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Tags: Balanced Budget

Back-of-the-Envelope Balanced Budget



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In one of the most awkward and vapid performances I can remember his having given, Pres. Barack Obama yesterday made it clear that he has learned absolutely nothing from the debt-ceiling debate — that he may be incapable of learning. He continued to talk nonsense about government “investing” in this, that, and the other, and said that was how the nation creates jobs. It was a self-discrediting performance.

He also promised to raise taxes. For Obama, taxes plainly are not in the main a fiscal issue, but an emotional one. He remains fixated on general-aviation consumers and energy companies, and he promises to stick it to them. (Economic reality: Oil is scarce, speeches are plentiful.)

“You can’t close the deficit with just spending cuts,” he declared. And he’s almost right about that. John Boehner can’t close the deficit with just spending cuts. Paul Ryan can’t do it. Senate Republicans can’t do it. President Obama can. That is because Barack Obama is at present the most important reason why you can’t close the deficit with just spending cuts.

The Congressional Budget Office estimates that the 2012 deficit will amount to 7 percent of GDP, or about $1.1 trillion. At 16.6 percent of GDP, federal tax revenue is 1.3 percentage points off its historical average of 17.9 percent of GDP; spending, at 23.6 percent of GDP, is significantly farther off the trendline, 2.9 percentage points more than its historical average of 20.7 percent of GDP. Spending, not revenue, is the real outlier.

What would a cuts-only balanced budget look like? There are lots of options. Eliminating Social Security would almost get you there by itself. Eliminating Social Security and Medicare would put you well into the black. But that isn’t going to happen. Neither is what I’m going to propose, but here’s my back-of-the-envelope balanced budget, with no tax increases:

1.      Social Security: Yeah, they’ll say you’re throwing Granny off the cliff. But it’s her or the grandkids. So implement aggressive means-testing and other reforms to cut 20 percent of spending for $150 billion in savings.

2.      Medicare: Ditto, for $100 billion in savings.

3.      Keep on going and reduce Medicaid and other health-care services spending by 10 percent: $33 billion.

4.      National defense: Republicans will howl, but there’s room for a 10 percent cut to all national-defense spending, including non-DoD activities such as DoE’s work maintaining our nuclear arsenal. That nets $74 billion in savings. Surely we can slaughter hapless desert barbarians more cheaply.

5.      “Other income security.” That’s the welfare state bits and pieces not included in Medicare, Medicaid, Social Security, food stamps, etc. Welfare of the checks-from-Uncle variety. Eliminating it entirely saves $159 billion. 

6.      Welfare for bureaucrats: Making federal-employee retirement and disability systems totally self-funding saves $123 billion.

7.      Eliminate federal education spending entirely: elementary, secondary, and higher-ed. Leaving it to the states and to the market saves us $106 billion. Harvard will figure something out.

8.      Eliminate “community and regional-development” spending, a.k.a. boondoogles and slush funds, except for disaster relief: $15 billion.

9.      Get farmers off welfare: $19 billion. Suck it up, Elmer.

10.  Foreign aid, international development, international-security assistance, etc. Quit meddling abroad and propping up Third World potentates, and save $44 billion.

11.  Cut all the “energy” spending on “energy information,” “energy emergency preparedness,” etc. — all the energy spending that doesn’t actually produce any energy. And throw federal energy-conservation spending on the fire, too. Cutting the bureaucratic answer to Jimmy Carter’s sweater saves $12 billion.

12.  “Advancing commerce” doesn’t. We’re looking at you, SBA et al.: $23 billion.

13.  Federal law enforcement: Cut spending by 10 percent. Legalizing it saves us $3 billion.

14.  Space flight: We aren’t flying in space anymore. Staying grounded saves $17 billion.

15.  Downsize Smokey the Bear: Cutting land-management, recreation, natural resources, etc., by half saves $21 billion.

16.  Quit subsidizing suburban sprawl: Cutting transportation spending by 10 percent saves $10 billion.

17.  Save $36 billion by cutting health research and training. Let Pfizer do it.

18.  The real-estate market isn’t going to make a comeback. So eliminate federal housing assistance and save $60 billion.

19.  Cut food stamps by 10 percent, save $11 billion.

20.  I know, I promised no tax increases, so that’s a 19-point plan to balance the budget: Just over $1 trillion in savings. No. 20 is a bonus tax hike: Eliminate the stupid and destructive mortgage-interest deduction and have the national debt paid off by the time the kids being born this year graduate from college.

Don’t like my version? Get your 2012 estimates from OMB here and tell me how you’d balance the budget.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, published by Regnery. You can buy an autographed copy through National Review Online here.

Tags: Balanced Budget , Debt , Deficit , Fiscal Armageddon

Real Tax Cuts, Real Spending Cuts



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Republicans have rotten luck when it comes to timing. Think about the miracle of the “Clinton economy” — Slick Willy took credit for a recovery that was under way well before he was elected and then evaded blame for a recession that began in the final months of his presidency, while two different Republicans, both named Bush, caught absolute hell.

In another case of bad timing, it’s a little bit unfortunate that when the Republicans finally summoned the testicular fortitude to start making a ruckus about spending, they ended up with an extension of unemployment benefits as the nearest issue at hand. For spending hawks, unemployment benefits probably aren’t the highest-value hill to die on. In fact, unemployment benefits are one of the better social safety-net programs we have in the United States. They’re not terribly expensive, in real terms; they reward work; and they have the happy effect of encouraging a dynamic labor market and supporting risk-takers who seek better lives in new jobs. Think about how much harder it would be for a scrappy, underfunded startup to attract good talent from well-established competitors if those workers didn’t know they had unemployment benefits as an emergency backup. Granted, our unemployment-benefit system is not especially well-run and could stand to be improved in a dozen ways — but, compared to Medicaid, student loans, farm subsidies, or a thousand other federal welfare programs, unemployment benefits are a pretty solid deal. (Though not as solid as they’d be if they were a privately run tax-free hybrid insurance/annuity that you begin paying into from your first job and can roll over into your retirement if you don’t tap into it before then. Feel free to pick that idea up and run with it, John Boehner. There’s more where that came from.)

Predictably, the Democrats are howling that the Republicans hate unemployed people and don’t really care about the deficit, that’s it’s all just a political charade. Of course it’s a political charade — but just a political charade? The Democrats’ go-to spokesman, Anonymous Aide, is challenging the GOP to show the same puritanical budgetary resolve when it comes to re-upping the Bush tax cuts, telling The Hill: “I will be curious to see if their newfound fiscal religion that everything must be paid for is something they stick to as long as debt and deficits are a problem. Or is [this] just an election-eve conversion [that] will be dropped as soon as convenient?” (Shame on The Hill, incidentally: Nothing in this cheap, substance-free quotation rises to the level of justifying anonymity. Seriously: Democratic aide talks smack about Republicans and he’s an anonymous source? Rent some self-respect.)

Embedded in Anonymous Aide’s line of attack is a familiar assumption, an article of faith, really, for Democrats: Tax Cuts = Spending. If what we really care about is the bottom line, the argument goes, then isn’t cutting revenue functionally the same thing as increasing spending? It is tempting to dismiss this as a high-school debaters’ trick, a flimsy and facile bit of see-through rhetoric. But never underestimate the Left’s ability to misunderstand (or simply ignore) conservative thinking. Of course conservatives care about something other than the bottom line: Conservatives want both fiscal responsibility and a state that is limited in size and scope, so as to preserve the private sphere of life and citizens’ individual liberties.

Liberals kinda-sorta want the same thing, but you’ll rarely get them to admit it. One of the head-clutchingest things ever written about American politics is this gem, from Jonathan Chait of The New Republic: “If you have no particular a priori preference about the size of government and care only about tangible outcomes, then liberalism’s aversion to dogma makes it superior as a practical governing philosophy.” Now, wipe that incredulous smirk off your face — liberalism’s aversion to dogma, indeed — and consider what it would mean to have “no a priori preference about the size of government.” Surely even the open-minded, dogma-shunning liberals over at The New Republic have an a priori preference that the size of government not equal 100 percent of GDP, or 500 percent of GDP. I’m pretty sure the non-ideologues in the sovereign-debt markets have a robust a priori preference that U.S. government spending not exceed GDP. Arguments over the size and reach of government are partly moral and ideological, but they are not exclusively moral and ideological. Reality intervenes. And reality is the friend of conservatism.

If congressional Republicans are going to argue for a balanced budget (or a less-unbalanced budget) and tax cuts, they are going to have to make — once again, whipping it up from scratch — the case for a limited central government. Americans are fairly receptive to that argument at the moment, but not as eager as some of my fellow conservatives would like to believe: Cut Social Security checks by 20 percent and that limited-government tea-party mob will be the one that comes around to tar and feather your sorry congressional hide. But the case can be made.

And while making the case, Republicans in Congress are going to have to make something else: a big list of things they are actually willing to cut. Otherwise, they will be refusing to recognize the reality in which they should be grounded, and they’ll be confirming Anonymous Aide’s cynical worldview. Instead, Republicans would do well to beat the Democrats at their own game: Offer Nancy Pelosi the extension of unemployment benefits — so long as she produces dollar-for-dollar cuts elsewhere in the budget. And then fight to extend the Bush tax cuts — with dollar-for-dollar spending cuts to match. Steny Hoyer’s out there saying that Democrats are going to be left with no choice but to raise taxes on the middle class, Obama’s campaign promise be damned. No choice? Republicans should give him some options.

– Kevin D. Williamson is deputy managing editor of National Review.

Tags: Balanced Budget , Taxes

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