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Follow the Straight (and Dotted) Lines to Budget Truths: View

Government Budget
Source: Bloomberg

July 12 (Bloomberg) -- In Washington, the weather has heated up. So has the rhetoric in the hybrid budget/debt-ceiling negotiations between President Barack Obama and congressional leaders. From the White House lectern on Monday, the president insisted that U.S. lawmakers have “a moral imperative to tackle our debt and deficit.” This means, generally speaking, that Democrats need to accept spending cuts and entitlement reform and that Republicans need to relent on tax increases.

Every so often, graphics can speak louder than words, and to that end we suggest a quick look at this chart, using data compiled by Bloomberg. It puts in stark perspective the imperative mentioned by Obama and underscores that, on this issue, he is solidly in the right.

The chart’s solid line -- the jagged mountain range in the foreground -- shows that income taxes, as a percentage of gross domestic product, are at 14.9 percent, the lowest since 1950. The average in the last 60 years has been closer to 18 percent. It is not hard to look at this line and think, as the president and Democrats do, that it will be tough to solve our budget problems without raising taxes.

The graphic’s dotted line -- the higher altitude range with the plateau -- sheds light on another side of the Washington debate. This graphic shows federal spending as a percentage of GDP since World War II. It is not hard to look at this line and think, as the president and Republicans do, that it will be tough to solve our budget problems without cutting federal spending and making changes to runaway entitlement programs like Social Security and Medicare.

The president and leaders in Congress have pledged to keep talking. All those involved say that they want to cut the deficit and bring our long-term debt under control. The specifics are in flux, but the general outlines are as clear as the above graphs: Any viable plan will require spending cuts and tax increases both.

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