Now that new numbers have been released by the Congressional Budget Office, it’s time once again for me to show how easy it is to balance the budget with modest spending restraint (though please remember our goal should be smaller government, not fiscal balance).
- I first did this back in September 2010, and showed that we could balance the budget in 10 years if federal spending was limited so it grew by 2 percent annually.
- I repeated the exercise in January 2011 after new CBO numbers were released, and re-confirmed that a spending cap of 2 percent would eliminate red ink in just 10 years.
- In August of that year, following the release of the CBO Update, I showed again that the budget could be balanced by limiting spending so it climbed by 2 percent per year.
- Most recently, back in January after CBO produced the new Economic and Budget Outlook, I crunched the numbers again and showed how a spending cap of 2 percent would balance the budget.
I’m happy to say that the new numbers finally give me some different results. We can now balance the budget if spending grows 2.5 percent annually.
In other words, spending can grow faster than inflation and the budget can be balanced with no tax hikes.
And here’s the video I narrated almost two years ago on this topic. The numbers have changed a bit, but the analysis is exactly the same.
In other words, ignore the politicians, bureaucrats, lobbyists, and special interests when they say we have to raises taxes because otherwise the budget would have to be cut by trillions of dollars. They’re either stupid or lying (mostly the latter, deliberately using the dishonest version of Washington budget math).
Modest fiscal restraint is all that we need, though it would be preferable to make genuine cuts in the burden of government spending.
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[…] But doing a better job than the remedial students is damning with faint praise. Just in case you’re tempted to grade them on a curve, just remember that balancing the budget without tax increases doesn’t require any heavy lifting. All policymakers have to do is limit the growth of spending so it grows by an average of 2.5 percent annually over the next decade. […]
[…] What I said about eliminating the deficit within 10 years is true—see [this analysis [7]]. I also don’t believe my position on governmental spending is radical at all. You are […]
[…] don’t need a tax increase. We can balance the budget simply by limiting spending so that it grows by “only” 2.5 percent annually. As I say to Cavuto, the White House is pushing higher taxes in order to enable a bigger burden of […]
[…] all that’s really needed to bring red ink under control is a modest bit of spending restraint. This video is from 2010, but the analysis is still completely relevant […]
[…] tax cuts can be made permanent and red ink can be wiped out in just 10 years so long as politicians simply control the growth of federal spending so that outlays don’t grow faster than 2.5 percent e…. Other nations have shown that this type of spending restraint is very successful, while no nation […]
[…] They tell us that tax increases are necessary, but even CBO data shows that the budget can be balanced in just 10 years if politicians merely limit federal spending so that it grows by “only” 2.5 percent per year. […]
[…] But doing a better job than the remedial students is damning with faint praise. Just in case you’re tempted to grade them on a curve, just remember that balancing the budget without tax increases doesn’t require any heavy lifting. All policymakers have to do is limit the growth of spending so it grows by an average of 2.5 percent annually over the next decade. […]
[…] It’s Simple to Balance the Budget with Modest Spending Restraint […]
[…] only is he a successful, job-creating entrepreneur, but he also cited my work (specifically, this budget analysis) when interviewed by the statists at Mother […]
[…] more revenue, the CBO numbers from last August showed that the budget could be balanced if spending was restrained so that it grew by 2.5 percent per year for a 10-year […]
[…] restraining the budget so that it grows 2.5 percent annually, for instance, is all that would be needed to balance the budget in 10 years. Not big budget cuts. Not small budget cuts. Just a bit of measly fiscal […]
[…] restraining the budget so that it grows 2.5 percent annually, for instance, is all that would be needed to balance the budget in 10 years. Not big budget cuts. Not small budget cuts. Just a bit of measly fiscal […]
[…] I said about eliminating the deficit within 10 years is true—see [this analysis]. I also don’t believe my position on governmental spending is radical at all. You are […]
[…] What I said about eliminating the deficit within 10 years is true—see [this analysis]. I also don’t believe my position on governmental spending is radical at all. You are […]
[…] I said about eliminating the deficit within 10 years is true—see [this analysis [7]]. I also don’t believe my position on governmental spending is radical at all. You are […]
[…] I make my typical point about how we can balance the budget if we merely limit federal spending so that it grows 2.5 percent annually. In other words, Mitchell’s Golden Rule leads to good […]
[…] here to read about Dan Mitchell’s 2.5% idea. Dan is a super smart and easy to understand economist […]
[…] that I can say with complete confidence. We don’t need a tax increase to balance the budget. We can get rid of red ink in just 10 years simply restraining spending so that it grows by only 2.5 percent per […]
[…] that I can say with complete confidence. We don’t need a tax increase to balance the budget. We can get rid of red ink in just 10 years simply restraining spending so that it grows by only 2.5 percent per […]
[…] I’ve crunched the numbers to show that we could balance the budget in just 10 years if we just limited spending so that it grew by “only” 2.5 percent annually. […]
[…] don’t need a tax increase. We can balance the budget simply by limiting spending so that it grows by “only” 2.5 percent annually. As I say to Cavuto, the White House is pushing higher taxes in order to enable a bigger burden of […]
[…] it doesn’t actually take much to move policy back in the right direction. A modest bit of fiscal restraint can solve the short-run challenge and some well-crafted entitlement reform can avert the long-run […]
[…] tax cuts can be made permanent and red ink can be wiped out in just 10 years so long as politicians simply control the growth of federal spending so that outlays don’t grow faster than 2.5 percent e…. Other nations have shown that this type of spending restraint is very successful, while no nation […]
[…] all that’s really needed to bring red ink under control is a modest bit of spending restraint. This video is from 2010, but the analysis is still completely relevant […]
[…] don’t need a tax increase. We can balance the budget simply by limiting spending so that it grows by “only” 2.5 percent annually. As I say to Cavuto, the White House is pushing higher taxes in order to enable a bigger burden of […]
[…] don’t need a tax increase. We can balance the budget simply by limiting spending so that it grows by “only” 2.5 percent annually. As I say to Cavuto, the White House is pushing higher taxes in order to enable a bigger burden of […]
[…] cuts can be made permanent and red ink can be wiped out in just 10 years so long as politicians simply control the growth of federal spending so that outlays don’t grow faster than 2.5 percent e…. Other nations have shown that this type of spending restraint is very successful, while no nation […]
[…] cuts can be made permanent and red ink can be wiped out in just 10 years so long as politicians simply control the growth of federal spending so that outlays don’t grow faster than 2.5 percent e…. Other nations have shown that this type of spending restraint is very successful, while no nation […]
[…] tax cuts can be made permanent and red ink can be wiped out in just 10 years so long as politicians simply control the growth of federal spending so that outlays don’t grow faster than 2.5 perce…. Other nations have shown that this type of spending restraint is very successful, while no nation […]
[…] tax cuts can be made permanent and red ink can be wiped out in just 10 years so long as politicians simply control the growth of federal spending so that outlays don’t grow faster than 2.5 perce…. Other nations have shown that this type of spending restraint is very successful, while no nation […]
[…] all that’s really needed to bring red ink under control is a modest bit of spending restraint. This video is from 2010, but the analysis is still completely relevant […]
[…] that simply requires somemodest spending restraint to address the short run problem and someintelligently designed entitlement reform to solve the […]
[…] that simply requires some modest spending restraint to address the short run problem and some intelligently designed entitlement reform to solve the […]
[…] actually needed to balance the budget is modest spending restraint, restraining outlays so they grow by an average of 2.5 percent. In other words, good things happen if policy makers comply with Mitchell’s Golden […]
[…] It’s simple to balance the budget with modest spending restraint – According to Congressional Budget Office data, we can make the Bush tax cuts permanent and balance the budget in just 10 years if lawmakers simply exercise some modest fiscal restraint and limit spending so it grows by an average of 2.5 percent ye…. […]
[…] It’s simple to balance the budget with modest spending restraint – According to Congressional Budget Office data, we can make the Bush tax cuts permanent and balance the budget in just 10 years if lawmakers simply exercise some modest fiscal restraint and limit spending so it grows by an average of 2.5 percent ye…. […]
[…] The source of that revenue should be pro-growth tax reform which, as Cato Institute economist Dan Mitchell has shown repeatedly, can be a panacea to our fiscal ills if combined with restraining the growth […]
Dan,
Your thinking was uplifting – I hadn’t imagined how easy balancing the budget might be until I saw your article and graph. Then I noticed the rate of govt revenue increase and it looks like you’re assuming tax receipts (and GDP?) will grow at roughly the rate of 6.5% annually for the next ten years. Am I thinking about this right? Please help.
Andy
[…] They tell us that tax increases are necessary, but even CBO data shows that the budget can be balanced in just 10 years if politicians merely limit federal spending so that it grows by “only” 2.5 percent per year. […]
[…] They tell us that tax increases are necessary, but even CBO data shows that the budget can be balanced in just 10 years if politicians merely limit federal spending so that it grows by “only” 2.5 percent per year. […]
[…] We don’t need higher taxes since we can balance the budget merely by restraining government spending so that it grows by an average of 2.5 percent per year. […]
[…] We don’t need higher taxes since we can balance the budget merely by restraining government spending so that it grows by an average of 2.5 percent per year. […]
[…] As you can see from this post, if we simply freeze spending (i.e., keep the current level of spending), the budget is balanced in […]
[…] about the long-run outlook in the United States. Yes, we can fix our fiscal problems if we cap the growth of spending and implement entitlement reform to address the long-run problem, but I’m not holding my breath […]
if medicare and medicaid are growing at 7% a year, and social security and interest on the debt expected to increase rapidly over next 10 years as baby boomers retire and interest rates rise, how do we keep to the 2.5% limit? It would mean everything else, including defence would have to be cut drastically.
Please dont get me wrong – I agree that we are spending way too much, so how do we keep to the 2.5% increase unless these entitlements are also kept at 2.5% a year…
for example: if medicare and medicaid increase by 7% a year, we would go from about $800bn in 2013 to about $1600bn in 10 years. If social security and interst on the debt increase by say 4% a year, we will go from about $1050bn in 2013 to about $1550bn in 10 years. That means if we take the budget today of about $3700bn and grow it by 2.5% a year, we would spend in total about $4700bn in 10 years. But now the entitements and interest are consuming $3150bn of that, leaving about 33% of the budget for everything else, whereas everything else now is about 50% of the budget. While there is a lot of fat in the rest of the budget that can be cut, would it be possible to reduce this from 50% to 33%?
[…] about the long-run outlook in the United States. Yes, we can fix our fiscal problems if we cap the growth of spending and implement entitlement reform to address the long-run problem, but I’m not holding my […]
[…] But doing a better job than the remedial students is damning with faint praise. Just in case you’re tempted to grade them on a curve, just remember that balancing the budget with tax increases doesn’t require any heavy lifting. All policymakers have to do is limit the growth of spending so it grows by an average of 2.5 percent annually over the next decade. […]
[…] *Here’s Mitchell’s analysis… […]
[…] It’s Simple to Balance the Budget with Modest Spending Restraint […]
Spending is definately the problem!!!
I’ve proposed another budget-fixing use of 2%:
http://hallofrecord.blogspot.com/2012/04/cut-2-annually-from-federal-spending.html
This could be done through better management and elimination of waste and fraud.
Don’t pedal backwards. Balancing in 10 years isn’t good enough in my opinion…we need to pay off our debts before they choke us.
The problem is that people think government should grow….even at a modest amount (“…if federal spending was limited so it grew by 2 percent annually.)
Stop the spending increases. The democrats think life under Clinton was so good, well go back to those spending levels and stay there. Stop spending!
Dan: I love your posts but on this subject, I don’t think that you get Obama’s goal. Based on his performance since he was inaugurated, he’s main objective is to push the country into near bankruptcy.
This way he can claim that higher taxes and regulations are necessary to “save the nation”.
So far, he’s wasted over $5 trillion with nothing to show for it. Energy independence, an empty promise. Increased employment became payoffs to his donors with so-called green jobs. Obamacare: a government grab for 20% of the U.S. economy.
In other countries, he might have been overthrown and executed. In this country, he has a chance to continue his economic reign of terror.