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Tom Firey: Some numbers to consider with election looming

October 24, 2012|By TOM FIREY

Before playing in Super Bowl VI, Dallas Cowboys running back Duane Thomas put the event in perspective: “If it’s the ultimate game, how come they’re playing it again next year?” 

The United States doesn’t have national elections every year, but they’re not that much less common than Super Bowls. All seats in the House of Representatives and one-third of the seats in the Senate are up for grabs every two years, and the presidency every four. So it’s hard to say that any one election is the “ultimate.” After all, the biggest problems that face the nation this election cycle are the same as what faced the nation two years ago and four years ago.

Still, this election does seem important. And so, as people prepare to go to the polls in two weeks, here are some numbers for them to contemplate.

• Unemployment: The most recent jobs report estimates that 12.1 million Americans were jobless and “actively” looking for work in September. That translates to an unemployment rate of 7.8 percent — the lowest since January 2009.

A different unemployment measure is known as the “U-6” rate because it appears on line 6 of the monthly report’s Table A-15. It includes part-time workers who want full-time jobs and jobless people who the government considers not actively searching but who say they want jobs and who have searched in the past. In September, U-6 was 14.7 percent, which translates to 22.8 million people.

• Deficit and debt: The federal deficit for fiscal year 2012 (which ended Sept. 30) was just less than $1.1 trillion, on a little more than $3.5 trillion in federal spending. Fiscal 2012 was the fourth straight year of trillion-dollar deficits, but the smallest since 2008.

The federal debt, which is the sum of all outstanding federal borrowing for this and previous years, is about $16.2 trillion.  Nearly 30 percent of that debt is owed to other government accounts such as the Social Security and Medicare trust funds. The rest is owed to “the public,” which includes everyone from bond-holding seniors to Chinese banks. The federal government paid $359.2 billion in interest on its debt in 2012.

• Future spending: The current debt is only a small part of the nation’s long-term financial problems. More troubling are the underfunded Social Security and Medicare programs and the rapidly growing Medicaid program.

To measure the total cost of government programs over time, economists use “net present value.” They recognize that a dollar today is worth more than a dollar 20 years from now (to understand why, ask yourself if you’d lend me $1,000 today on the lone condition that I repay you $1,000 in 2032), so they “discount” future money in a manner that you can think of as “reverse interest.” Economists estimate future government revenues and spending obligations, discount them for time, and subtract them to calculate the nation’s long-term fiscal gap.

Boston University economist Laurence Kotlikoff, who pioneered this sort of estimate, calculates that the federal fiscal gap is $211 trillion (plus an additional $38 trillion at the state and local levels). To close that, federal taxes would need to be raised 64 percent immediately and permanently (and state and local taxes raised 12 percent) or federal expenditures cut 40 percent (and state and local spending cut 12 percent), or some combination thereof.

But with more than two-thirds of all government spending going to such sacred cows as national defense, Social Security, Medicare, Medicaid, education and public safety, where do you cut? And with just less than 30 percent of the economy already being paid to government, how much higher do you raise taxes?

When voters go to the polls Nov. 6, I hope they vote for candidates who will change those numbers for the better.

Thomas A. Firey is a senior fellow at the Maryland Public Policy Institute and a Washington County native.

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