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Is the Deal a Recipe for National Decline?

By David Callahan, TAPPED - January 2, 2013

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Interest payments will rise as domestic spending falls. 

Now that the future revenue path is pretty clear for the next decade, I took another look at President Obama's 2013 budget, which projects spending and revenue through 2022 on the assumption"”a correct one, it turns out"”that taxes will only rise on the affluent. 

As I noted in an earlier post today, the White House projects serious cuts to domestic spending. These cuts wouldn't be necessary if the Bush tax cuts were fully repealed. So, in effect, President Obama has largely endorsed the fiscal priorities of his predecessor, with tax cuts forcing spending cuts. This may not amount to "starving the beast," but it is putting government on a conservative diet. 

I've written a lot about this historic capitulation already, so I won't say more. 

Instead, let me focus on another implication of letting the Bush tax cuts largely live on. The United States will not only cut spending over the next decade, it will also dramatically increase the national debt"”adding $6.6 trillion in new debt by 2022.

Readers will know that Demos, the think tank for which I work, has long favored running large deficits in order to stimulate the economy during and after the Great Recession. But there's something deeply wrong about proposing to permanently tax Americans at the lowest level in a generation and funding defense at Cold War levels while piling up over $6 trillion in new debt. 

And here's one fact that sums up the disturbing nature of the U.S.'s fiscal choices: Under President Obama's budgetary plans, the federal government will spend more money on interest payments on the national debt between now and 2022 than it will spend on all non-security discretionary domestic programs. A lot more, in fact. 

Non-security discretionary spending will total $4 trillion over the next decade. Interest payments will total $5.7 trillion. The first year that the U.S. spends more on interest than discretionary spending will be 2015. From then on, the gap widens quickly. In 2022, under Obama's plan, the United States will spend almost exactly twice as much on interest as on all domestic discretionary spending"”$850 billion on interest, $430 billion on domestic programs. 

Is that twisted or what? It is bad, to say the least, when a nation spends more money paying its debtors than investing in the foundations of future prosperity. 

The picture is just as grim when analyzed in terms of GDP. Last year, interest payments on the debt totalled 1.4 percent of GDP. By 2022, they will total 3.3 percent of GDP. And nearly the reverse is true for discretionary domestic spending, which is slated to fall from 2.9 percent of GDP last year to 1.7 percent by 2022. 

I'll say it again: This is bad. 

Is keeping taxes near a historic low really worth embracing the priorities of a declining power: Endless and escalating debt payments and an ever more severe disinvestment in our society? 

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David Callahan is a senior fellow at Demos and editor of PolicyShop, the Demos blog.

This year featured attacks on everything from contraception to the definition of rape.

The Democrats won this round of the fiscal-cliff standoff, but now let's get to the right debate.

Details of the agreement reached by the president and congressional Republicans are still forthcoming, but from the look of it, Obama gave ground where he need not have.

© by The American Prospect

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