Catastrophic Deficits Loom on Horizon

By Heinemann, H. Erich | Insight on the News, September 2, 1996 | Go to article overview

Catastrophic Deficits Loom on Horizon


Heinemann, H. Erich, Insight on the News


President Clinton says "the era of big government is over." Yet, during the first three years of his administration, actual federal tax revenues rose $322 billion to $1.4 trillion, a 29 percent increase. In dollar terms, that was the biggest tax increase for a comparable period in the nation's history.

Federal tax collections were $5,365 per person in the year ended June 30, 1996, up 25 percent from the average of $4,293 in 1992, just before Clinton took office. In the same period, compensation per worker (wages, salaries and benefits) rose in the neighborhood of 10 percent.

Higher taxes clearly played a key role in reducing the federal deficit from $327 billion in 1992 to $115 billion in the year ended in the second quarter of 1996. Meanwhile, the Treasury's operating surplus (revenues minus outlays except net interest) soared to a record $125 billion in this period, from a deficit of more than $100 billion.

However, without basic changes in programs for the elderly, these gains will be short-lived. Under present law, catastrophic budget deficits loom just over the budgetary horizon. Whatever else they may expect to debate in the presidential campaign, both Bill Clinton and Bob Dole plainly hope to avoid this issue.

Social Security and Medicare should be subject to the same income tests as other Washington programs so the wealthy do not get government handouts. Social Security should shift from pay-as-you-go financing, which undermines national saving and investment. Instead, at least one-third of Social Security should be on the same basis as the typical private pension plan, which makes investments in productive assets and then pays benefits from earnings on those assets.

About $180 billion of Clinton's $322 billion tax increase has gone toward reducing the federal deficit. Federal transfer payments -- which take income from people who work to give to people who do not -- accounted for roughly $130 billion, while interest on the debt rose $40 billion. Other federal outlays fell, with deep cuts in Pentagon spending partly offset by modest gains elsewhere.

Washington is focusing on welfare reform. Voters have rejected the perverse incentives in the current system -- incentives that create the problems the programs are supposed to solve. More important, welfare is a metaphor for the much larger issue of how to rein in growth of government transfers.

Programs that actually help poor people (means-tested entitlements and Medicaid) are less than 20 percent of the $1 trillion-plus that federal, state and local governments spend each year for transfer payments. In 1996, the Treasury will finance more than 80 percent of total transfers with checks direct from Washington and through grants to states and localities. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Catastrophic Deficits Loom on Horizon
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.