Welcome to VoteFacts.org. We hope you like numbers because today we are presenting a TIME magazine article by Joe Klein titled The 20% Solution in order to help our readers get focused on facts when it comes to federal spending and revenues. As we always do, we are providing the full article here - The 20% Solution. But to help us walk through some facts, we will also provide you with some bits and pieces from the article. Let's begin here:
"Scott Rigell, a freshman House Republican... pulled out an easel and magic marker and showed me how he'd come to his conclusion (to renege on his pledge not to raise taxes): "You have to see it in context," he said, writing "Bush' tax cuts" on the board. He wrote "16.9%" on his pad. "That's our average revenues as a percentage of gross domestic product (GDP) over the past 11 years, and it's a good firm figure. It includes good years and bad ones." Revenue was up to 18.2% of GDP at the end of the housing bubble in 2006 and down to 15.1% after the Wall Street bust. "Now can you tell me the last time we ran a government with 16.9% revenues? 1959. Before Medicare and Medicaid."
We noticed that an 11 year average of 16.9% was compared with a single year, 1959. But we also noticed that readers are left to wonder why the Bush tax cuts were ever mentioned, since the article never draws any direct correlation between those tax cuts and the 16.9% average revenues they mention. On the contrary, the article draws some loose parallels between low tax revenues and the economic crisis of 2008.
Anyhow, we're not here to debate what led to the 11 year average of 16.9% - whether it was the financial crisis, the 2001, 2003, or 2009 tax cuts, some mysterious man on the moon, or a combination of all of the above. What we are here to do is help people get focused on facts, and this article is a good springboard to accomplish that.
First let's look at annual federal revenues as a percentage of GDP over the 11 year time span mentioned in the article, since they don't display them for their readers:
2001 - 19.5%; 2002 - 17.6%; 2003 - 16.2%; 2004 - 16.1%; 2005 - 17.3%; 2006 - 18.2%;
2007 - 18.5%; 2008 - 17.6%; 2009 - 15.1%; 2010 - 15.1%; 2011 - 15.4% OMB Table
Next let's look at average federal revenues as a percentage of GDP during some other 11 year time spans (recall that the TIME article talked about the 16.9% average over the past 11 years):
1970 - 1980 = 17.9%; 1980 - 1990 = 18.5%; 1990' - 2000 = 18.7%
According to the Congressional Budget Office (CBO):
"Federal revenues have fluctuated between about 15 percent and about 21 percent of GDP over the past 40 years, averaging 18 percent." CBO, Page 17
Klein then goes on to show his readers another set of numbers:
20 21 22 23 24
17 18 19 20
According to Klein, the top line is the range of spending numbers and the second line is revenue numbers. However, what he never tells his readers is why 5 numbers were chosen for spending and 4 for revenues, or even what time period those numbers came from (if they are historical numbers). They are just kind of there. While we cannot know for sure, these numbers seem to be presented as a way to get his readers focused on a goal of 20% spending and 20% revenue.
In the TIME article, Klein says that he would prefer higher than 19-20% revenue and 21% spending, but we're not certain if he is looking at these levels as permanent or temporary. At one point in the article he said that the 20/20 sane center, as he describes it, is the "basis for a reasonable discussion of a long-term deficit." On the other hand he says the discussion of the 20/20 solution "elided a major philosophical difference between liberals and conservatives: whether government should increase spending to goose a dormant economy during a recession."
For some historical references, we thought readers might want to look at what federal revenue and spending looked like in the late 2000's when our nation reflected a budget surplus. In the year 2000, tax receipts were 20.6% while spending was at 18.2% of GDP, and for the year 2001, tax receipts were 19.5% with spending again at 18.2%. OMB Table
So what we know from this article is that Joe Klein prefers federal taxing and spending levels above 19-20% for revenues and above 21% for spending. But what we really want know is what you think. Do you think the goal of spending for the federal government should be close to the historical average of 18% of GDP?
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VoteFacts Original Post Date: July 8, 2012