Despite liberal claims to the contrary, spending ? not declining revenues ? drives America?s long-term deficits. Once the economy recovers, revenues are projected to return to their historical average of 18 percent of the economy ? even if all tax cuts are extended. Federal spending ? rising from its historical average of 20 percent of the economy to a projected 26 percent by the end of the decade ? is the moving variable.
Nearly all of this new spending will come from Social Security, Medicare, Medicaid, and interest on the debt. Combined and adjusted for inflation, these annual expenditures will rise from $1.6 trillion to $3 trillion over this decade. Therefore, budget reform must include putting Social Security and Medicare on a fixed long-term budget with a capped growth rate.