The blizzard of statistics and the ‘fiscal cliff’

By Mac Thornberry | Published Saturday, January 5, 2013

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In the blizzard of statistics surrounding the “fiscal cliff,” two numbers give us the essential bottom line. They are 20.6 and 24.3. Let me explain.

Since World War II, the top income tax rate has varied widely. It has been as high as 94 percent and as low as 28 percent. Usually it was somewhere in between. But in all those 67 years with all of those different tax rates, the revenue collected by the federal government was never higher than 20.6 percent of our Gross Domestic Product (GDP), the most common measure of our overall economy.

Mac Thornberry

At the height of the tech boom in 2000, 20.6 percent of GDP was collected in taxes. Collections were nearly as high in 1945 at 20.4 percent, but the average during these six decades has been 17.7 percent of GDP. Today, tax revenue is about 15.8 percent of GDP.

A number of factors, of course, affect the amount of revenue going to the government, including the health of our economy. It is important to structure our tax code in a way that is as fair and simple as possible and in a way that promotes job creation with higher economic growth and improving standards of living. If more people work and the economy grows, tax revenue for the government will increase. But, even if we achieve economic growth as vigorous as we have seen it in our lifetimes, the plain facts of history tell us that we will not collect more than 20.6 percent of GDP in taxes.

Federal spending today is 24.3 percent of GDP. Let me repeat: Federal spending today is 24.3 percent of GDP. So even if we have the strongest economic growth we can imagine and are able to match the highest tax collections of the last 67 years, it will not be enough to pay for the amount of spending we have now. In fact, it will fall far short. Spending must be reduced in order to get our fiscal house in order, and no amount of argument about the tax rates will change that basic fact.

Most federal spending is in mandatory spending programs, known as entitlements. In fact, more than 60 percent of federal spending goes to entitlements and required interest payments on the debt. Even if the entire military and Department of Defense were eliminated, as well as all foreign aid and departments up and down the National Mall, we would still have an enormous deficit because all of the tax revenue coming into the federal government is not enough to pay for just the spending on entitlement programs today. And it will get much worse in the future as more baby boomers retire, fewer people are working and paying taxes, and life spans continue to increase. If we do not make changes today to reform these programs, they will not exist in the future. There simply will not be enough money.

For all of the rhetoric and arguments flying around, the bottom line is clear, based not on economic theory but on the facts of the last 67 years. Whatever happens on taxes, only by reforming entitlement programs can those programs survive and only then can the United States get its fiscal house in order and fulfill our responsibilities to future generations.

U.S. Representative Mac Thornberry (R-Clarendon) represents the 13th district of Texas in Congress. He serves as Vice Chairman of the House Armed Services Committee and as a member of the Permanent Select Committee on Intelligence.

3 Responses to “The blizzard of statistics and the ‘fiscal cliff’”

  1. Tracy Smith says:

    So what Programs would you cut Congressman?

  2. Jack Tucker says:

    Congressman Thornberry, you theoretically represent me.

    Whenever today’s GOP talks about “spending cuts,” they are referencing nothing more than cuts to what they refer to as “entitlement spending,” those very programs assisting we the people. For years now, it seems, the Republican Party has successfully been able to turn even their own policy failures into ideological successes. The party has persuaded Americans, all across this land, , the real problem in our country is the sole result of welfare. Despite the problems their very own ideology has produced, such as quadrupling the national debt since 1980 (mainly through defense spending and their subsequent refusal to deal with it,) placing two wars on a credit card, or being fiscally irresponsible when they are in power
    The last GOP president to ever balance the budget was Dwight Eisenhower. In addition, Eisenhower refused to lower taxes while still paying down the national debt. Furthermore, on top of all this, Ike created jobs by investing in infrastructure as the country witnessed the development of the Interstate Highway System, while our nation’s treasury enjoyed a six dollar return for every dollar invested. In sum, the former President refused to lower taxes, paid down the nation’s debt, created jobs, all while implementing a major infrastructure project, providing the government with a hefty return on investment. While many modern day Republicans point out how Eisenhower was supposedly “against” a highly centralized government, taking power and authority away from the states, they neglect to mention one thing: he was also a president who saw the value of social programs and is most likely the last moderate Republican president who served our Country.

  3. John Foster says:

    I will say this..if there is nothing done about this administrations reckless spending there won’t be any of these programs around for anybody. And with his amnesty plan going on now behind the scenes (while the gun control joke is headlining the news) if those illegals become citizens they be able to access all of the SS,medicare, you name it right then and it will drain our already bankrupt programs away. To honest with you, there is so much wasted money in EVERY department of government and they say we can’t find ANY cuts?? One proposal out there that to me there is no reason not to do it is to take one penny from every dollar we spend and apply that to the debt. Look at the bullcrap with the hurricane disaster..over a third of that bill goes to things not even related to tha hurricane..and the repubs are getting slammed for not signing off on it.repubs are right to hold up that bill and should demand to get a clean bill without the pork..thats one of the many things wrong in washington. We should clean them all out and start over!


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