What Would It Take to Balance the Budget? A Lot Less Work Than We Think

Most people, including me, tend to think that balancing the budget is a Herculean task. I look at the yearly deficit numbers racked up by our self-proclaimed Blue Dog President and I wonder how we can ever bring those long, long red lines to zero. All the proposals, from the left and right have been reported by the MSM as being full of misery and woe and none of them get us to a balanced budget in less than twenty years. We all know we don’t have that kind of time.

But Nick Gillespie and Veronique de Rugy have a proposal that not only promises to balance the budget in ten years but also does so without raising taxes or actually cutting the budget by one thin dime.

Have they proposed a miracle, the fiscal version of the perpetual motion machine. No. As it turns out, the problem isn’t nearly as large as we think it is. The solution is to peg the budget as near as we can to 19 percent of GDP, which is what the CBO has estimated tax revenues to be for the next decade (assuming the Democrats don’t raise taxes in the next month). Here is their setup to the proposal, called “The 19 Percent Solution”.

A balanced budget based on 19 percent of GDP would mean $1.3 trillion in cuts over the next decade, or about $129 billion annually out of ever-increasing budgets averaging around $4.1 trillion. Note that these are not even absolute cuts, but trims from expected increases in spending.

What that means, essentially, is that Congress would need to pass a budget that’s about 3.6 percent smaller than normal. Notice, by the way, I didn’t say the budget would have to be 3.6 percent smaller than the prior year’s budget. There is a difference. Let me explain.

Based on the numbers here, I calculated the percentage of growth from one budget to the next. Here is the list for the last ten years, including the budget as proposed by President Obama for 2011:

2001 to 2002: 5 percent

2002 to 2003: 4.5 percent

2003 to 2004: 4.3 percent

2004 to 2005: 4.2 percent

2005 to 2006: 11.1 percent

2006 to 2007: 3.6 percent

2007 to 2008: 3.4 percent

2008 to 2009: 6.5 percent

2009 to 2010: 13.9 percent

2010 to 2011: 5.3 percent

Average increase per year from 2001 to 2011: 6.1 percent

For those of you keeping partisan score, the average increase in the Bush years was 5.3 percent and the average increase thus far in the Obama years is 9.6 percent.

But back to the subject. If we adopt The 19 Percent Solution, budgets will, generally, still increase, just not by as much. As you can see, if we cut 3.6 percent from the increase of each budget, we would still have spent more money than the previous year in every budget save two. One of those would have been flat and the other would have been cut by a whopping two-tenths of one percent. Old people would not have had to eat dog food, our military would not have fallen into ruin, and we would not have needed to dump countless puppies and kittens into blenders to make a tasty but inexpensive gruel to feed the teeming millions of starving children. Based on my math, our Federal government would have, on average, gotten a 2.5 percent raise each year for the last ten. I can think of plenty of people who haven’t gotten such a reliable raise by their employers over the same period of time.

In other words, if we adopt this policy, we would not have to actually cut the budget at all. We would spend at least as much money next year as we’re spending now. This is not only possible, but doable right now. Back to the article:

Are our leaders willing and able to identify and cut just $25 billion in waste and excess out of more than $700 billion in non-defense discretionary spending? Is reducing the $714 billion the Department of Defense received in 2010 by a paltry $25 billion impossible? Can Medicare and Medicaid, two programs that are infamous for waste and fraud and cost well over $720 billion in 2010, find $35 billion in efficiencies? The specific cuts should be open to negotiation, but the historical record shows that the available level of government revenue is fixed.

If our leaders can not make these paltry cuts on their own, then we will have to insist. We have a revenue limit we can not exceed. That’s not a conservative principle at work, but cold, hard fact. Tax revenues to Washington sit right around 19 percent, no matter how much the President’s vaunted debt commission wishes that number was much higher. We have to work within reality, and reality says that we can only plan for 19 percent. It is foolhardy and irresponsible to plan for anything else.

Fortunately, getting spending to 19 percent, or ideally even less, would not require any real sacrifice at all, except perhaps to the politicians in Washington who use our money to secure their continued employment and the people whose campaign contributions net them billions of our dollars. But I think those folks could do with a little bit smaller trough, don’t you?

(Cross-posted at The Greenroom)

Other Posts of Interest:

• Obama Stars in New Movie: For a Trillion Dollars More
• Loose Lips Sink Budgets!
• Congressman Jeff Miller on Our Spending Realities

Tags: Big Government, Economics

Category: The Economy and Your Money