Want to know just how bad our budget problems are? The 2012 budget plan unveiled yesterday by Rep. Paul Ryan and Republican House leaders cuts federal spending by $6.2 trillion over the next ten years — and still adds $6 trillion to the national debt.
Yet, by and large, Americans still believe there is a painless way to balance the budget. They have a better chance searching for that pot of gold at the end of the rainbow.
That’s not to say that Americans don’t understand the need to balance our budget. Most Americans want spending cut and the budget balanced. In fact, a recent Reuters/Ipsos poll showed that fully 71 percent of voters oppose raising the current $14.3 trillion debt ceiling.
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But when it comes to what to cut, voters have a hard time finding anything they are willing to go without. Of course, everyone is against “fraud, waste, and abuse.” And certainly there is a great deal of that in the federal budget. But there is no line item called “fraud, waste, and abuse.” One can’t go in and simply slice waste off the top of the budget. Rather, it is marbled throughout in ways that often defy easy cutting. Moreover, one person’s boondoggle is another person’s critical program.
And when it comes to programs, there are remarkably few that the public seems willing to cut. For example, we’ve increased federal education spending by 188 percent in real terms since 1975 without any improvement in outcomes. Yet just 24 percent of voters say they support cuts in federal education spending. A majority of Americans also oppose cutting anti-poverty programs, homeland security, aid to farmers, and funding for the arts and sciences.
Indeed, about the only program the public seems anxious to cut is foreign aid — not surprising, since voters think it consumes 10 percent of federal spending. The actual figure is slightly less than 1 percent. The public also wants to cut the benefits and pensions of government workers. They believe that makes up another 10 percent of the budget. In reality, it is 3.5 percent. That’s not an argument against cutting foreign aid or the excessive benefits of government workers, but you aren’t going to get to a balanced budget that way.
In fact, you are not going to get to a balanced budget by cutting domestic discretionary spending. All domestic discretionary spending, everything from the FBI to the FDA, from the Department of Commerce to the Department of Education, makes up just 18 percent of the federal budget. You could eliminate it all, and we would still face a budget deficit this year of more than $680 billion.
And while we are at it, 57 percent of voters oppose cuts in defense spending. Defense, of course, accounts for another 19 percent of federal spending. It will have to be on the table if the budget is ever going to be balanced.
In the end, the only real way to bring the federal budget into long-term balance is to reform entitlement programs, as Ryan has proposed doing. But here again, the public is reluctant to support cuts. According to the most recent Gallup Poll, two-thirds of Americans oppose cutting Social Security benefits. Even self-professed supporters of the Tea Party oppose cutting Social Security by 2–1. Nearly as many voters, 61 percent, oppose cutting Medicare.
On the other side of the ledger, Americans are slightly more willing to raise taxes to balance the budget — but only on the “rich,” usually defined as someone earning a lot more than they do. But, of course, taxing the rich won’t get you to a balanced budget either. Even setting aside the damage to the economy that tax increases would do, you simply can’t get enough money out of the rich to solve our fiscal problems. In fact, if you confiscated — not just taxed, but confiscated — all the wealth of every millionaire in America, you could come close to covering our current national debt. But once entitlements start to really kick in, in about a decade or so, we’d be in trouble again.
Any tax increase that would make a dent in our long-term debt would have to go well beyond the rich, biting deeply into the middle class. But tax hikes of that magnitude would devastate economic growth and prove counterproductive in the end. Simply put, we can’t tax our way out of this hole.
So if you want to know why we are in trouble, look no further than us. If we are serious about avoiding the fiscal train wreck to come, we are going to have to be willing to cut even those programs we like. There can be no sacred cows. Everything has to be on the table.
Ryan’s approach is a good start. But for the long term, it will require a 2012 presidential candidate capable of explaining the facts to an uninformed public and courageous enough to make the necessary cuts — even if the public thinks they hurt.
Not that I disagree with your conclusion, but it bears keeping in mind that just like with "fraud and waste," there is a lot more involved in foreign aid than programs clearly labeled "foreign aid." A significant chunk of our military expenses goes toward defending other countries, for instance. I'm not saying we shouldn't be doing that, just pointing out that the true cost of foreign aid is more than 3.5% of our budget (though of course not enough by itself to solve all our problems by cutting it all, even if that were wise).
I don't know where you're getting your data from, but I think you can whack almost every penny of education spending from the Federal budget. At least return it to its pre-Carter levels.
Arts? gone. Sciences? Unless it's proving its worth, Gone.
etc
etc
Those of us who make these decisions in our household and business budgets on an ongoing basis, have a great deal of experience solving these very problems. I'll bet I and a couple of my fellow hard-nosed business-oening friends could get together and have the budget balanced in a couple of days. Though there would be a big pile of gored oxen laying around.
"Want to know just how bad our budget problems are? The [Paul Ryan plan] cuts federal spending by $6.2 trillion over the next ten years — and still adds $6 trillion to the national debt."
And why is that? because these massive budget cuts are paired with massive tax cuts for the wealthy, bringing the top marginal rates from 35% to 25%. So it's not a proof that our budget outlook is dire. It's a proof that trying to comfort the wealthy while balancing the budget is not just misguided but pretty much impossible. And if we're talking about inflicting pain on the American public, why not start with the wealthy and work our way down? hmmm?
Please don't cut back on waste, fraud, and abuse. Everybody I know is either wasteful, fraudulent, or abusive. Cut back, and my friends won't have enough money to buy me drinks now and then.
I find "In fact, if you confiscated — not just taxed, but confiscated — all the wealth of every millionaire in America, you could come close to covering our current national debt." very interesting, and helpful when discussing with the "tax the rich" crowd.
Does anyone know where Mr. Tanner got this from, and what the numbers to back it are? I'm always more confident saying things like this when I can cite a source.
As you are well aware, Ryan's plan eliminates many deductions at the same time it is reducing the top rate, so in fact the plan increases tax revenues.
The Ryan budget does nothing -- absolutely nothing -- to lower the cost of health care. It merely expects seniors to happily take progressively punier "vouchers" to purchase progressively more expensive private health insurance.
Your statement doesn't contradict anything I said. You can "broaden the tax base" by taxing more people and you can eliminate midddle class tax breaks all the while cutting dividend and income rates for the top 1%. My point is that it is incredible to give a sermon of brimstone and fire about our dire budget outlook and urgent need for shared sacrifice, just to then argue that we need to do more debt-financed tax cuts for the rich even greater than the already unaffordable Bush tax cuts.
I'd support the tax cuts a lot more if it was an across the board 5 to 10% rate cut. If tax cuts are good for the top earners then they are good for the middle and bottom brackets as well.
We have a serious problem with bloat in government. When that happens to us in business, we arbitrarily cut an area or function by the estimated bloat - say 25% -- then let the managers figure out what NOT to do. When we see what doesn't get done, we decide whether it's acceptable.
With the serious bloat in our governments at all levels, I'd suggest 25% to everything (even defense; we don't need $700 hammers). After the 25% round, we'd probably discover that another reduction is in order. Following those painful "reorganizations", we need to deal with the other BIG item which is not part of the budget.
Social Security is not part of the budget even though lawmakers “conveniently” want to put it in the budget in these discussions. The SS fund was raided by the Feds for decades, and most of it should be paid back. I know seniors will not get all of what they saved, but they shouldn’t be ripped off simply because they’re vulnerable.
A little even-handed fairness would be nice, but don’t hold your breath.
Of course, we could just wait until no one will buy our bonds, then do it like the USSR did –
What the "tax the rich more" crowd fails to grasp is that resources are limited. The more that politicians seize from the private sector for their spending desires, the less is left for spending, investment, and charitable donations. Political decision-making is characterized by its short-sightedness, domination by special interest groups, and the fact that politicians rarely suffer any adverse consequences when they do wasteful and counter-productive things. And despite all the silly rhetoric about "investments" the state almost never really invests in productive assets.
On the other hand, people and organizations (for and non-profit) tend to make generally sensible decisions, weighing costs versus benefits and planning for the long-run.
Extracting more resources from the private sector to feed the governmental leviathan thus transfers them from sensible decision-makers to those who have a track record of squandering them on a vast array of boondoggles. This is why the Founders wanted a small government of very limited authority, but the authoritarian "progressives" smashed the constitutional restraints on federal power back in the 30s.
Trying to cover the federal debt with more tax revenues is equivalent to trying to fill in a black hole.
What you are forgetting is that when you lower the top rates, the wealthy have incentive to earn more and therefore pay more in taxes.
After the Bush tax cuts, there were news stories about how the treasury was receiving much more than it anticipated. The increasing deficits of the Bush years came from the fact that he spent money like a buzzed sailor (as opposed to the drunken sailor Democrats).
Clinton raised the tax rate in the 90s. Did the wealthy stop making gangbuster profits? Were entrepreneurs
deterred from launching tons of new companies? And please do explain to me how an investment banker working a 100-hour week will work even harder if given a tax cut.
MoneyChanger,
A government is not a profit-driven enterprise. If CEO George W Bush of America Widgets Co. were to say "we made too much money off selling widgets to hard-working americans. it's their money. We must rebate all the profit and cut prices", he'd be thrown into a pool of sharks mounted with laser beams.
George C. Leef,
Resources are limited. That's not a reason to raise taxes on the have not and cut the taxes on the have yachts.
Plus, GE is cutting jobs while getting rax REBATE from the government. That rebate comes from MY tax money.
"if you confiscated — not just taxed, but confiscated — all the wealth of every millionaire in America, you could come close to covering our current national debt."
IowaHawk has done the math. If you confiscated every dollar earned about $250K by everyone then you get 1.412 trillion - way short of paying off the national debt.
ArielD misses my point entirely. It will do no good to increase taxes on anyone or anything because the politicians will blow through that money, then plead that they need still more. America's problem is not that we have budget deficits, but rather that the government absorbs far too much of the wealth produced within the country and uses it for unproductive or counter-productive things. It is not possible to stop the expansion of federal spending by letting the politicians confiscate more wealth. The people who have yachts already have them; the next million taken from some successful individual might have gone into a productive enterprise or been donated to a helpful charity. What good will the political class do with it?
ArielD - this is not a question whether you tax the rich or you cut spending on the poor. This is a complex question that Democrats simply want to ignore. Wallow in the glory of the Clinton years and close your eyes, ears and mind to what is coming down the pike. The irresponsibility is amazing.
Due to the demographics of the baby boomers this country can't afford social security or medicare. Anyone who basks in the notion that these programs are some sort of savings programs are not paying attention and have been sold a bill of goods. Social security and Medicare are government programs. Plain and simple. Yes, you have been taxed for them but you do not have an account. It is socialism. If you disagree please show me your account and tell me how you are going to diversify your account.
The only options here are to cut spending, inflate the currency, tax the lower, middle and upper classes to an extraordinary rate or go bankrupt (let the Chinese use treasury notes for wallpaper).
The inflation route is a disaster. Taxing everyone to death will ensure the economy is severely crippled. Bankruptcy could start a war. Maybe we should cut spending for the first time since WWII?
