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Non-defense cuts can't close the deficit
The deficit arithmetic
Taxes and tariffs bring in about 17% of gross domestic product while the federal government spends about 23%. That six point mismatch adds up to deficits of $1.7 trillion a year.
Well over a majority of spending goes to entitlements: Social Security, Medicare, and Medicaid. Only about 4% of the whole economy is discretionary spending, half of it defense and half non-defense. Adjusting non-defense discretionary spending alone cannot fill a $1.7 trillion annual deficit, so the arithmetic runs straight into politics.
The 1990s revenue
Revenue was higher in the 1990s, when the federal budget ran surpluses at a time of productivity gains from computerization and the internet. Going into those years, revenue was closer to 20% of the economy. The Bush tax cuts and the Trump tax cuts in both of his terms have since changed the fiscal picture.
Reagan's reform commission
In the 1980s, President Reagan asked Alan Greenspan to chair a commission on Social Security reform, and a political consensus formed around changes that effectively cut benefits. The retirement age for full benefits crept up from 65 to closer to 68.
Why are entitlements harder to change than other spending?
Social Security, Medicare, and Medicaid are mandatory spending, which means their payments follow from standing law. Congress does not vote on their totals each year. Discretionary spending, which includes defense, is set annually through appropriations bills. Changing a mandatory program takes new legislation that rewrites its rules.
How did the 1983 Social Security commission work?
The National Commission on Social Security Reform was created in 1981 and reported in January 1983. It was chaired by Alan Greenspan and included members chosen by President Reagan and congressional leaders. Congress passed the 1983 amendments that spring, and Reagan signed them in April. They included taxing some benefits for higher-income recipients and raising the payroll tax schedule.
What produced the federal surpluses of the 1990s?
The federal government ran surpluses in fiscal years 1998 through 2001. Tax increases passed in 1990 and 1993 raised revenue, and spending growth was restrained. Strong economic growth and booming stock gains in the late 1990s pushed tax receipts higher. The Congressional Budget Office recorded the 2000 surplus at about 2.3 percent of gross domestic product.
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