A just-released report from the bean counters at the Congressional Budget Office is getting lots of attention because the bureaucrats are now admitting that Obamacare will impose much more damage to the economy than they previously predicted.
Of course, many people knew from the start that Obamacare would be a disaster and that it would make the healthcare system even more dysfunctional, so CBO is way behind the curve.
Moreover, CBO’s deeply flawed estimates back in 2009 and 2010 helped grease the skids for passage of the President’s failed law, so I hardly think they deserve any applause for now producing more realistic numbers.
But today’s post isn’t about the Obamacare fiasco. I want to focus instead on some other numbers in the new CBO report.
The bureaucrats have put together their new 10-year “baseline” forecast of how much money the government will collect based on current tax laws and the latest economic predictions.
These numbers show that tax revenue is projected to increase by an average of 5.4 percent per year.
As many readers already know, I don’t fixate on balancing the budget. I care much more about reducing the burden of government spending and restoring the kind of limited government our Founding Fathers envisioned.
But whenever the CBO publishes new numbers, I can’t resist showing how simple it is to get rid of red ink by following my Golden Rule of fiscal restraint.
Here’s a chart showing projected revenue over the next 10 years, along with lines showing what happens if spending (currently $3.54 trillion) follows various growth paths.
The two biggest takeaways are that a spending freeze (similar to what we got in 2012 and 2013) would almost balance the budget in 2016 and would definitely produce a budget surplus in 2017.
I also highlight what would happen if politicians merely limited spending so it grew at the rate of inflation, about 2.3 percent per year. Under that scenario, the budget would be balanced in 2019 (actually a $20 billion surplus, but that’s an asterisk by Washington standards).
In other words, there is no need to raise taxes. It’s very simple to balance the budget without extracting more money from taxpayers.
This means the Simpson-Bowles people are wrong. The Domenici-Rivlin folks are wrong. Senator Patty Murray is wrong. Jeb Bush and Lindsey Graham are wrong. And (here’s a surprise) the Obama Administration is wrong.
And we have some additional evidence. It’s a chart taken directly from the CBO report and it shows that revenues over the next 10 years will be above the long-run average. This is because even weak growth slowly but surely produces more revenue for Washington, in part because it gradually pushes people into higher tax brackets.
And this chart just looks at the next 10 yeas. If you peruse the long-run fiscal projections, you’ll see that the tax burden is projected to increase dramatically over the next several decades.
The moral of the story is that there should be tax cuts (ideally as part of tax reform), not tax increases.
P.S. Just in case you think I was being unfair in my description of the Congressional Budget Office, keep in mind that these are the bureaucrats who advise Congress that economic performance increases when taxes go up.
P.P.S. And even though CBO is finally admitting some of the flaws in Obamacare, the bureaucrats are still unrepentant Keynesians. Check out this excerpt from a story in yesterday’s Washington Post.
Rep. Chris Van Hollen (Md.), the top Democrat on the committee, cited the CBO’s finding that the law will “boost overall demand for goods and services over the next few years,” This is because people benefiting from its expansion of Medicaid and insurance subsidies will likely have extra money to spend, which “will in turn boost demand for labor over the next few years,” the report says.
So CBO would like us to believe that the more money the government redistributes, the more growth we’ll get. I guess this explains why France is such an economic dynamo.
More seriously, this is the same flawed analysis that allowed CBO to claim the so-called stimulus was creating jobs as employment was falling.
You can understand why I’ve written that Keynesian economics is the left’s perpetual motion machine.
P.P.P.S. Here’s a Center for Freedom and Prosperity video that I narrated back in 2010, which explains why it is simple to balance the budget. The numbers in the video obviously need to be replaced with the ones I shared above, but the analysis is still right on the mark.
P.P.P.P.S. And if you want to know how to achieve the modest spending restraint needed to balance the budget, the Swiss “debt brake” would be a good place to start.
It’s really a spending cap, and it’s worth noting that the Swiss budget has increased by only 2 percent per year since voters imposed the law back in 2001.
Or maybe we could somehow hope that politicians would simply be responsible, like lawmakers in Canada and New Zealand in the 1990s. Or we could reincarnate Reagan. Or even bring back Clinton.
P.P.P.P.P.S. Since we started this post by talking about how Obamacare is undermining the economy, let’s close with a great example of Obamacare humor.
Remember Pajama Boy? Well, he’s back for an encore performance thanks to some very clever people at Americans for Prosperity.
There’s no update, by the way, on whether being without a job impacts his chances of getting a date with Julia. They’d make such a good couple.
This is amusing, but it surely isn’t as funny as President Obama’s Chief Economist, who actually argued with a straight face that it was a good sign that Obamacare was leading people to drop out of the labor force because unemployment “might be a better choice and a better option than what they had before.”
Sort of reminds me of this Chuck Asay cartoon, or this famous set of wagon cartoons.
Dependency for more and more people. Such an inviting concept…until this happens.
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alas…… poor pajama-boy… replaced by a singing cat…
yet another blow to the credibility of America’s tragically-hip community…
Taxpayers are stimulating their demand with their own money. Who would have thought that prosperity was that easy? Americans discovered that? Amazing!
You don’t think that the Honda Accord in the dealer’s show room is worth your scarce $25K? But heck if a voter-lemming pitchfork democracy government comes and takes the $25k in taxes from you, and then gives you a beat up ‘90’s Chevy in return, for free, of course, then you’re going to take it (and you’d be a sucker indeed if you don’t since you already paid for it anyway, willing or not).
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As a joke, someone with those Nissan Leaf all electric cars should make a “Keynesian Car” and tour it around the country: You mount a small wind turbine on top of the roof of your Nissan Leaf and feed the wind draft generated electricity back to the powertrain motor. A virtuous cycle forms: The faster the car goes, the more wind there is, the more electricity is fed back to the powertrain motor, the more the motor pushes, the faster the car goes, the more the wind… and so on. Keynesian electric energy from nothing!
P.S The tragic joke is that many voter-lemmings will exclaim: Yeah, how come nobody thought of that? Some coverup/conspiracy designed to keep people hooked on Big Energy perhaps?
Or imagine a store owner: His staff gets paid too much (a pitchfork democracy government just increased the min wage), his taxes are too high, he has to sell at a high price, customers are scarce, and business is down. Voila! One morning he gets his Keynesian idea: He grabs a couple hundred dollar bills from the counter, goes out to the homeless and skateboarders loitering outside his store and proposes: “I’ll give you this money, so long as you spend it in my store!”. The loiterers enthusiastically rush into the store. Prices are high, but what the heck! its gift money anyway. Enthused the shopkeeper starts handing out more “Keynesian stimulus” money from his register. Any passerby who agrees to spend the money in the store is given cash. Business is booming and times are good! (watch out poor chap though, the Occupy protesters from the park two blocks down the street may turn on you if they find out).
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It is overly optimistic to think that the crisis will come only “when there is nothing more left to steal”.
The crisis and America’s demise will come simply:
When the American People start stealing a bit more than the next most competitive nations in the world.
Things are often non-linear. There are great inflection points. Points of no return.
That point may have already passed, and we are simply living the last few twilight years of momentum. But even if it has not quite passed yet, American voter-lemmings are on trajectory to cross that point. As the consequences of a less motivated HopNChange population slow growth, and as the relative worldwide standing of the American middle class goes down, frustrated voters will head to the polls in an attempt to arrest their decline through more redistribution. The vicious cycle closes.
ObamaCare alone has already prompted another 2% of available national labor energy to jump on the cart. The rest who continue working are stuck (or will soon be inevitably stuck) with the bill. But wait! The working must also maintain enough enthusiasm in their work to outcompete four billion rising souls worldwide. When does the tipping point come?
When the environment becomes less competitive than the next most competitive nations in the world, America will fold quickly. You don’t have to wait until there is not anything more to steal. The inflection point will come much much sooner. Used to being in the worldwide top 10%, the American middle class has a sobering long ride down…
Enjoy the few short years of the emerging Euro-style voter-lemming smorgasbord, until the folding point comes. But better procure an escape life boat before that point comes. It might be an uncontrollable mad rush by then….
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