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Archive for the ‘Balanced Budget’ Category

Just like the swallows return each year to Capistrano, I eagerly await the Congressional Budget Office’s release of its annual Economic and Budget Outlook.

But not just because I’m a fiscal wonk. I also like perusing this publication to find CBO’s “baseline” forecast for government revenue over the next 10 years.

And once I have that data, it’s then a simple matter to figure out the degree of spending restraint that will reduce red ink and balance the budget.*

Let’s conduct that exercise.

We’ll start by going to page 2 of the report, which reveals that federal tax revenue (assuming there are no changes in law) will grow from $3,189 billion this year to $5,029 billion in 2025. Over that ten-year period, revenues will grow each year by an average of 4.67 percent.

So, at the risk of stating the obvious, this means that red ink will increase if yearly spending increases by more than 4.67 percent, but it also means that the deficit will fall if the burden of federal spending grows by less than 4.67 percent each year.

Indeed, we can easily calculate how easy it is to achieve fiscal balance. Simply take CBO’s estimate of federal spending for the 2015 fiscal year, $3,656, and then look at what happens based on various assumptions for future spending growth.

A spending freeze means the budget balances in 2018.

If federal spending increases by 1 percent each year, we balance the budget in 2019.

If federal spending climbs by 2 percent each year, we balance the budget in 2020.

And if federal spending jumps by 3 percent each year, we balance the budget in 2024.

Here’s a chart showing these options.

Balanced budget CBO Jan 2015

Now let’s explore three implications of this data.

First, there is no need to cut spending. It would be good to impose genuine spending cuts, to be sure, but progress is possible so long as spending grows slower than revenue. And the real goal should be to make sure that spending grows slower than the private sector.

Second, there is no need to raise taxes. A lot of beltway types would like voters to believe that our fiscal problems are so huge that tax increases are both necessary and desirable. That’s obviously wrong. Indeed, tax hikes almost surely enable more spending rather than deficit reduction.

Third, when Washington insiders assert that tax increases are needed to preclude “savage” and “draconian” spending cuts, they’re using the dishonest DC definition of a “cut,” which is when spending doesn’t rise as fast as previously forecast.

 At this point, you may be wondering, “Gee, if it’s so simple, why don’t we already have a balanced budget?”

The main problem is that politicians generally don’t like spending restraint. Between 2000 and 2009, for instance, they let spending grow nearly four times faster than revenue.

That being said, we’ve actually made progress over the past five years thanks to a nominal spending freeze.** And as outlined above, we can make more progress in the near future with a few more years of modest spending restraint.

The real key is whether we can maintain fiscal discipline. In the long run, there’s very little hope of spending restraint unless there’s genuine entitlement reform.

And getting that type of reform probably won’t be possible if politicians think they can just raise taxes instead. Particularly a value-added tax, which the European evidence shows is a money machine for bigger government.

Probably the best way of getting good policy would be some sort of long-run spending control process, akin to the Swiss Debt Brake. If politicians know they can only increase spending by, say, two percent each year, that will encourage them to finally prioritize the budget and make some long-overdue reforms.

*As I have written, over and over again, restraining the size and scope of the federal government should be the main goal of fiscal policy. Deficits and debt are undesirable, of course, but they’re best viewed as symptoms of the real problem, which is too much spending.

** The good news is that spending grew very slowly beginning in 2010. The bad news is that spending rose so fast last decade (particularly in 2009) that the burden of federal spending is still much larger than it was when Bill Clinton left office.

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Like a lot of libertarians and small-government conservatives, I’m prone to pessimism. How can you be cheerful, after all, when you look at what’s been happening in our lifetimes.

New entitlement programs, adopted by politicians from all parties, are further adding to the long-run spending crisis.

The federal budget has become much bigger, luring millions of additional people into government dependency.

The tax code has become even more corrupt and complex, with more than 4,600 changes just between 2001 and 2012 according to a withering report from outgoing Senator Tom Coburn of Oklahoma.

And let’s not forget the essential insight of “public choice” economics, which tells us that politicians care first and foremost about their own interests rather than the national interest. So what’s their incentive to address these problems, particularly if there’s some way to sweep them under the rug and let future generations bear the burden?

And if you think I’m being unduly negative about political incentives and fiscal responsibility, consider the new report from the European Commission, which found that politicians from EU member nations routinely enact budgets based on “rosy scenarios.” As the EU Observer reported:

EU governments are too optimistic about their economic prospects and their ability to control public spending, leading to them continually missing their budget targets, a European Commission paper has argued. …their growth projections are 0.6 percent higher than the final figure, while governments who promise to cut their deficit by 0.2 percent of GDP, typically tend to increase their gap between revenue and spending by the same amount.

Needless to say, American politicians do the same thing with their forecasts. If you don’t believe me, just look at the way the books were cooked to help impose Obamacare.

But set aside everything I just wrote because now I’m going to tell you that we’re making progress and that it’s actually not that difficult to constructively address America’s fiscal problems.

First, let’s look at how we’ve made progress. I just wrote a piece for The Hill. It’s entitled “Republicans are Winning the Fiscal Fight” and it includes lots of data on what’s been happening over the past five years, including the fact that there’s been no growth in the federal budget.

You should read the entire thing for full context, but here are a few brief excerpts on why the left can’t be feeling very happy right now.

…Democrats presumably can’t be happy that the lion’s share of the Bush tax cuts were made permanent. …revenues are now projected to average only 18 percent of GDP over the next 10 years…a smaller tax burden than we had throughout the Clinton years. And you can’t finance big government in the long run without a lot more revenue. And they definitely can’t be happy that domestic discretionary spending is now below where it was during the Bush years, when measured as a share of GDP. And with sequester-enforced budget caps, it’s quite likely that number will drop even further. …Perhaps even more important, looking forward, is that House Republicans for four consecutive years have approved budget resolutions that assume genuine reform of Medicare and Medicaid. And they’ve won their biggest majority since before World War II, so GOPers can feel reasonably confident that voters (perhaps sobered up by the fiscal disarray in Europe) understand the need to modernize these programs.

By the way, the point about keeping taxes under control is critical. Simply stated, it’s virtually impossible for government to get much bigger without a stream of new revenue (or, in the case of a value-added tax, a river of new revenue).

Let’s now focus on the second issue, which is how we can maintain this progress.

Here’s a chart I put together back in September that showed projected revenue over the next 10 years (blue line). I then showed what happens if spending is left on autopilot and also what happens if policy makers simply restrain spending so that it grows 2 percent annually (gold line), which is actually a bit higher than inflation.

As you can see, it’s very simple to achieve a budget surplus. And we don’t even need the same amount of spending restraint that we enjoyed over the past five years!

The challenge, of course, is that Obama and many other politicians (including quite a few Republicans) don’t want government on a diet. After all, why let government “only” grow 2 percent each year when you can please the lobbyists, bureaucrats, cronyists, contractors, and other insiders by letting spending increase two or three times faster than inflation?

Fiscal probity isn’t easy. Genuine spending restraint not only means saying no to special interests and campaign contributors, it also means picking smart fights. In some cases, Obama and the left may dig in their heels and threaten a partial government shutdown in hopes of getting bigger budgets.

Sometimes such fights are unwise, but there’s a very strong case to be made that the GOP ultimately prevailed in the 1995 and 2013 shutdown battles.

The bottom line, as illustrated by this amusing A.F. Branco cartoon, is that Republicans shouldn’t automatically act like the French army if there’s a fight over something that really matters – such as a growing burden of government spending.

And it also means not falling back into bad habits. Republicans were profligate big spenders during the Bush years and it’s not easy to stay on the wagon of spending restraint.

This Lisa Benson cartoon is a good illustration of what will happen if GOPers cater too much to special interests.

For more information showing how it is simple to make progress, here’s my video explaining how simple it is to balance the budget with modest spending restraint. It’s several years old, so just keep in mind the chart above as you watch.

Though I hasten to add that the real goal isn’t balancing the budget. I’m far more interested in restoring a limited, constitutionally restrained federal government.

If we do that, fiscal balance is an easy and obvious consequence. In other words, if you deal with the underlying disease of too much government, you automatically eliminate the symptom of red ink.

P.S. Since I mentioned government shutdowns, I should point out some very good cartoons and jokes on that topic. They can be viewed here, here, here, here, and here.

P.P.S. On another topic, I’m disturbed that Sony has cancelled a movie simply because the crazy dictator of North Korea apparently was able to get his henchmen to hack into the studio’s computers. Sure, companies have to focus on the bottom line and make dispassionate decisions, but it’s still troubling.

President Obama could earn major praise if he undertook some big public gesture, such as showing The Interview at the White House, perhaps for some of the folks (such as Shin Dong Hyuk) who escaped that brutal regime.

In the meantime, here’s a funny, yet also sad, image on what happened.

Remember, this isn’t just a dictatorship that has impoverished people with total statism. It is also a regime that starves its people to the point where its army had to lower physical standards because so many young people were stunted by malnutrition.

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What happens when you mix something good with something bad?

To be more specific, what happens when you have a big success story, like the spending cap in Switzerland that has dramatically slowed the growth of government, and then expect intelligent and coherent coverage by a government-run media outfit that presumably wants a bigger public sector?

Well, the answer is that you get a very muddled story.

Here’s some of what Swiss Info, which is part of the Swiss Broadcasting Corporation, wrote about that nation’s “debt brake.”

The mind-boggling…debt racked up by governments…has turned some heads towards Switzerland’s successful track record… Swiss voters approved a so-called ‘debt brake’ on federal public finances in 2001, which was put into operation in 2003. A decade later, the mountain of government debt – that soared to dangerous levels during the 1990s and early 2000s – has been reduced by CHF20 billion ($23 billion) from its 2005 peak. The ratio of debt to annual economic output (gross domestic product or GDP)…fell from 53% to 37% between 2005 and the end of 2012.

There’s nothing wrong with that passage. Indeed, you could almost say that Swiss Info was engaging in boosterism.

Moreover, the story points out that other nations have been going in the wrong direction while Switzerland was enjoying success.

…as Switzerland was chipping away at its mountain of debt, other countries were building theirs up. …Since the middle of 2007 public sector debt alone has soared 80% to $43 trillion, according to the Bank for International Settlements.

And the story even notes that other nations are beginning to copy Switzerland.

The Swiss debt brake is the perfect model for other countries to embrace… Germany applied its own version of the Swiss debt brake in 2009, followed by Spain and other European countries.  …“Switzerland came up with the blueprint for what I am sure will be the standard fiscal model of the future,” said Müller-Jentsch.

So why, then, do I think the story has a muddled message?

The answer is that there is no explanation of how the debt brake works and therefore no explanation of why it is a success.

A reader will have no idea, for instance, that the debt brake is actually a spending cap. Readers also will have no way of knowing that red ink has been controlled because the law properly focuses on limiting the growth of spending.

By the way, it wouldn’t have required much research for Swiss Info to include that relevant data. If you do a Google search for “Swiss debt brake,” the first item that appears is the column I wrote in 2012 for the Wall Street Journal.

In that piece, I explained that “Switzerland’s debt brake limits spending growth to average revenue increases over a multiyear period” and I added that “Before the law went into effect in 2003, government spending was expanding by an average of 4.3% per year. Since then it’s increased by only 2.6% annually.”

So why didn’t Swiss Info mention any of this very relevant information? Is it because it tilts to the left like other government-owned media outfits, and the journalists didn’t want to acknowledge that spending restraint is a successful fiscal policy?

I have no idea whether that’s the case, but there is a definite pattern. When I appear on PBS, the deck is usually stacked in favor of statism. Moreover, you won’t be surprised to learn that I’ve had similar experiences with government-run TV in France. And it goes without saying that the BBC in the United Kingdom also leans left (though at least they seem to believe in fair fights).

This video from Swiss Info is similarly vague. It’s a favorable portrayal, but people who watch the video won’t know how the debt brake works or why it has been successful.

P.S.  I don’t know the details about the German version of the debt brake, but it’s probably having some positive impact. The burden of government spending has not increased in that nation since 2009, at least when measured as a share of GDP. Though the Germans also weren’t as profligate as other nations (including the United States) in the years before they adopted a debt brake, so I’ll have to do more research to ascertain whether the German approach is as good as the Swiss approach.

P.P.S. In any event, the moral of the story is that good fiscal policy should be based on the Golden Rule of having government grow slower than the productive sector of the economy.

P.P.S. The Princess of the Levant and I continued our tour of the French Riviera. This photo is from Les Jardins Exotiques at Chateau d’Eze.

photo1(5)

As part of my travels, I’ve learned that the unluckiest people in the world are from Menton and Roquebrune in France. That’s because they were part of Monaco until 1860.

So now, instead of enjoying an income tax of zero under Monegasque rule, they are part of France’s wretched fiscal system.

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Congressman Paul Ryan, the Republican Chairman of the House Budget Committee, has unveiled the GOP’s latest budget plan.

Is this proposal deserving of applause or criticism? The answer is yes and yes, with a bit of emphasis on the former.

Let’s start with some depressing news. The Ryan budget has gotten weaker each year.

Three years ago, he put forth a budget that limited spending so that it grew 2.8 percent per year.

Two years ago, he put forth a budget that limited spending so that it grew 3.1 percent per year.

Last year, he put forth a budget that limited spending so that it grew 3.4 percent per year.

His latest budget continues this slide in the wrong direction. Here are the numbers from the new budget, showing that the burden of government spending will rise by an average of 3.5 percent annually over the next 10 years.

And this is during a time when inflation is projected to be about 2 percent per year!

Ryan FY2015 Budget

Since it would be foolish to ever expect perfection from the political process, let’s now look at the positive features of the Ryan budget.

1. Spending may be growing, but it would grow at a slower rate than the President’s proposed budget.

2. Spending may be growing, but it would grow at a slower rate than nominal economic output, thus satisfying Mitchell’s Golden Rule.

3. Perhaps most important, the budget contains genuine and structural reform of both Medicare and Medicaid, so it at least partially solves the long-run fiscal crisis.

4. The budget also foresees tax reform, including lower tax rates for households, a 25 percent corporate tax rate, and a move toward territorial taxation.

Now let’s close with some hard-to-judge news.

The tax reform would be “revenue neutral,” so it’s difficult to accurately assess the proposal without knowing the “revenue raisers” that would offset the “revenue losers” listed above (particularly since lawmakers would be bound by static scoring).

If lower tax rates are financed by getting rid of distortions such as the healthcare exclusion, the net effect is very positive.

But if lower tax rates are financed with increased double taxation (a major shortcoming of the Cong. Camp tax plan), then it’s unclear whether policy has improved.

One final comment. I’m disappointed that the House Budget Committee’s report approvingly cites Congressional Budget Office analysis to suggest that the Ryan budget would boost economic performance.

I think that’s a tactically and morally dubious approach. It’s tactically misguided because the Ryan budget supposedly hurts growth from 2015-2017 according to CBO’s short-term Keynesianism.

And it’s morally dubious because it’s wrong to use bad arguments to advance good policy. The supposed added growth beginning in 2018 is based on the assumption that interest rates are the significant determinant of economic growth – which is the same thinking displayed in the left-wing debt video I shared yesterday.

Paul Ryan and the House GOP can legitimately claim that the proposed budget is good for growth. But improved economic performance would be the result of a smaller burden of government spending and a potentially less destructive tax system. Those are the policies that free up labor and capital for the productive sector and boost incentives to utilize those resources efficiently.

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The President’s new budget has been unveiled.

There are lots of provisions that deserve detailed attention, but I always look first at the overall trends. Most specifically, I want to see what’s happening with the burden of government spending.

And you probably won’t be surprised to see that Obama isn’t imposing any fiscal restraint. He wants spending to increase more than twice as fast as needed to keep pace with inflation.

Obama 2015 Budget Growth

What makes these numbers so disappointing is that we learned last month that even a modest bit of spending discipline is all that’s needed to balance the budget.

By the way, you probably won’t be surprised to learn that the President also wants a $651 billion tax hike.

That’s in addition to the big fiscal cliff tax hike from early last and the (thankfully smaller) tax increase in the Ryan-Murray budget that was approved late last year.

P.S. Since we’re talking about government spending, I may as well add some more bad news.

I’ve shared some really outrageous examples of government waste, but here’s a new example that has me foaming at the mouth. Government bureaucrats are flying in luxury and sticking taxpayers with big costs. Here are some of the odious details from the Washington Examiner.

What can $4,367 buy? For one NASA employee, it bought a business-class flight from Frankfurt, Germany, to Vienna, Austria. Coach-class fare for the same flight was $39. The federal government spent millions of dollars on thousands of upgraded flights for employees in 2012 and 2013, paying many times more for business and first-class seats than the same flights would have cost in coach or the government-contracted rate. …Agencies report their premium travel expenses to the General Services Administration each year. These reports were obtained by the Washington Examiner through Freedom of Information Act requests. …The most common reasons across agencies for such “premium” flights in 2012 and 2013 were medical necessities and flights with more than 14 hours of travel time.

By the way, “medical necessities” is an easily exploited loophole. All too often, bureaucrats get notes from their doctors saying that they have bad backs (or something similarly dodgy) and that they require extra seating space.

Probably the same doctors who participate in the disability scam.

But I’m digressing. It’s sometimes hard to focus when there are so many examples of foolish government policy.

Let’s look at more examples of taxpayers getting reamed.

One such flight was a trip from Washington, D.C., to Brussels, Belgium, which cost $6,612 instead of $863. Similar mission-required upgrades included several flights to Kuwait for $6,911 instead of $1,471, a flight from D.C. to Tokyo for $7,234 instead of $1,081 and a trip from D.C. to Paris for $6,037 instead of $477. …NASA employees also racked up a long list of flights that cost 26, 72 and even 112 times the cost of coach fares, according to Examiner calculations. Several space agency employees flew from Oslo, Norway, to Tromso, Norway — a trip that should have cost $65. Instead, each flew business class for $4,668. Another NASA employee flew from Frankfurt, Germany, to Cologne, Germany, for $6,851 instead of $133, a flight that cost almost 52 times more than the coach fare. …One flight from D.C. to Hanoi, Vietnam, for an informational meeting cost $15,529 instead of $1,649, according to the agency’s 2012 report.

Frankfurt to Cologne for $6851?!? Did the trip include caviar and a masseuse? A domestic flight in Norway for $4668? Was the plane made of gold?

I do enough international travel to know that these prices are absurd, even if you somehow think bureaucrats should get business class travel (and they shouldn’t).

And as you might suspect, much of the travel was for wasteful boondoggles.

Department of the Interior employees, for example, flew to such exotic locations as Costa Rica, Denmark, Japan and South Africa in 2012. …The Department of Labor sent employees to places like Vietnam and the Philippines for “informational meetings,” conferences and site visits.

The one sliver of good news is that taxpayers didn’t get ripped off to the same extent last year as they did the previous year.

The agencies spent $5.7 million in 2012, almost double the $3 million they paid for premium travel in 2013.

The moral of the story is that lowering overall budgets – as happened in 2013 – is the only effective way of reducing waste.

P.P.S. Want to know why the tax reform plan introduced by Congressman Dave Camp was so uninspiring, as I noted last week?

The answer is that he preemptively acquiesced to the left’s demands that class warfare should guide tax policy. Politico has the details.

Republicans had vowed for more than three years to slash the top individual income tax rate to 25 percent as part of a Tax Code overhaul. …last week Camp abandoned plans for a deep cut in the top marginal tax rate. He settled for 35 percent, which is just 4 percentage points lower than the current one. “It was a distribution issue,” Camp said. Getting all the way down to 25 percent “would have reduced taxes for the top 1 percent” and “I said we would be distributionally neutral.”

In other words, this is the tax code version of the Brezhnev Doctrine. Whenever the left is successful is raising the tax burden on the so-called rich (the top 20 percent already bears two-thirds of the burden), that then supposedly becomes a never-to-be-changed benchmark.

Fortunately, Reagan did not accept the left’s distorted rules and we got the Economic Recovery Tax Act in 1981, which helped trigger the 1980s boom.

And even when Reagan agreed to “distributional neutrality,” as happened as part of the 1986 Tax Reform Act, at least he got something big in exchange.

The Camp plan, by contrast, is thin gruel.

A big rate cut is what powered the last major tax overhaul, in 1986, which delivered tax cuts to every income group while slicing the top rate to 28 percent from a whopping 50 percent. …Lawmakers may look at the proposal and think: “I’m having the world coming down on me” and “all this just to get the rate down 4 points?”

That being said, the Camp plan has plenty of good features, including modest rate reductions and repeal of a few bad loopholes. But it’s accompanied by some really bad provisions, such as increased double taxation and higher taxes on business investment.

P.P.P.S. Long-time readers may remember this amusing Reagan-Obama comparison.

For understandable reasons, that’s what crossed my mind when seeing this example of Obama humor.

I should hasten to add, incidentally, that this is not to suggest I want Obama to do anything about the Ukrainian conflict (other than perhaps encourage decentralized power).

Unless one genuinely thinks that Putin has both the capacity and the desire for global imperialism, it’s hard to see how America’s national security is affected.

But I still appreciate good political humor. I like it when Obama is the target, and I like it even when it’s directed at people like me.

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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.

Balancing the Budget Is Easy

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.

CBO Above-Average Revenues

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.

Pajama Boy Jobless

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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I’m testifying tomorrow to the Joint Economic Committee about “The Economic Costs of Debt-Ceiling Brinkmanship.”

I won’t give away what I’m going to say (though you can probably figure out my views rather easily by reading this, this and this), but I do want to share a chart from my testimony.

It shows that it is remarkably simple to balance the budget with a modest amount of spending restraint.

Based on Congressional Budget Office data, we can balance the budget in just three years if spending grows by “only” 1 percent per year.

Balanced Budget with Spending Restraint

The chart also shows that you can balance the budget in just four years if spending is allowed to grow “just” 2 percent annually.

And if you for some reason think that the burden of government spending should rise faster than inflation, then we can balance the budget in seven years by restraining spending so that it grows 3 percent each year.

Here are a couple of relevant observations.

There’s no need to raise taxes. Indeed, there’s amply room to lower the tax burden and reform the corrupt tax code.

If you use honest budget numbers, there’s no need to impose steep spending cuts, though that actually would be desirable.

Good things happen when you follow my Golden Rule for fiscal policy.

Our main goal should be reducing the burden of government relative to private output, not balancing the budget.

That being said, one of the reasons that it’s so simple to balance the budget is that we’ve actually enjoyed two consecutive years of government spending being lower than it was the year before. Something to keep in mind just in case you thought the Tea Party didn’t make a difference or if you didn’t think sequestration was a big victory.

Here’s the video I keep recycling that explains why it’s important to restrain the growth of spending and also shows that when you address the disease of spending, you easily deal with the symptom of deficits.

If it worked for Bill Clinton, it could also work for Barack Obama.

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