Red Ink: Inside The High Stakes Politics Of The Federal Budget by David Wessel is an important work which analyses federal spending historically to arrive at the conclusion that the current spending levels are not sustainable over time. A main thesis of the author is that the federal government borrowed 35 cents for every dollar spent in 2011. The rate of spending last year was approximately $400 million dollars an hour.
This is true despite the fact that the federal government ran considerable surpluses for the four years from 1998 to 2001. There are rational reasons why the federal government has had difficulty in maintaining a balanced budget over time, according to Wessel.
The author points out that the United States defense budget is greater than the combined defense budgets of the next highest 17 defense budgets of foreign countries. More specifically, the defense budget during the Iraq
and Afghanistan Wars rose to levels not seen since World War II.
On social programs, the spending for Medicare and Medicaid rose from 2.5 cents to roughly 30 cents of every federal dollar spent today. In addition, the population has been growing steadily at approximately 750,000 people a year beyond the death rate since ’01.
The United States is far richer today than during the Great Depression. For this reason, there are viable options to reduce the federal debt. Wessel shows
statistically that the effective tax rates for the upper-middle class quintile have been reduced by half over the last 30 years. The wealthy, according to the author, are in an even better position due to the treatment of capital gains and dividends, as well as foreign tax havens.
Wessel explains that the Obama Administration utilized fiscal muscle and the federal reserve to save the United States economy from an impending collapse. Red Ink is a call to action by every major constituency in the United State to address both the revenue side and expenses of the federal government before the debt reaches crisis levels.Powered by Sidelines