Jon Huntsman’s $1 trillion mistake

Introduction

Jon Huntsman was off by $1 trillion or more when he claimed that Social Security, Medicare and interest payments would consume “every dollar of federal revenue” within 10 years. A spokesman says Huntsman meant to include Medicaid in that list, but even that wouldn’t make the claim accurate.

In his June 21 speech announcing that he is running for the Republican presidential nomination, the former ambassador said:

Huntsman, June 21: We must make hard decisions that are necessary to avert disaster. If we don’t, in less than a decade, every dollar of federal revenue will go to covering the costs of Medicare, Social Security and interest payments on our debt.

That’s not even close to being true, according to budget projections by the nonpartisan Congressional Budget Office. CBO’s January budget projections showed “baseline” spending in 2021. Those projections show that Social Security, Medicare and net interest payments on the debt would consume $3.08 trillion in 2021, assuming no changes in current law. But they also show total federal revenues would reach $4.96 trillion — making Huntsman’s arithmetic off by nearly $1.9 trillion.

In fairness, CBO’s revenue projections are probably much higher than Congress is likely to approve, since they assume that all scheduled tax increases will be allowed to take effect. And spending will probably be higher for Medicare, since CBO is obliged to assume that Congress won’t ease scheduled cuts in payments to doctors, as it has repeatedly in the past. But even under a more likely “alternative” fiscal scenario, which CBO released a day after Huntsman spoke, his claim falls far short. That projection assumes Congress won’t let big cuts in doctor payments take effect, and will extend tax cuts for all but high-income taxpayers. But even so, CBO figures that revenues would be 18.4 percent of gross domestic product in 2021, and total spending for Social Security, Medicare and interest would total 14 percent. And since CBO’s most recent projection of GDP shows it exceeding $24 trillion in 2021, the difference still works out to be just over a $1 trillion mistake by Huntsman.

When we asked the Huntsman campaign about this error, a spokeperson told us the candidate had meant to include Medicaid spending in his list. “The remarks were [meant to be] regarding Social Security, Medicare, Medicaid, and interest on the debt,” the spokesperson said in an exchange of e-mail messages. Huntsman’s spokesperson referred us to a CNNMoney.com story from January. But even that doesn’t quite back up what Huntsman supposedly meant to say:

CNNMoney, Jan. 21, 2011: Barring serious efforts to curb the growth in the country’s debt, by 2020 Washington could be spending 92 cents of every tax dollar on Medicare, Medicaid, Social Security and interest alone.

Huntsman said “every dollar” would be consumed, not 92 cents out of every dollar.

The CNN story is based on a report issued in November by the Government Accountability Office. It said “roughly 92 cents of every dollar of federal revenue will be spent on net interest costs, Social Security, Medicare, and Medicaid by 2020” — assuming, among other things, that “all tax provisions are extended to 2020,” including Bush tax cuts even for high-income taxpayers. It’s roughly in line with the latest CBO “alternative” scenario, which projects that in 2021 about 91 cents of each dollar of federal revenue would be consumed by those four items.

Huntsman would have been correct to say that Social Security, Medicare, Medicaid and interest will probably consume “nearly” all tax dollars, unless Congress makes decisions that it has so far been unwilling to make.

– By Brooks Jackson, with Scott Blackburn