Posted by: Debby Durkee | December 7, 2010

Yes, we can balance the budget.

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Yes, we can balance the budget.

Some interesting ideas are popping up from Americans on how to get the United States’ fiscal house in order. Here’s a great proposal from Reason’s Nick Gillespie and Veronica de Rugy. Instead of cutting here and trimming there, they propose keeping the budget at 19% of GDP each and every year, since the Congressional Budget Office has shown that that amount is in keeping with the federal government’s annual receipts. They say this isn’t really all that hard, and Hot Air’s Jimmie Bise, Jr. shows us the way. They don’t address the deficit, however.

…Nick Gillespie and Veronica de Rugy have a proposal that not only promises to balance the budget in ten years but also does so without raising taxes or actually cutting the budget by one thin dime.

…The solution is to peg the budget as near as we can to 19 percent of GDP, which is what the CBO has estimated tax revenues to be for the next decade (assuming the Democrats don’t raise taxes in the next month). Here is their setup to the proposal, called “The 19 Percent Solution”.

A balanced budget based on 19 percent of GDP would mean $1.3 trillion in cuts over the next decade, or about $129 billion annually out of ever-increasing budgets averaging around $4.1 trillion. Note that these are not even absolute cuts, but trims from expected increases in spending.

What that means, essentially, is that Congress would need to pass a budget that’s about 3.6 percent smaller than normal. Snip —

Now, he doesn’t say they have to cut spending, just don’t increase it as much year to year. He goes on to show how much the federal budget increased from year to year from 2001 to 2011, and he came up with an average.

Average increase per year from 2001 to 2011: 6.1 percent.  Snip—

…If we adopt The 19 Percent Solution, budgets will, generally, still increase, just not by as much…Based on my math, our Federal government would have, on average, gotten a 2.5 percent raise each year for the last ten… Snip – (Here’s more from Gillespie and de Rugy:)

Are our leaders willing and able to identify and cut just $25 billion in waste and excess out of more than $700 billion in non-defense discretionary spending? Is reducing the $714 billion the Department of Defense received in 2010 by a paltry $25 billion impossible? Can Medicare and Medicaid, two programs that are infamous for waste and fraud and cost well over $720 billion in 2010, find $35 billion in efficiencies? The specific cuts should be open to negotiation, but the historical record shows that the available level of government revenue is fixed.

If our leaders can not make these paltry cuts on their own, then we will have to insist. We have a revenue limit we can not exceed. That’s not a conservative principle at work, but cold, hard fact. Tax revenues to Washington sit right around 19 percent, no matter how much the President’s vaunted debt commission wishes that number was much higher. We have to work within reality, and reality says that we can only plan for 19 percent. It is foolhardy and irresponsible to plan for anything else.

As some of the commenters to this column have noted, this gives the Congress the excuse to keep spending a huge amount and enables them to grab 19% of the economy. This might be a good solution for the short term. It still doesn’t address the deficit, so where will we really be as we try to pay it back? It would seem that more and deeper cuts might be required to service our debt. I say eliminate the EPA, the Department of Energy, and the Department of Education for starters, then move on to a 10-20% across the board cut in all areas of the government. When we’ve accomplished that, then we can look around to see where else we can trim the fat.  Read all of Bise here: Read all of Gillespie and de Rugy here:


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