Collision course

Date posted: September 20, 2012

There’s a big debate ongoing about the federal budget and federal spending. But some say there’s more to the debate than just total spending. Instead, it’s also a debate about where spending is occurring. N.C. State University economist Mike Walden explains.

“Well, if you do look … at not only where federal spending is going, but where it is come, you really see two different directions for two important parts of the federal budget. One is the path of spending on what is called the big three entitlement programs — Social Security, Medicare, Medicaid.

“From the 1960s to today, that spending has increased about sevenfold — about seven times. And it’s projected to continue to go up. And of course, a lot of that is being driven by demographics. A baby boom generation, for example, retiring and, quite frankly, people living longer.

“The other component, important part, or one of the important parts of federal spending is federal spending on what would broadly be called investments: investments in roads — maintenance and building of new roads — and education and helping the development of new technology.

“This spending has gone the opposite direction. In fact, over the time period the 1960s to now, on a relative basis it’s dropped 50 percent. And many economists worry about this because they worry that we do need obviously modern roads and education and technology to have an improving standard of living.

“So this is really, I think, a big issue in the federal budget. The fact that we have one category of federal spending clearly going up. We have another going down. Both, of course, are important parts of federal spending. It’s going to be very tough to solve that problem.”

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