Heading Off the Budgepocalypse

Neither the Democratic proposal put forth by Senate Majority Leader Harry Reid nor the GOP proposal offered by House Speaker John Boehner offer the sort of reform needed to put America's budget on a sustainable long-term path. What sort of fiscal diet would it take to get the federal books into shape? Via the Center for a Responsible Federal Budget, Congressional Budget Office director Douglas Elmendorf recently laid out the broad options:

  • Raise federal revenues significantly above their average share of GDP;
  • Make major changes to the sorts of benefits we provide for older Americans;
  • Substantially reduce the role of the rest of the federal government—that is, defense (the largest single piece), Food Stamps, unemployment compensation, other income-security programs, veterans’ benefits, federal civilian and military retirement benefits, transportation, health research, education and training, and other programs—in our economy and society.

So the choices are to either raise taxes dramatically in order to pay for the growth of entitlement spending; overhaul entitlements, especially Medicare; or bulldoze the foundations of the non-entitlement aspects of the budget—not just defense spending, but a host of other federal programs too. There's no ideology at play here, unless you count a bias toward fiscal reality; this is just the minimum required to make the basic budget math work. 

Defense spending can and should be reduced dramatically, but even the sort of wholesale cutbacks in troop deployment that get tagged as radical and impossible wouldn't be enough. Which means that even though some libertarians might find the third idea appealing (if only as a starting point), it would be hard to make it work.

Liberals might look at the first option and argue that the problem can be fixed by raising taxes. But the sort of tax hikes that would be required aren't merely unpopular, they're historically unprecedented—and they would require far more than closing a few loopholes and raising taxes on higher earners. 

In the next ten years, the federal government is projected, under the rosiest scenario, to run a budget deficit of about $7 trillion. But according to former Congressional Budget Office director Douglas Holtz-Eakin, allowing the tax cuts first passed during the Bush presidency to expire, thereby increasing the top two tax rates and the rate at which capital gains are taxed, would net only about $1 trillion in deficit savings over the same time frame.

That means middle class tax hikes would be required—big ones, too. Paying for entitlements to grow apace would require the government to consume a dramatically larger percentage of America's economic pie. Historically, as Nick Gillespie and Veronique de Rugy have often noted, the federal government has run on an average of about 18-19 percent of GDP. The all-time annual high is 20.9 percent, during the peak of World War II. Allowing entitlements to grow as planned would require raising taxes so much that they eat up more than 30 percent of GDP.

Think passing entitlement reform is hard? Try working up to a (more than) 50 percent across the board tax hike, or something roughly like it. 

Even President Obama knows that in the long term, Medicare can't be fixed simply by raising taxes. The program "will run out of money, and we will not be able to sustain that program, no matter how much taxes go up," he said last week. Substantial entitlement reform, in other words, is the most likely—and perhaps the only plausible—path forward. The debt limit debate might have made a good platform to start planning out that path. It's too bad that neither party did

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  • Old Mexican||

    The poster was the ONLY good thing about that movie.

  • ||

    What? Are you mad?

  • ||

    I agree.

    The poster sucked, too.

  • Old Mexican||

    Re: Pro Libertate,

    What? Are you mad?


    Well, that's the point: I wasn't saying much.

  • PermaLurker||

    That movie was a real eye opener for me. I was previously unaware that Australia had such a large problem with gay barbarian bondage bikers.

  • ||

    What's funny is that people have this strange idea that that movie is about post-apocalyptic Australia. Not at all. That's the way Australia was in 1980.

  • Paul||

    I thought it was about a boy who lost his dog.

  • ||

    That's another movie.

  • ||

    What?!?! He lost his dog to a wrist-mounted crossbow! And the tanker was filled with sand! Cause when you are involved in a high speed post-apocalyptic chase that's actually a red herring, it's a great idea to load the tanker with 10 tons of sand.

  • Almanian||

    HERESY! One of the greatest. movies. EVER.

    "Children of the Wasteland, you disappoint me..."

    "You can run! But you can't hide!"

    "If it's all the same to you, I'll droyv that tankah...."

    You don't get dialogue like that in just any old movie.

  • Trespassers W||

    I presumed OM was talking about Disaster Movie.

  • ||

    I'm gonna drive that tanker...but you'll blow me first.

  • IceTrey||

    Do you really think the federal government is only going to run 700 billion dollar/yr deficits for the next 10 years? I don't.

  • LIBERTARIAN DICTATOR||

    Neither the Democratic proposal put forth by Senate Majority Leader Harry Reid nor the GOP proposal offered by House Speaker John Boehner offer the sort of reform needed to put America's budget on a sustainable long-term path.

    My budget plan is to cut all discretionary spending. Discretionary spending is everything that is not defense social security or medicare.

    Defense will be cut 50%.

    Medicare will be cut 20% and will be allowed to grow at 1 half of the inflation rate each year

    Social security will be cut by 20% and will be allowed to grow at negative the rate of inflation.

    I will cap the debt at 13 trillion dollars. For every dollar above 13 trillion that the US owes 100 current or former Bureaucrats will be executed. after the first 10,000 bureaucrats have been killed the next dollar over will include the execution of 10 current and/or former members of congress.

    The debt limit will be decreased by 1 trillion dollars each year debt is below 500 billion. afterward debt will be allowed to increase at one quarter the rate of inflation.

  • Doktor Kapitalism||

    Add [BRACKETS] the [EMPIRE] and a dash of crazy and you get something similar to HTS.

  • Doktor Kapitalism||

    Maybe I should have read the whole thing first--already a pinch of crazy. Needs more to be Triathalon quality, though.

  • libertarain dictator||

    I don't know where I was going with that.

    I am just pissed that actual cuts are not on the table and the whole fucking debate is about one group wanting to grow the government slightly slower then the other group.

    So I thought I would make a joke about it.

    And failed.

  • Rob||

    Except the debt would double with this scenario because because the bureaucrats in the Accounting Dept will accidently overspend on bullets by between 10-20 trillion dollars.

  • Old Mexican||

    Re: LIBERTARIAN DICTATOR

    LIBERTARIAN DICTATOR


    Makes as much sense as "Philanthropic Mass Murderer"

  • Appalachian Australian||

    Cut Medicare 100%. Communities, hospitals, and doctors will still find ways to serve needy seniors.

    I would certainly be glad to contribute 2.9% (or more) of my income to a nearby charity serving the elderly.

    Alter Social Security so that payouts exactly equal whatever was collected the month prior in payroll taxes. The elderly would be subjected to no more hardship than people who actually work for a living. Besides, Chad insists Social Security will never be unable to pay benefits because it's set up this way.

  • Restoras||

    Well Chad is forgetting that the ratio of workers to retirees is, what 3:1? And falling? Unless we all get our freak on in a big hurry.

  • Old Mexican||

    In the next ten years, the federal government is projected, under the rosiest scenario, to run a budget deficit of about $7 trillion. But according to former Congressional Budget Office director Douglas Holtz-Eakin, allowing the tax cuts first passed during the Bush presidency to expire, thereby increasing the top two tax rates and the rate at which capital gains are taxed, would net only about $1 trillion in deficit savings over the same time frame.


    WOW! So we would reduce the deficit by a whopping 16.6 percent!!! In 10 YEARS!

    And yet people like Tony will argue that anti-tax people do not care about the deficit.

  • Red Rocks Rockin||

    The typical response to that is, "Well, we just have to increase GDP and we'll be okay!"

    It's the "MONEY COMES FROM ELVES AND WORMHOLES!" philosophy at work.

  • Zuo||

    NOOOOGH! NO MORE TALKKKKH!!! WE GO INNNN!! WE KILLL!!!

  • ||

    I'm just waiting for the pundits to admit "We're fucked". Move to Greece.

  • ||

    That is why they are so set on raising taxes. If we don't start raising taxes now, we will never raise them. And if we never raise them, the government will run out of money. The whole thing is going tits up. We are going to have to have a renewal of the social contract and a new kind of smaller government. The fear of this inevitability is why the Left has gone so batshit in insane over the last ten years.

  • 35N4P2BYY||

    I would argue that the left has been bonkers for a tad bit longer than that, say crazy since Wilson or prohibition.

  • ||

    But back then no one had ever tried their ideas. And they at least had some coherent ideas. Now, all of their ideas have tried and failed. They haven't had a new idea or program in over 40 years. All they have is "more and bigger" of what they had before. Now we are broke and it is obvious none of their ideas work. That has caused them to go crazy.

  • 35N4P2BYY||

    Granted, but I would like to think that, even then, someone had an idea that government taking responsibility for peoples choices was a bad idea.

  • Restoras||

    Two excellent comments, John. Progressivism in its death throes.

  • Rob||

    The only problem I have with entitlements collapsing down the road is that I haven't figured out a way to make them collapse immediately.

  • ||

    don't forget that raising taxes marginally can increase revenues marginally, but raising taxes by a LOT will likely decrease revenues anyway.

    They are at max revenues or very close to it. There's no room to go up. Things WILL change.

  • ||

    The fear of this inevitability is why the Left has gone so batshit in insane over the last ten years.

    Batshit insane left = more taxes more unsustainable debt more federal control of markets, more entitlements and more spending.

    allegedly sane Right = more taxes more unsustainable debt more federal control of markets, more entitlements and more spending.

    I fail to see why the left is insane whi8le the right is not.

    Does wanting a 1% less tax increase and a 1% less spending increase make all the difference?

    The right: "Trust us cuz we masturbate in our own feces only 23 hours a day."

  • ||

    http://www.fart-sounds.net/fart_sound_board.htm

    Top row, 4 from the left. With a bullet. My current response to all things debt.

  • Nancy Pelosi||

    Are you serious?

    I go with "Shave and a Haircut."

  • Red Rocks Rockin||

    That means middle class tax hikes would be required—big ones, too.

    That's really the dirty little secret. "The Rich" simply do not make enough to cover all the spending that the left wants, even after 35 years of inflation driven by credit and workforce expansion. The poor's contribution is miniscule. So the math dictates that the middle class would be stuck bearing the brunt of it.

  • Restoras||

    This, and when you throw in all the middle-class welfare that's going bye-bye, there is going to be a lot of pissed of people. Will be fun/tragic to watch unfold.

  • ||

    Team Blue is talking about a "jobs deficit" and a need to 'create' jobs.

    I am going on record here:
    If there is no concerted effort to control the US federal deficit either by cutting expenditures or raising taxes (or both) and, if the US Government goes for a big 'stimulus', the US will record a $3T deficit in a fiscal year before 2020.

  • Binky||

    However, it'll be in Nuevo Dollars.

  • ||

    Let's do all three.

  • Appalachian Australian||

    Substantially reduce the role of the rest of the federal government—that is, defense (the largest single piece), Food Stamps, unemployment compensation, other income-security programs, veterans’ benefits, federal civilian and military retirement benefits, transportation, health research, education and training, and other programs—in our economy and society.

    Sounds good to me.

  • Alan Kellogg||

    To what degree would administrative reform reduce the deficit?

  • ||

    Depends what you mean by "administrative reform".

    Offering +/-535 selected individuals a short, sharp introduction to Madame Guillotine might help.

  • ||

    Actually, I assume you mean at least 537 to include the executive branch.

  • scarpe Nike Store||

    is good

  • ||

    OK wow that makes a lot of sense dude.

    www.web-privacy.au.tc

  • Nike Dunk High Women||

    thanks

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