Green Room

Want to Balance the Budget? It’s Easier Than We Think.

posted at 1:33 am on December 6, 2010 by

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 Veronica 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?

Jimmie runs The Sundries Shack and has his own very entertaining podcast called “The Delivery”. He is also an amateur musician, an aspiring composer, an unrepentant geek and an avid fan of Twitter. This article is cross-posted there.

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Comments

Sure, all we have to do is get Democrats and bureaucrats to stop smoking our money like crack.

Easy-peasy.

PS The 19% rule is a cold hard fact, but facts don’t enter into the conversation, you have to know that by now.

Merovign on December 6, 2010 at 1:56 AM

Well perhaps it’s just me, but this plan seems to ignore the fact that around 41% of the 2010 budget is borrowed money. Even with continued low interest rates, the borrowing will increase and this is not accounted for in your plan. How do you plan to cut the borrowing costs with short term interest rates near zero? Note that if interest rates rise the borrowing costs will jump dramatically.

This plan continues to rely on increased borrowing from our future generations. It does nothing to address deficit spending and even enshrines it.

GnuBreed on December 6, 2010 at 6:42 AM

PS The 19% rule is a cold hard fact, but facts don’t enter into the conversation, you have to know that by now.

Merovign on December 6, 2010 at 1:56 AM

tru dat

cmsinaz on December 6, 2010 at 6:53 AM

This plan continues to rely on increased borrowing from our future generations. It does nothing to address deficit spending and even enshrines it.

GnuBreed on December 6, 2010 at 6:42 AM

Not actually. The essence of the plan is that we peg the size of the budget to the same GDP number as our revenues. It is a plan to balance the budget, not to pay off debt.

If you want to handle debt, the answer is simple: make the budget smaller than 19 percent of GDP.

Jimmie Bise, Jr on December 6, 2010 at 9:52 AM

Jimmie Bise, Jr on December 6, 2010 at 9:52 AM

Jimmy Bise for President.

Or SOMEthing!

44Magnum on December 6, 2010 at 10:55 AM

Will never get passed. It is common sense ideas based on practicality that never get used. I have just finished listening to CD of American History and reading a Patriots History of the US, and what sticks out is the solution to almost every American problem has been based on ideology. My plan will work, because my ideological philosophy is greater than yours. And of course has to be forced upon everyone else.

Taxes especially! We never seem to be able to sit down and look at what actually works, then do what works. Crazy!

odannyboy on December 6, 2010 at 11:24 AM

Living within one’s means…simple as that.

I’d suggest trying to go for a 15% of GDP as the max limit Government can take away from the taxpayers and spend. Built in mechanism for developing a surplus. For real emergencies…war, for example, do it the old fashioned way, sell war bonds, then if necessary, dip into the emergency surplus. Common sense kitchen table budgeting that Congress and government in general have completely forgotten.

But, for God’s sake, we’ve got to stop the appropriating on meaningless garbage and put an end to the spending like drunken sailors on Saturday shore leave.

coldwarrior on December 6, 2010 at 1:31 PM

But, for God’s sake, we’ve got to stop the appropriating on meaningless garbage and put an end to the spending like drunken sailors on Saturday shore leave.

coldwarrior on December 6, 2010 at 1:31 PM

Want a truly odd unintended consequence? If you peg the budget to a specific GDP percentage, then the overall dollar amount of the budget can float up or down depending on how well the economy is doing. So, those groups who feast on taxpayer pork, which would get some at this point no matter what we do, would likely get more in a booming economy and less in a down economy.

In other words, setting the budget at a percentage of GDP would provide an incentive for labor unions, big corporations, members of Congress, and all the other big interest groups to push the economy into higher and higher levels of production.

Perverse, no?

Jimmie Bise, Jr on December 6, 2010 at 2:13 PM

This post has been promoted to HotAir.com.

Comments have been closed on this post but the discussion continues here.

Allahpundit on December 7, 2010 at 2:59 AM