We've come a long way since the early days of the Republic, when the federal budget amounted to a few "paltry" tens of millions of dollars. It took a full 173 years — from the founding of the United States in 1789 until 1962 — for America's national budget to hit the staggering $100 billion mark. It took only nine more years, until 1971, to reach $200 billion. Four years later we surpassed $300 billion, and two years after that, $400 billion. Now, President Carter has proposed a $500 billion budget for fiscal 1979, which begins October 1, 1978 — an increase of $38 billion from the previous year.
It's hard for the average person to grasp just how much a half-trillion is. Here's one way: If you put that amount in a line of dollar bills laid end to end, it would reach to the moon and back 250 times! Stacked up, 500 billion silver dollars would reach as high as 2,830,500 Empire State Buildings. Looking at it another way: If you had started at the birth of Christ to spend $700,000 a day, 365 days a year, you would just now, in 1978, finally be getting rid of $500 billion.
Now we are going to be spending that much in a single year! And by fiscal year 1986 — just eight years away — we will probably be spending double that amount: a full trillion dollars! The prospect is mind-boggling!
Moreover, the government expects to take in by taxation only $440 billion (if one can use "only" to describe such a sum), assuming President Carter's proposed $25 billion tax cut to stimulate the economy is enacted this fall. This would leave a budget deficit of slightly over $60 billion to be covered by increased government borrowing — and that on top of a roughly equal red-ink total for fiscal 1978. We will thus be racking up the biggest two-year deficit in the history of the nation.
This gives us yet another way of putting the new budget into perspective. In the coming fiscal year, the federal deficit alone — $60 billion — will be nearly 12 times greater than the entire federal budget during Herbert Hoover's last year as president! In that year, the federal budget totaled less than $5 billion, a mere one-hundredth of today's figure.
Continued deficit spending has resulted in a steadily growing national debt now standing at some three-quarters of a trillion dollars — almost $3300 for every man, woman, and child in the nation. Moreover, the interest which must be paid on this debt — just as private individuals have to pay interest on loans from banks — amounts to over $50 billion annually. Thus, the interest burden on our national debt will constitute a full ten percent of the 1979 fiscal budget!
What are the reasons for the soaring growth in government spending? Why is it that Washington — like many individual Americans — just can't seem to hold down expenditures and bring its spending into line with its income?
Inflation, of course, is partly responsible for the record leaps in federal outlays in recent years. But then again, inflation is largely caused by the borrowing and money supply increases necessitated by government overspending. It's a vicious circle from which Washington just can't seem to break loose. It is part of the famous "inflationary spiral."
But inflation is by no means the only culprit, as we can see by measuring federal spending as a percentage of the gross national product (GNP), the dollar value of the country's total output of goods and services. Going back again to the presidency of Herbert Hoover, the federal government was taking only 2.5 percent of the GNP when he assumed office in 1929. Today, Washington's share of the GNP is a walloping 22 percent!
Aside from inflation, the single most significant factor in the soaring government budget is the alarming jump in recent years in outlays for social services — health, education, welfare, and various other social programs. Spending in these areas has greatly outpaced that in other sectors, including national defense.
If the proposed comprehensive national health insurance program is enacted in coming years, the problem will be further compounded. Proposed federally funded " full employment" programs along with a suggested major urban renewal program would also add to the increasing burden of social spending.
In the minds of many Americans, the record half-trillion-dollar budget for 1979 is difficult to reconcile with President Carter's campaign pledge to put "highest priority" on fiscal austerity and to balance the budget by 1981. Ironically, however, the new half-trillion-dollar budget is actually considered to be "conservative" and "restrained." It is only 8.2 percent higher than fiscal 1978's $462 billion budget. Considering inflation, the planned increase for 1979 is a mere two percent in real terms.
Carter has described his budget as "lean and tight" — and, in fact, there are no major new spending programs included in it, a fact sure to disappoint many of the liberals and minority groups who were instrumental in electing him. One national newsmagazine even asked in a headline, "Is $500 Billion Enough?"
Why, then, another record budget?
President Carter — or any president for that matter — actually has personal discretion over only a small portion of the national budget. He is virtually locked into spending increases over which he has little or no control. These so-called "uncontrollable" items in the budget — social security benefit payments, medicare and medicaid, interest on the national debt, federal pensions, and so on — today account for well over three-quarters of the entire budget. The budget, in effect, largely grows by itself, and neither the President nor Congress appears able or willing to arrest its growth.
Each year, for example, there are more people reaching retirement age and qualifying for social security or federal pensions, which are automatically tied to increases in the cost of living. Also, the number of people eligible for food stamps, medicaid, housing subsidies and other assistance is growing each year.
American government spending is literally out of control, and, ironically, there seems to be little that can be done about it. It is as though Washington has created a Frankenstein monster which continues to devour multiple billions of additional dollars each year — automatically!
The only way the budget will become balanced by 1981 is by short-circuiting the monster: introducing no major new spending programs, permitting some current ones to increase only nominally, and cutting out numerous programs altogether.
But politically such "surgery" can be costly. Congressmen dislike taking away federal dollars from constituents — especially in election years. Belt tightening is simply not good politics.
So where is all this leading?
If the government continues to incur large and persistent deficits to finance spending, inflation will continue unabated. This would clearly involve risks — risks of eventual runaway inflation, recession, or worse. It would also put America in a worse trade position in the world, with international confidence in the dollar continuing to sink.
Bringing the budget — and inflation — under control, on the other hand, would also involve some painful readjustments in the economy, though they might possibly be less devastating in the long run.
The United States has been on a spending binge for years. By perpetuating inflation through persistent overspending, it has succeeded only in postponing the day of reckoning.
But the piper will have to be paid! Just like a person who embarks on an extended credit card binge, the U.S. will one day have to come face to face with the consequences of its spendthrift ways. Economic disaster scenarios such as those outlined in two recent national best-selling novels, The Crash of '79 and On the Brink, seem increasingly plausible.
Will the American people and their leaders be willing to make the sacrifices necessary to prevent total economic catastrophe? The next few years will tell.