Is that fact that US budgeting is on par with the accuracy of our weatherman perhaps related to our budget crises?
No, not really. Look at the things causing our current budget deficits. We have the 2003 Bush tax cuts. CBO informed him at the time that those tax cuts would almost certainly cause a substantial increase in deficits. They were passed anyways. CBO isn't really capable of estimating the costs for wars abroad, but it wasn't exactly a secret that fighting multiple wars for a decade on the farthest corner of the globe might blow a hole in the budget. You can also look at the Recovery Act. It wasn't a secret that this was going to significantly increase the deficit and CBO scored it as just that.
The major cause of our currently huge budget deficits is a lot older than what we're talking about here though. It's the concept of "automatic stabilizers". The idea dates back to the New Deal. Basically as the economy slips into a recession tax revenue automatically decreases and social spending automatically increases. It operates completely on autopilot. Conversely as you're working your way out of a recession and into a boom, these stabilizers are designed to work in reverse helping to prevent the economy from overheating and to recoup some of the deficit spending by putting the budget into surplus during the boom (as we saw during 2003 though, it's far too easy for politicians to take those surpluses and simply squander them).
Here's some of the big automatic stabilizers:
- Unemployment: As people lose their jobs during a recession the unemployment rolls swell. This dramatically increases government spending until employment starts to recover.
- Food Stamps: As people lose their jobs or end up being unable to find anything better than a minimum-wage gig at McD's, the number of food stamp recipients soars. Once again this results in a dramatic increase in public spending.
- Social Security: Many elderly Americans work past the retirement age because they like doing what they do, aren't ready to give up their livelihood, would like to save a little more for their golden years, or whatever. During recessions countless elderly Americans end up moving to Social Security earlier than they intended to. My employer laid off 800 workers last year (nearly 1/8 of our workforce). We were pretty successful in making sure that the guys ready for retirement took the layoffs so we didn't have to can so many young guys with their entire lives ahead of them. But needless to say, this sudden influx into Social Security once again causes a pretty sharp increase in spending.
- Marginal taxes: These are also designed as an automatic stabilizer. The idea is that as peoples' incomes decline or vanish altogether, they drop into lower marginal tax rates. As a result they end up paying lower effective tax rates. Federal tax revenue drops dramatically, both in total dollar amount and as a percentage of the economy.
- EITC: Same thought as marginal taxes. This was an innovation of the Reagan years by the way. As incomes drop during a recession a lot more people become eligible for the EITC. In some cases people actually receive more in their tax refund than they paid in taxes. Tax revenue drops dramatically as a result.
There's plenty more. You could point out all the young Americans going to college today because entry-level jobs aren't available right now. That causes a big spike in spending. You could point out the increase in poverty-level families eligible for Medicaid. Once again.
My point being is that the major cause of huge budget deficits
today is because of these automatic stabilizers. They are doing exactly what they were designed to do. But it's also important to remember that during a recovery they work in reverse. Public spending on the stabilizers drops. Tax revenue increases, as do effective tax rates and the share of the total economy. If we don't irresponsibly squander the good years (as politicians are wont to do), this is designed to roughly balance out. But back to the CBO, politicians routinely write and sign legislation that the CBO tells them will blow huge holes in the budget. Why let the stabilizers do their job when you can squander the surpluses on tax cuts and Medicare giveaways, you know?
As the economy recovers, these stabilizers will start to work in reverse and the deficits will erase themselves. Maybe not all the way, there is currently a structural imbalance in the federal budget due to things like the unfunded 2003 tax cuts and Medicare Part D that will still be there until Congress makes decisions about them. But most of the deficit will disappear as the economy recovers and the stabilizers start working the other way.
Onto a very different topic that is also relevant, we often talk about long-term budget deficits. You know, the nightmare that is the federal budget 25, 50 years from now. This is completely different from the current budget deficit. If you look at CBO estimates (which are generally what this discussion is based around), our current deficits mostly disappear and then gradually start to increase, and increase, and increase until their mammoth. Why? A couple causes. Social Security plays a small role. Demographic changes mean that revenues vs spending need to be adjusted. Small tweaks can accomplish this on either the revenue or spending side. It stops having an effect as demographics stabilize a couple decades from now.
The big player, the one that is causing 95% of the nightmare is Medicare. Healthcare spending across our economy has been growing at a rate much higher than inflation for quite some time. It continually swallows an ever greater portion of our economy. The CBO has no rational reason to expect that this is going to stop tomorrow or 5 years from now. And as you may or may not know our government is a huge player in healthcare. It spends more money providing healthcare than the entire private sector does by a pretty good amount. Thus it stands to reason that they are heavily affected by the inflation in medical costs. We need to find a way to deal with this. Simply flinging all Medicare recipients to private companies doesn't resolve the problem. Medical price inflation is as bad there as it is for the public dime. We have to figure out something that will actually work to control medical inflation. One reason I will be tremendously disappointed if Obamacare is struck down is that the bill basically threw the kitchen sink at the problem. They included almost every idea that's been proposed to help control healthcare costs that didn't fundamentally dismantle what Medicare is today. Most have effects on the private market as well and if some work they should help to stop the deterioration of that market.
Does that make sense? That our short-term and long-term deficit problems are actually completely unrelated and that fixing one will have no effect on the other?
