Invoking the Beatles’ plea in “Hey Jude” to “take a sad song and make it better,” National Review columnist Deroy Murdock recently issued a friendly challenge to several think tanks. He urged them to pitch specific policy reforms to Donald Trump. National Taxpayers Union Foundation (NTUF) was given the mission of convincing Trump to support a balanced-budget proposal known as the Penny Plan. We’re up for it.
The Penny Plan is a simple reform to cut spending by one cent for each dollar spent and limit outlays to the amount of incoming revenues. It was last introduced in Congress as the One Percent Spending Reduction Act of 2014. That bill would have reduced outlays by 1 percent for three consecutive years. Starting in the fourth year after passage, a spending cap would be instituted. At 18 percent of GDP, it would match the average level of tax receipts to the federal government, setting a path for a balanced budget.
The biggest reason is the worsening fiscal outlook. The Congressional Budget Office (CBO) projects that the government is on pace to spend $544 billion more in fiscal year 2016 than it will collect in taxes. Worse is to come without a change of course: CBO foresees deficits rapidly exceeding $1 trillion per year by 2020.
As the Treasury continues to borrow to maintain this excessive spending, the debt held by the public alone (irrespective of deceptively named “trust fund” debt) will rise from 75 percent of GDP this year to over 86 percent in a decade. And the next president will need a solution quickly next year: A budget agreement in 2015 suspended the limit on the level of public debt the government can issue, but the debt ceiling will be reset in March 2017, just two months after the inaugural. The long-term budget picture is even worse. Without reform, entitlement programs will impose an immense burden: Trillions of dollars of unfunded liabilities will loom over taxpayers.
Without reform, entitlement programs will impose an immense burden: Trillions of dollars of unfunded liabilities will loom over taxpayers.
Trump should be worried about this outlook, but Clinton might also recognize a threat here: absent massive, economy-crushing Sanders-style tax increases, many of her poll-tested spending promises will be difficult to fund in a budget swamped by debt service and out-of-control benefit programs.
Another reason this plan should be supported is that the government spends too much through too many overlapping or ineffective programs. And the candidates acknowledge this. In the primary debates, Clinton, Sanders, and Trump each made at least one statement about the problem of wasteful or duplicative government programs.
This is not a new issue: The past several administrations have been engaged in a seemingly endless war on budgetary waste. President Obama’s and George W. Bush’s budget submissions to Congress included lists of programs to reduce or terminate due to performance or overlap. President Clinton sought to “reinvent government” so it could perform better and cost less. In the 1980s, President Reagan’s Grace Commission issued a report on rooting out federal inefficiencies. Under President Carter, there was a National Conference on Fraud, Abuse and Error. This “war” on waste goes back at least to the 1970s.
The fact that the problem persists is a sign that a new strategy is needed.
On CandidateCost.org, NTUF is tracking the cost of the spending-related policy promises of the candidates. We have yet to see a great deal of specifics regarding what they would do to cut outlays. The Penny Plan would bring a fresh approach to reining in the federal budget. It would increase fiscal responsibility without imposing new or higher taxes that could hamper economic growth, costing jobs and opportunities for Americans.
Moreover, linking spending levels to the size of the economy will incentivize lawmakers to pursue pro-growth policies, which should include tax reform and open trade.
Perhaps most important — given a recent Gallup poll that found the number of Americans who think they pay too much in taxes has reached a 15-year high of 57 percent — the Penny Plan would help protect Americans from the grasping hand of the taxman. The Beatles sang a “sad song” about him too.
— Demian Brady is the director of research for the National Taxpayers Union Foundation.