The President has issued an ultimatum that more tax revenue must be part of budget negotiations. Indeed, he endlessly repeats his desire for a “balanced approach,” implying that as much as 50 percent of the deficit reduction in any agreement should come from higher revenues.
Because I am a thoughtful, middle-of-the-road, pragmatic guy, I’m willing to accept the President’s ultimatum. I do have one tiny request, however, and that is for any such deal to be based on honest math.
What I mean by this is that I don’t want politicians to approve a budget that results in more spending, but then claim that they “cut spending” because the budget didn’t grow even faster. I want a spending cut to mean less spending (gee, what a novel idea).
And when they talk about new revenue, I want to see how much revenue the IRS is collecting this year, and measure revenue increases against that number. After all, the crowd in Washington should be happy to get more money, even if it is the result of benign factors such as more jobs being created, companies earning higher profits, and people getting more pay.
I assume these are reasonable requests. After all, this is how businesses and households operate their budgets, and I’m sure the political insiders wouldn’t want to use dishonest numbers to mislead voters (perish the thought!).
So what would a balanced approach look like, assuming we want to use honest math? The answer isn’t that complicated. I started with the latest estimates from the Congressional Budget Office for spending and revenues for this fiscal year (FY2011). I then assume, in the interest of a “balanced approach,” that spending should be cut by 5 percent each year and that revenues should climb by 5 percent each year.
The results, as illustrated by the graph, are remarkable. If we use a 50-50 deal of higher revenue and lower spending, we balance the budget in just five years. The President is right!
Taxpayers will be happy to know the “balanced approach” gets rid of red ink and also leaves enough room to make the 2001 and 2003 tax cuts permanent. Heck, there would be enough left-over revenue to enact additional tax cuts. After all, since we’re looking for balance, there’s no need to let revenues grow by 7 percent or 8 percent each year.
So, Mr. President, do we have a deal? Should we use your “balanced approach” and eliminate today’s big deficit by cutting spending and raising revenue by equal amounts? You were serious about your request, right? Hello, is anybody there?
As you already realize, I don’t think the President actually means what he says about a “balanced approach.” Or, to be more specific, I think he’s happy to do a 50-50 deal, but only if “spending cuts” and “revenue increases” are defined in ways that enable the growth of government.
Inside the beltway, this is known as “baseline budgeting” or “current services budgeting.” But whatever it’s called, it is a dishonest way of presenting information to the American people, as explained in this video.
Never make a deal with someone that is dishonest. Why? Because when you give up something you give it up forever, and then he doesn’t keep his end of the deal.
Making a deal with someone who is dishonest means you lose.
The right answer now is to not raise the debt ceiling, and force the Treasury Secretary to pay bonds as they come due. When he runs out of money, the government will have to be cut. That is a good thing. If he defaults, then interest rates will rise, and the government will be even less able to continue funding.
It is truely more important to cut the government somewhere than where it is cut.
Of course O’bama will cut the constitutional government first: Defense, border patrol. He will even try to even expand unconstitutional functions: TSA, Dept of Education, Dept of Agriculture, Dept of Energy, various welfare agencies.
In so doing, absent congressional budget, he opens himself for impeachment.
Also keep in mind that one approach to increase tax revenues is to cut tax rates. Our business tax rates are the highest in the world, and should be cut. Cutting taxes enables growth, and a rising tide lifts all boats.
By not increasing the debt limit, the Republican House can guarantee a cut in federal spending by 2.3 trillion in the first year, a result that is devoutly to be wished.
I wonder if cutting the budget by 25% within 5 years is a real possibility. I like the concept myself, but it seems overly optimistic.
I’d like “compromise” to be understood as my demanding the federal government cut its scope, its power, and its expenditures by 40%, and then later on I settle for just 10%. Gimme seven years of that sort of compromise, and we might just have something we can live with.
This administration (and quite frankly most of the “professional” politicians) remind me of what used to be said of the Soviets: What’s theirs [the bureaucracy] is theirs, and what’s ours [the taxpayers] is negotiable.
Actually, I’m pretty sure they think what’s ours is theirs too.
Dan, I think you’re being too generous here. Any increase in revenue enables a bigger government. That said, I think Doug has a point… 25% cut in spending over 5 years – as the leading edge of the boomers qualify for Social Security and Medicare – is probably unrealistic. My thought was it took us 10 years to get from cash-flow balanced to where we are. Allow 10 years to get back there. Allow growth in revenue only to the extent that it reflects GDP growth and inflation. Let the politicians re-arrange the tax code, but in an essentially revenue-neutral way. Of course, that’s probably just as unrealistic. But that’s the commitment I’d want before I’d vote for an increase in the debt limit. 10 years. Balanced budget. Gradual decrease in spending. No revenue increases. Annual votes on the debt limit increase, going down by at least 10% of the 2011 deficit each year.
My ‘compromise’ is allowing the deficit to be reduced gradually, over 10 years, rather than all at once, right now. You need a debt limit increase? As a compromise, I’ll let you bump up the limit if – and only if – you demonstrate you can cut spending to match revenue within 10 years. If you don’t like the compromise, we can do it all right now (or whenever the Chinese stop lending to us, whichever comes first.)
nice article and some great points, but the government is way too large and has it’s grubby paws in too many aspects of our lives. the size of government needs to be cut to 1/3 of what it is now. this country has nearly been lost to the progressive ideology. the ideology of obamunism.
it has come to the point where i believe nothing ANY politician says and question the true motive for ANYTHING they do. this country needs to be reset… desperately.
cut everything from the national budget except defense and the civil/criminal court system. leave all else to the states and private enterprise.
How about we cut all spending except SocSec, Medicare and Medicaid back to the FFY2007 level and then only allow growth with CPI, then get rid of the rest of the Education Dept and all the “green” subsidies, and then attack entitlement reform with in teh current payroll taxes. Then, further moves toward a balanced budget would be 75% savings to 25% revenue, with tax and other reforms to stimulate growth so most of the new revenues are self-financing.
I don’t recall thousands of people starving for lack of govt programs in 2007, and the Iraq war was at its peak, so I’m pretty sure that wouldn’t ruin the country or DoD. And it would save close to $1T right off the bat.
It really isn’t hard if you’re willing to be an adult about it.
Oh, wait— hardly any adults in Washington… of course, we elect them so they try to pander to our worst inclinations… hmmmm.
The elephant in the room of course, is the military. Chalmers Johnson, author of “Blowback” and “Dismantling the Empire” brings the question: do we really need to over 800 overseas military bases; do we need to continue occupation of Okinawa, Germany, and so forth? He also makes the case that the multiple layers of redundant and overlapping secret intelligence agencies are fantastic boondoggles. And despite the rhetoric of finding Bin Laden after 10 years (smirk) he charges that they are incompetent to a great extent.
And military authorities beyond my expertise have said the Iraq and Afghan wars have been entirely paid for off-the-books with borrowed money. Perhaps we should start with honesty there? The Executive branch power grab under Bush was unprecedented, and it is good to see the Congress getting some backbone over Libya. With all the hyperbole about getting tough, It will be interesting to see if the Tea Bag crowd con go after a tougher constituency than just immigrants and the underclass.
How about we adopt Obama’s “trigger” idea, except apply it to spending, not tax rates?
In other words, if revenue does not reach projections, there’s a cross the board cut (except actual interest and principle repayments on the debt, per the 14th amendment) that totals the shortfall.
Of course, Congress can protect selected programs (and thus increase the cuts for remaining spending) with a majority vote (given a presidential signature) or 2/3 (given a presidential veto).
[...] what they seem in Babylon on the Potomac. As I’ve repeatedly noted, a spending cut means something different for politicians than it does for those of us in the real world. The political elite claim they are cutting spending anytime they don’t increase spending as [...]
The Federal corporation hasn’t used “honest math” in at least 150 years. In fact, the math has become more fuzzy in the last decade. They’re in to deep to the loan sharks at the Federal Reserve to back out, now. They’re just the wrong people to play “Monopoly” with.
[...] never what they seem in Babylon on the Potomac. As I’ve repeatedly noted, a spending cut means something different for politicians than it does for those of us in the real world. The political elite claim they are cutting spending anytime they don’t increase spending as fast [...]
[...] is sort of like claiming your diet is successful because you’re gaining 2 pounds each week instead of 5 pounds. I explain this scam in an interview with Judge [...]
[...] I want to know why America’s fiscal situation is so out of whack. I’m willing to take a dispassionate look at the numbers. And if those figures show that the President is right, and that “unaffordable tax cuts” have caused higher deficits, then I’m willing to support higher revenues (after all, I am a pragmatic, middle-of-the-road guy). [...]
[...] I want to know why America’s fiscal situation is so out of whack. I’m willing to take a dispassionate look at the numbers. And if those figures show that the President is right, and that “unaffordable tax cuts” have caused higher deficits, then I’m willing to support higher revenues (after all, I am a pragmatic, middle-of-the-road guy). [...]
[...] I want to know why America’s fiscal situation is so out of whack. I’m willing to take a dispassionate look at the numbers. And if those figures show that the President is right, and that “unaffordable tax cuts” have caused higher deficits, then I’m willing to support higher revenues (after all, I am a pragmatic, middle-of-the-road guy). [...]
[...] I want to know why America’s fiscal situation is so out of whack. I’m willing to take a dispassionate look at the numbers. And if those figures show that the President is right, and that “unaffordable tax cuts” have caused higher deficits, then I’m willing to support higher revenues (after all, I am a pragmatic, middle-of-the-road guy). [...]
[...] But as I’ve explained before, this demagoguery is based on the dishonest Washington practice of assuming that spending should increase every year, and then claiming that a budget cut takes place anytime spending does not rise as fast as previously planned. [...]
[...] But as I’ve explained before, this demagoguery is based on the dishonest Washington practice of assuming that spending should increase every year, and then claiming that a budget cut takes place anytime spending does not rise as fast as previously planned. [...]