Voter's Survival Kit: 8 Things You Need to Know about Taxes, Spending & Debt

There's time for one last look at the issues before the presidential election, and one thing seems worth remembering as the voting starts: Very little happens in this world without money, and one of the biggest challenges for the next president and Congress is the fact that the federal budget is in such bad shape.

"Follow the money," someone famously says in "All the President's Men" (a great political movie, by the way, and for more cinematic genius, check out our favorite political films list, log on to Public Agenda, and tell us your own favorites).

That's a good rule, because the budget sets the government's priorities. Granted, there are many challenges facing the country, from the economy to foreign policy. But to some extent, the budget underlies all of them.

And the budget is in bad shape. In the short term, we're looking at serious deficits, maybe as high as $1 trillion next year when the costs of the Wall Street bailout and another stimulus package are factored in. In the long run, nearly every expert says the budget is unsustainable, as the nation faces huge expenses for Medicare and Social Security.

That means finding enough money to get the job done is going to shape the priorities for the next president. Most experts are saying that we'll have to accept deficits for the next few years because of our troubled economy. But there's a limit, and there's no question that the government's financial situation is going to limit the options for the next administration.

So before you vote, and in the spirit of our Voter's Survival Kit, we're offering eight key things you need to know about the federal budget. Both Barack Obama and John McCain have been reluctant to acknowledge how serious the problems are. But whether they acknowledge it or not, everyone in Washington already knows these grim facts about the federal budget, and you should, too. It's going to make a big difference to the next president – and to your future.

Right now, the U.S. economy seems to be in a shambles, and most Americans want the government to play some role in helping us get through this. But government's ability to help out -- whether by cutting taxes, stabilizing the financial system, or helping Americans who are down on their luck -- is severely hampered by its own dire economic condition.

The government's going to run a huge deficit next year, no matter who wins the election. Deficits are the norm in Washington, and for 31 out of the last 35 years, the U.S. government has spent more on programs than it has collected in taxes.

This year alone, the red ink (that's the deficit) is expected to be close to half a trillion dollars. Next year will be worse, because of the slumping economy. Tax revenues will be down, and the government will be spending more to try and head off a serious recession.

When the government spends more money than it collects, it borrows to cover the cost. Over time, the U.S. government has accumulated a staggering $10 trillion federal debt. Right now, we spend more money each year on interest on the debt than we spend on the war in Iraq.

There's simply no way the government can cut taxes, or even keep them at current levels, and still afford all the programs people say they want. Something's got to give.

Budget experts across the political spectrum – liberals, conservatives and the government's own auditors – say the country is facing huge additional expenses in Medicare and Social Security as health costs rise and retiring baby boomers begin to leave the work force.

Medicare is the biggest problem. Not only does Medicare have to cover the needs of 78 million baby boomers, it also has to deal with health care costs that are rising much faster than the rate of inflation.

If we do nothing, the country's debt will be growing faster than our economy in about 15 years, which means we won't be able to keep up. By 2040, the country would need nearly every dollar it collects in taxes just to cover the costs of Medicare, Medicaid, Social Security and interest on the debt.

To protect Americans who rely on Social Security and Medicare and reduce the unsustainable costs of these programs, we need to start reforming them right away. Relatively small changes now will make a big difference later, but the longer we wait, the harder this will be for everyone.

How do we know this? Here are our sources:

Budget of the United States Government; Congressional Budget Office, The Budget and Economic Outlook, September 2008 and The Long-Term Fiscal Outlook, December 2007; U.S. Government Accountability Office, The Nation's Long-Term Fiscal Outlook April 2008; Facing Up to the Nation's Finances; and "Where Does the Money Go?", by Scott Bittle and Jean Johnson.