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James Pethokoukis

Does Washington really need to balance the budget within 10 years?

3. Just what tax breaks does the House want to scale back or eliminate as part of its tax reform plan? Reducing or eliminating some tax preferences, like those on investment income, would actually hurt economic growth. And will the House stick with its plan of consolidating the current six individual income tax brackets into just two brackets of 10% and 25%? Will the House continue to use the slower-growth CBO forecasts?

4. Yet another question: Will the House try to balance the budget in a decade without major Medicare reform until 2023?

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I know, let mint 17 one trillion dollar coins.

mwbri on January 23, 2013 at 3:05 PM

Moot quesions.

This is all just a dog and pony, smoke and mirrors show by the RINOS.

In legislation filed yesterday, the House GOP Leadership made an important twist in their plan to pass a short-term increase in the debt ceiling. Rather than increase the debt ceiling by a few hundred billion dollars, buying them time for further talks on the budget, they have opted to “suspend” the debt ceiling. Its a blatant abdication of their constitutional authority. It’s an ominous sign of the talks to come.

Article 1 of the US Constitution gives Congress the exclusive authority to borrow money to fund the government. Up until World War I, Congress would approve every bond issuance. The borrowing demands of the war made this impractical, so Congress authorized a “debt ceiling,” where the government could freely borrow up to a statutory limit and then go back to Congress to approve additional borrowing. Think of it as giving your teenager a pre-paid debit card.

With this measure, the government had more flexibility to manage its affairs while preserving the Constitutional principle that Congress controlled the purse strings.

“Suspending” the debt ceiling until May upends this principle. Upon enactment, the government’s borrowing authority would be unlimited until May. Presumably, the government could borrow trillions in this window, providing either the markets or the Fed would meet the new supply of debt.

Worse, however, is that the GOP move establishes a very slippery precedent. The left has been agitating to simply eliminate the idea of a debt ceiling entirely. For all its flaws, the ceiling at least guarantees we will have some debate about government spending. The left finds this annoying. Unfortunately, the GOP plan to “suspend” the ceiling provides at least partial support to this argument. If we can “suspend” it for three months, why not a year? Once you’ve surrendered the constitutional principle behind the ceiling where and how can you draw a line?

Despite their past history of punting on difficult fiscal issues, I was willing to give the House GOP a skeptical benefit of the doubt on their plan for a short-term lift in the ceiling. The deficit debate has three components, ie. debt ceiling, sequestration, and budget expiration, which happen close to each other, but not simultaneously. It made some strategic sense to weave them together into a single debate.

I assumed, however, that this would entail an increase in the debt ceiling of a few hundred billion dollars, to provide the time to negotiate a longer-term deal. I did not anticipate it would feature the House GOP surrendering its constitutional obligations.

When the GOP took control of the House, they vowed that every piece of legislation would contain specific language citing the constitutional authority for the proposed law. It would be interesting to see their interpretation of the constitutional authority to suspend the document.

Difficultas_Est_Imperium on January 23, 2013 at 3:05 PM

It is mathematically impossible to balance the budget at any point ever without doubling “revenues” (actual government income, not tax rates, which will not double the income), or cutting government spending by half. Our current tax revenue pays for social security, medicare/medicaid, and interest on the debt. Everything beyond that is borrowed.

So either totally do away with discretionary spending (no courts, no military, no welfare, no whatever), or do away with ss / medicare / medicaid, make discretionary cuts to offset the interest servicing.

That brings us to a balanced budget, but still leaves us with 16+ Trillion in debt. SS Medicaid / Medicare will continue to grow exponentially on auto pilot if they are not down away with, so it would be a short term balance unless we cut those 3 programs.

We will never see a balanced budget again.

Timin203 on January 23, 2013 at 3:11 PM

There are days – like right now – when my mind immediately thinks….

Oh f_ck it – the world is full of idiots.

jake-the-goose on January 23, 2013 at 3:24 PM

Run from the cliff! There’s better ground over there.

Run. Run.

I would note, however, that not all the problems we have lie in either spending or revenues. There is still the entirely un-talked about problem of regulation which has as much of an impact on economic growth as either of the former.

Dusty on January 23, 2013 at 3:32 PM

Completely missing from the useless story by James Pethokoukis is the effect of INTEREST RATES on DEBT.

He is either unaware of what interest rates are, how compound interest works, or the FACT that the Federal Reserve is MONETIZING the national DEBT in spite of the fact that their charter prohibits such actions.

ANYONE that talks about government spending without mentioning the Federal Reserve is a fool.

Freddy on January 23, 2013 at 3:40 PM

I would note, however, that not all the problems we have lie in either spending or revenues. There is still the entirely un-talked about problem of regulation which has as much of an impact on economic growth as either of the former.

Dusty on January 23, 2013 at 3:32 PM

Right, well, the problem lies with the ruling class completely and utterly embracing a dead, idiotic economic theory like Keynesianism. They do it because its politically expediant for them (they can get more power, spend as much as they want, and claim they’re HELPING the economy). Anything that interferes with free market exchanges — regulation, taxation, prohibitions, etc — is going to retard economic growth.

That is a related problem to our spending and “revenue” problem, but even if we were growing at a blockbuster rate, we are wayyyy wayyy past being able to grow ourselves out of this hole.

Timin203 on January 23, 2013 at 3:41 PM

jake-the-goose on January 23, 2013 at 3:24 PM

I like that motto…with your permission, I think I’ll use it in my daily life.

NJ Red on January 23, 2013 at 3:46 PM

And also, this article is pulling the recent liberal trick — talk about debt HELD BY THE PUBLIC as if interagency debt doesn’t matter. If interagency debt doesnt matter as we can wash it away, then lets all admit the social security system is absolutely broke, has zero dollars, and is a huge drain on resources.

You can’t have it both ways — we either count the t-bills that the SSA has in our “trust fund” as real debt for the government, or we concede that SS is totally broke. Either way, this debt has to be rolled over by treasury into real debt to the public (ahem federal reserve) or the money has to be borrowed from the public (ahem federal reserve) to cover current and future SS pay outs. So it’s definitely real, live, important debt.

And how about all of the unfunded pensions? What about the t-bills being held by those pension funds? Are we saying we will not pay those pensions out when its time to?

Because I’m iokay with that — lets cancel all intra government debt on both sides of the balance sheet (SSA’s “asset” of tbonds, and treasuries liability of the bonds in SSA’s “trust fund) and cancel the whole fricking program.

Timin203 on January 23, 2013 at 3:47 PM

Let’s try for cutting the deficit by 75%, the GWB levels next year…

phreshone on January 23, 2013 at 3:54 PM

If I ever join a political party in the future it will be one which will do more than simply balance the budget, it will reform the corrupt system. It will campaign to get rid of the corrupt income tax regime and replace it with a simple and corruption-resistant fair-tax.

FloatingRock on January 23, 2013 at 4:13 PM

That brings us to a balanced budget, but still leaves us with 16+ Trillion in debt. SS Medicaid / Medicare will continue to grow exponentially on auto pilot if they are not down away with, so it would be a short term balance unless we cut those 3 programs.

We will never see a balanced budget again.

Timin203 on January 23, 2013 at 3:11 PM

There is actually a very simple to comprehend starting point. What many people do not understand is that MANY ‘add on programs’, like SCHIP(that costs more than 150 billion AFTER Obamacare), have been added to the medicaid budget over the last several decades.

A nice ‘clean’ way to clear up much of this spending is to eliminate EVERY government program that ‘assists’ ANYONE not in poverty! Currently, families in Cal that make $75k+ are on federal handout lists! All we accomplish with these subsidies is to increase prices which hurts BOTH the government AND the consumer.

Freddy on January 23, 2013 at 4:39 PM

Returning to the pre-stimulus baseline would be a huge step in the right direction. You know, that $800 billion dollar one-time only stimulus that actually gets included annually? Get rid of that and get people back to work, and the budget will be balanced, or pretty darned close, all without any radical changes to anything.

xblade on January 23, 2013 at 5:27 PM