, the public debt plus the intragovernmental debt).   He, therefore, nearly doubled the national debt, adding about $5 trillion during his two terms.  Yes, Bush, the Republican, in many ways governed like a liberal.  He was a free spender, added new unfunded entitlements, spent twice as much as Clinton, was wild on immigration, and signed off on every bailout and stimulus package that came his way, at a cost of three trillion (including Obama's add ons), all of it borrowed.  The GOP and the nation have suffered greatly as a result. 

Jonah Goldberg of National Review tells us that Bush increased spending on education 58%, Social Security 17%, Medicare 51%, hiways and mass transit 22%, health research and regulation 55%, veterans' benefits 59%, and that overall spending grew twice as fast under Bush than Clinton.  Nothing like good conservative Republican governance at work.

So Bush made serious mistakes, chief of which is ruining the Republican reputation for fiscal prudence.

But let's move on because Bush is no longer President.

In the previous fiscal year (2008), the deficit was $459 billion.  The year before that it was $162 billion.  So, yes, a downturn in economic fortunes does affect tax revenues.  So, does spending.  For this fiscal year, it was $569 billion when Mr. Obama took office. Under his proposals, another $1.276 trillion will be added to the deficit this year, for a total of $1.845 trillion.  With interest make that a cool $2 trillion.  This includes his "American Recovery and Reinvestment Act," the so called "stimulus" package he signed in February, a $787 billion monster spending gusher, the largest in our nation's history, the one with 1100 pages of spending that no one read before signing.  So, Obama is running a $2 trillion deficit this year or more than 13% of GDP.  Federal outlays this year will surpass $4 trillion or 28.5% of GDP -- a level not reached since World War II.  The $4 trillion number, by the way, is roughly equivalent to the GDP of Japan.  Remarkable really. 

John Gordon writes that the federal deficit for the year is more than the entire GDP of all but a small number of nations and more than the entire US debt in 1982.  Our total debt (including government borrowing from Social Security or SS) is 75% of GDP.  Yet following WWII, it was 130% of GDP.  Japan's national debt is 180% of its GDP.  Gordon worries not as much about the raw numbers as the trend.  Debt accumulation historically has been justified for two reasons: going to war and battling recessions.  Since 1982, when the national debt was 35% of GDP, despite twenty five years of unprecedented growth and no Cold War, the debt-to-GDP ratio has more than doubled.  In other words, politicians from both parties have made a thousand obscene promises to a thousand different constituencies and cannot back down on them, reduce or end them, as they spend their nation into oblivion.  The fatal flaw of democracy once again: the irresistible urge to buy votes with other people's money.  And the ship continues to take on water, spiraling steadily downward in a ruinous cycle of spending, borrowing, and debt accumulation.  The point is that it makes sense to go into debt to fight a war or to reverse a recession (preferably through tax cuts but also because of decreased revenue that accompanies the economic slow down), because both are temporary.  The debt can then (and should be) paid back after the crisis has ended.  But spending increases for each of the various programs of the so called "stimulus" package, as any observer of Washington knows, will simply be incorporated into new spending baselines by the dysfunctional political class, and will never be returned to former, lower levels.  The notion that the spending increases are temporary is farcical.        

But it is actually not the 2009 Obama budget that is concerning.  No, that is merely the initial deposit for the Obama proposals for budget 2010 and on into the misty, distant, hazy future of unprecedented spending over the next ten years.  Of looming trillion dollar deficit projections as far as the eye can see.  No, it is Obama budget 2o10 ( A New Era of Responsibility: Renewing America's Promise), released in February, that should concern every American who fears for the financial integrity of his nation.

Let us quote from the Director of the CBO (Douglas Elmendorf):

• As estimated by CBO and the Joint Committee on Taxation, the President's proposals would add $4.8 trillion to the baseline deficits over the 2010-2019 period. CBO projects that if those proposals were enacted, the deficit would total $1.8 trillion (13 percent of GDP) in 2009 and $1.4 trillion (10 percent of GDP) in 2010. It would decline to about 4 percent of GDP by 2012 and remain between 4 percent and 6 percent of GDP through 2019.
• The cumulative deficit from 2010 to 2019 under the President's proposals would total $9.3 trillion, compared with a cumulative deficit of $4.4 trillion projected under the current-law assumptions embodied in CBO's baseline. Debt held by the public would rise, from 41 percent of GDP in 2008 to 57 percent in 2009 and then to 82 percent of GDP by 2019 (compared with 56 percent of GDP in that year under baseline assumptions).
• Proposed changes in tax policy would reduce revenues by an estimated $2.1 trillion over the next 10 years. Proposed changes in spending programs would add $1.7 trillion (excluding debt service) to outlays over the next 10 years. Interest costs associated with greater borrowing would add another $1.0 trillion to deficits over the 2010-2019 period.
• Our estimates of deficits under the President's budget exceed those anticipated by the Administration by $2.3 trillion over the 2010-2019 period. The differences arise largely because of differing projections of baseline revenues and outlays. CBO's projection of baseline deficits exceeds the Administration's estimate (prepared on a comparable basis) by $1.6 trillion.

March 20, 2009

There is much there to digest.  Let us cull some of the commentary.

The nonpartisan Congressional Budget Office (CBO) finds that the president's budget will incur $9.3 trillion in federal deficits between 2010 and. 2019 --$2.3 trillion higher than Obama had originally claimed.  But what's a couple trillion between friends - mere tinkering around the Beltway margins.

The CBO projects that the president's proposed budget will increase the deficit to $1.8 trillion in 2009; $1.4 trillion in 2010; and $970 billion in 2011 -- falling to $658 billion in 2012 before rising again to $1.2 trillion in 2019.  In other words, Obama spends heavy at first and then again later.  The total deficit from 2010 to 2019 is assessed at $9.3 trillion.  That's an awful lot of borrowing.  The deficit is not likely to fall below $500 billion for the foreseeable future.  Of note, because we hear so much of the deficit "inherited" by Obamaites from President Bush, let's see if the expected deficits under the Obama budget are indeed all Bush's fault.  Again, citing the CBO, Obama's projected deficits are more than double what they would be under current laws and policies (ie: simply continuing existing spending and taxation policies from the Bush administration or "baseline" assumptions). 

Micheal Boskin compares the Obama budget proposal for 2010-2019 with a "do nothing" baseline (i.e. - current laws and policies), which means a continuation of current spending and taxation policy.  Based on CBO  estimates, the cumulative deficit for the Obama 2010-2019 budget is $9.3 trillion, which is $6.5 trillion higher than a "do-nothing" budget would have been, not the $2 trillion reduction he touted (which came from an illusory reduction from an imagined ten year continuation of top Iraq War spending).  The CBO granted that under Obama's tax and spending proposals, the deficit would increase by $4.829 trillion, but doesn't include Obama's $177 billion for 2009, the $195 billion in "legislative add ons" (the so called "stimulus" bill), and the "corresponding$1.267 trillion in add ons for 2010-2019 (i.e. the continued impact of the so called "stimulus" bill), all of which had been incorporated into the CBO baseline.  So, in fact, as bad as the $4.829 trillion the CBO projects is, the figure is actually $6.5 trillion for 2010-2019 of additional debt over a "do-nothing" budget.  What does $6.5 trillion in additional debt mean to the taxpayers?  Assuming debt will be paid, this translates to a $163,000 tax bill for every taxpaying family.  In ten years, with interest, make that $250,000 if paid at once.  It also will require a significant tax hike for those earning well below the magic $250,000 threshold of Obama lore, the number dividing the virtuous from the leprous wealthy, whom, we are assured, are vile and unclean. 

And let us also be clear: the tax increases Obama seeks in coming years will fall far short in closing this gap, even as he eliminates the Bush tax cuts for the "rich" and takes away deductions on charitable donations, tears at the middle class with a new monster tax on carbon to "green" constituents, increases capital gains, and shakes down the dead.  None of this will come near closing the gap in his budget. 

Obama's 2010 budget, according to CBO, will increase spending by $2.3 trillion over ten years more than White House estimates.  The White House claims that the CBO, which is now run by Democrats, have a more pessimistic outlook, but the differences are fairly small.  CBO predicts a 3% decline in economic growth, while White House economists anticipate a more favorable 1.2% drop.  Thereafter, the projections are nearly identical for 2010 (2.9% CBO vs. 3.2% White House) and 2011 (4% for both).  The major difference between the two then is in spending. 

For fiscal 2009, CBO expects Federal spending will reach 28.5% of GDP, 25.5% the following year (2010), and consume 23% - 24$ of the nation's economy for the next ten years, much higher than the average of 20.7% over the last forty years.  What about this year's deficit as a percentage of GDP: a whopping 13.5%, while next year's will be at 9.6%,  never falling below 4.1% for the rest of the decade.  These figures include the massive tax increases called for by Obama in 2011 (basically, a repeal of Bush's tax cuts of 2001 and a return to Clinton era tax rates: those earning more than $250,000 per year would see income tax rates go from 36% to 39.6%, capital gains would increase from 15% to 20%.  It also assumes the $646 billion in new cap and trade revenue.)  The public debt-to-GDP ratio will double from 40.8% to 82.4% (again not including the intragovernmental debt or SS).

There would also be decreases in personal exemptions and itemized deductions, including donations to charity and home mortgage interest costs) and $646 billion in new "cap and trade" carbon taxes he will impose on energy.  None of this, by the way, includes the new middle class health care entitlement Obama seeks to create beginning with a "downpayment" of $634 billion, but which is more likely to cost at least $1.2 trillion over ten years.  Federal spending will increase from $3 trillion in 2008 to $4 trillion in 2013, an increase of $1 trillion or 33% in five years.  And the increases in spending represent a veritable liberal grab bag of every favorite Democrat pet project: Child Nutrition programs, Pell Grants, national service scholarships, state welfare grants, job training, and so on.  The State Department funding would double, and the Education Dept. would increase by more than 60%.  Baseline spending would increase annually by $780 billion over the next ten years.  Entitlement spending (Medicaid, Medicare) will increase by $1.1 trillion.  The percentage of national debt held by the public from 40.8% in 2008 to 82.4% in 2019, levels not seen since World War II. 

Then, the massive government spending that occured while the nation was at war declined quickly as the nation demobilized.  Don't expect that to happen here: these are for the most part transfer payments with political constituencies that will have to be maintained.  The increased spending will simply become the new starting point for yet further increases down the road.  No one realistically expects anyone in Washington to actually decrease spending once new increases or new programs are added into the annual appropriations.  All of this, means of course only one thing: massively expanded government, greater entitlements, larger political constituencies, more dependency, higher taxes, inflation, economic stagnation and decline: in other words, the European Welfare State here in the US, even as Europe is recognizing the unsustainability of its own Social Democratic project. 

Obama's 2010 budget proposal released February 26, 2009, represents so massive an expansion of the government role in the life and economy of the nation, it will enjoy a position of such command and dominance that it will be difficult to ever challenge or reverse.  Federal expenditures will increase to $4 trillion for 2009 or 28.5% of GDP, from $3 trillion or 21% of GDP in 2008 and 20% in 2007.  This is a greater percentage of the economy than any year since 1945 when the nation was still at war.  More than during the Vietnam conflict and the recessions of 1974-75 and 1981-82.  The 2009 budget deficit is estimated by the White House to come in at 13.5% of GDP, far higher than any in the post war period. 

Kevin Hasset in National Review gives another perspective on the deficit.  The US deficit over the next ten years is greater than the combined GDPs of India, Russia, Brazil, Spain, and Canada.  Obama will need to borrow $7 trillion to cover his spending plans, more than the economy of Japan or Germany, the second and third greatest economies in the world.  The deficit for this year alone, about $2 trillion, is larger than the entire Canadian economy.  But, the debt is not just a one year phenomenon of confused Keynesian hogswaddle, for it continues.  For example, the debt in 2019, the tenth year of his projected budget, is $712 billion.  Trillion dollar deficits as far as the eye can see.

And what about our friends in Europe, the home of the welfare nanny state?  Are they following our prescriptions?  Kevin Hassett again finds that Obama has outflanked to the left even the Europeans.  As a percentage of GDP, the Obama stimulus package is ten times that of France!  Sacre bleu!  And nearly two times that of Germany.  It is significantly higher than even that of Luxembourg.  So, even as Europe moves more to an American model, recognizing the unsustainability of such proposals and the need for having to pay for them ultimately through job killing taxes, the Europeans say no.  Prior to the recent G-20 summit in Europe, with Treasury Secretary Timothy Geithner and White House Economic Czar Larry Summers calling for Europe to follow America's example with a giant "stimulus" packages of their own, the Europeans wisely shook their heads. 

EU finance minister, Jean-Claude Juncker, responded as follows: "Recent American appeals insisting that the European make an additional budgetary effort to combat the effects of the crisis were not to our liking," he said.  Furthermore, when the euro was enacted in 1999, the EU established strict limits on deficit and debt to GDP ratios to avoid using massive deficit spending with every economic downturn.  Budget deficits were to be kept under 3% of GDP and total national debt to be maintained below 60% of GDP.  The US has accumulated $1 trillion debt in the past six months alone or 7% of GDP.  A recent paper by four economists also debunks the obsolete Keynesian models for "stimulus" spending based on some fantasy "multiplier" effect.  The White House economists (Christina Romer and Jared Bernstein) anticipation of three million new jobs from the Obama stimulus package is six times too high or about $1.3 million per job.  Far better to have used the money for lowering corporate and/or marginal tax rates.  

But do not expect the Obama team to heed the advice of fellow lefties from Europe.  They are on a mission.

White House budget director and former CBO chief Peter Orszag on March 20 stated that deficits in the range of 5 percent of GDP are not sustainable. According to the CBO analysis, however, the Obama budget would hold a deficit-to-GDP ration of 5.3 percent for the Fiscal Year 2010 to Fiscal Year 2019 period.

“Deficits in the let's say 5 percent of GDP range would lead to rising debt-to-GDP ratios in a manner that would ultimately not be sustainable,” Orszag explained.

Christina Romer, president of the President's Council of Economic Advisors, defended Obama's budget on Fox News Channel's “Fox News Sunday,” saying that the economy would grow much faster once Obama's health-care, education, and energy initiatives took full effect." 

This, last statement, of course, is laughable.  So by adding a new health care entitlement expected to cost more than $1 trillion, we're going to save money.  Or, by depending on "sustainable" fuels like wind and solar and various cellulosic fuels such as ethanol, none of which will give us energy independence (unlike coal, nuclear, natural gas, oil shale, oil exploration in our own nation, all of which are proven energy sources and commercially viable), and all of which require vast government subsidies to survive, we are going to save money.  The liberal imagination is an amazing thing to behold.

Then there is the matter of paying for all this.  Obama proposes that cutting back the "tax breaks for the wealthiest 2%" would somehow do it.  He also vowed that those earning less than $250,000 will not see their taxes go up "one single dime."  As the WSJ reports using IRS data, those earning $200,000 or more (roughly the top 2%) paid 62% of all federal income tax; the top 1% paid 40% of all federal revenue while earning 22% of all reported income.  So, Obama proposes to raise the top marginal rate from 35% (already steeply progressive) to the Clinton era level of 39.6% along with another 2% for phased deduction phase outs (payroll taxes, mortgage and charitable deductions), and then increases in capital gains and dividend rates.  None of this will even approach the price tag for new spending Obama proposes.  But forget about the top Obama rate of 42% for the wealthiest 2%.  If Obama took 100% of taxable income of everyone earning more than $500,000 in 2006 (before the economic downturn when times were good), he would generate an additional $1.3 trillion, less than a third of the $4 trillion in federal spending called for by Obama in 2010.  Even if Obama taxed everyone earning more than $75,ooo in 2006 at a 100% level, he would have produced barely enough to fund the $4 trillion.  Of course, in economic down times such as we have now, raising taxes will produce far less than it would have in 2006.  In other words, the Obama proposal to cover his new spending by raising taxes on the top 2% is a farce and an illusion.  He will have to raise taxes on anyone working and even then it will not begin to cover his ambitious plans.

So much for the Obama revolution.

What about interest on the debt? 

The CBO analysis shows that Obama's deficits will require an extra $1 trillion in interest payments over the next decade, meaning that the country will pay a total of $4.8 trillion in interest to finance the record levels of spending and borrowing Obama proposes. 

We paid $450 billion in interest for fiscal year 2008 alone.

After Medicare, Medicaid, Social Security, and National Defense, interest payment on the debt is the largest item in the federal budget.  It will eventually crowd out everything else.  Then what will we do?

By 2019, the CBO said the national debt will be a whopping 82 percent of the nation's gross domestic product (GDP). This means that in future years, the government could owe its creditors more than the goods and services that the entire economy can produce.

And, finally, what about entitlements?  The great bugaboo that no one wants to talk about.  The so called "unfunded liabilities."  The greatest of hoaxes began when Lyndon Johnson adopted the "unified budget," in which surplus revenue generated by Social Security was mixed with the general budget to conceal the true size of the deficit during the Vietnam War.  This budgetary book cooking continues to this day. 

If the US government had to show its anticipated expenditures for future liabilities such as pensions and healthcare the same way the private sector must, in other words, accrual accounting, as George Will discussed, what would our actual national debt be today?  Not the $11 trillion figure cited above, as bad as that is, but $56 trillion!  Or several times the size of the entire US economy.  Is any of that sitting in a bank somewhere, earning interest?  Of course not.  It doesn't exist.  There is no Social Security Trust fund.  There is no money sitting somewhere, i.e. a trust fund, gathering interest to cover future obligations.  Rather, we have the grandest of Ponzi schemes.  In fact, it was recently announced that Social Security is currently in negative cash flow caused by the recession.  Even today, there is more money going out than coming in.  The program, in other words, paid out more than it recieved.  This may reverse itself when the economy turns around but only temporarily.  We can no longer rely on the payroll tax surplus to fund the rest of the government.  When you hear about the Social Security "surplus," it is yet another scam: whatever excess is coming in is spent on other things.  There is no surplus anywhere.  It is all spent.  But future uncovered obligations remain. 

By such honest accounting methods, accrual accounting, the federal budget deficit for fiscal year 2008 (ending September 30) would have been not the $459 billion as reported above, as bad as it is, but $3 trillion. 

Also discussed in the Financial Report of the US Government for 2008, is that the population will continue to age.  Over the next 25 years, the percentage of the population over 65 will increase from 12% to 20%, while the portion of working, taxpaying Americans will shrink from 60% to 55%.  The three major entitlements, Medicare, Medicaid, and Social Security, will comprise 65% of the entire federal budget in 2030, up from 44% today.  Based on current policies, in thirty years government revenues will cover only half of expected expenditures.

This from Wikipedia:

 The Government Accountability Office (GAO), Office of Management and Budget (OMB) and the U.S. Treasury Department have warned that debt levels will increase dramatically relative to historical levels if entitlement programs are not reformed. For example, projected expenditures for Medicare and Social Security programs exceed tax revenues by over $40 trillion over the next 75 years. Mandatory expenditures are projected to exceed federal tax revenues sometime between 2030 and 2040 if reforms are not undertaken.^[15][16] The severity of the measures necessary to address this challenge increases the longer such changes are delayed. These organizations have stated that the government's current fiscal path is "unsustainable."^[17]

Further analyses on the looming entitlement debt bomb.

Social Security and Medicare spend more than they take in already, even with the ongoing payroll (FICA and Medicare) taxes, let alone accumulating savings for future obligations.  As baby boomers begin retiring, that deficit will only continue to grow.  By 2012, 10% of income taxes coming into federal coffers will go to pay for SS and Medicare.  In 2020, eleven years from now, these two programs will consume 25% of income taxes to cover the shortfall.  By 2030, they will consume 50% of federal income tax revenue.  Something, obviously, will have to give.  Drastically higher taxes, reduced benefits, or both.  Or default.

This, by the way, does not include Medicaid, which is almost as big a financial burden as Medicare.  A recent CBO report showed that by 2050, these two programs will take over the entire federal budget, pushing out everything else including national defense, education, SS, infrastructure, everything.  The government, in other words, will provide only for health care and nothing else.  Or, if Medicare and Medicaid continue growing according to CBO projections and the government continues providing all other services, a middle income family will have to pay two thirds of its income in taxes.

The government gets away with this recklessness in various ways.  The most obvious is by budgetary sleight-of-hand.  For example, by not employing accrual accounting methods and unifying the budget so that Social Security revenues are combined with the general budget to hide the true size of the deficit.  Then there is the ability of the government to borrow and print money.  And to pass on the cost of deficit spending to future generations.  That we have a media-cum-cheerleader for government expansion and, especially, for the current administration, instead of a true watchdog over government corruption and incompetence, obviously does not help.  If, for example, the media investigated the fiscal negligence of the government with the same dogged tenacity as they did in attempting to undermine the Iraq War effort, we would probably have a very different situation.  Career politicians who can bribe voters with giveaways, lack of term limits, difficulty and cost in unseating incumbents are other contributing factors. 

Between all of these gimmicks and systemic flaws, we have managed to create an utterly reckless and irresponsible government, spending and borrowing its nation into oblivion, concealing the true costs of its vulgar promises that will have to ultimately be paid by future generations - either in the form of confiscatory tax rates, drastic reductions in services or both: the impact will inevitably be social upheaval, hyperinflation, overwhelming debt, a massive interest on the debt that will crowd out everything else, a socialized economy in permanent contraction: a second rate power with vastly reduced opportunities and standard of living for its citizens, and, who knows, perhaps, bankruptcy and all the consequences of that horrendous event - civic unrest and breakdown of the rule of law, a banana republic.