Economics

Balancing the Budget

It's time to get serious about cutting government spending.

|

The political class predicted "disaster" if Congress didn't raise its debt limit.

I think that was a scam to get more money. See, the poor politicians don't have enough, and they need to borrow more. We taxpayers are cheap. This year we'll give them only $2.2 trillion. They want to spend $3.8 trillion.

The president said if he didn't get more money, Social Security checks wouldn't go out. Why not?

With $2 trillion, they can pay Social Security, Medicare, the interest on the debt, and still have billions left. It's billions more than the government spent when President George W. Bush took office. What's the problem?

The problem is that Republicans and Democrats under Bush and President Obama doubled spending. Now, Obama wants more taxes.

Taxes shouldn't be the answer when spending is the problem.

Grover Norquist, who heads Americans for Tax Reform (ATR), leads the charge to keep the focus on spending. Norquist and ATR are famous for asking officeholders and candidates to sign a pledge not to raise taxes. Some say he is the reason the debt-ceiling debate was so drawn out.

"I think the reason there isn't a tax increase on the table," he told me, "is that 235 members of the House of Representatives signed a pledge never to raise taxes, a pledge to their voters, and 41 senators did. …

"Only if you take tax increases off the table do you even begin to … focus on spending, and that's what Obama wants to keep our focus off of. He wants us to talk about the deficit, not spending."

I pointed out that Obama might have scored points with the public because new revenues he sought—even though they wouldn't do much to shrink the deficit—would come from closing unpopular tax "loopholes."

 Norquist said he favors that—if tax rates are lowered at the same time.

"(We) want to simplify the code," he said. "(We) want to take a lot of the goodies that politicians have laced into that code … as long as you reduce tax rates and it's not a hidden tax increase."

Milton Friedman always said taxes don't tell the whole story. What counts is how much of our resources government spends, however it acquires them. The doubling of spending under Bush and Obama hasn't gotten enough attention.

"We need to ask what it is government should do," Norquist said. "But it's going to be knockdown, drag-out. All government overspending creates the constituency for its own perpetuation. … Weaning people off, that is very difficult."

He's right. When politicians make little cuts in the rate of spending growth, every interest group mobilizes to protect its little piece of the pie. That's why you must cut government like you take off a Band-Aid: quickly and all at once.

It's not hard to balance the budget. On my show, we made enough cuts to create a $237 billion surplus. I cut whole departments, like Education and Commerce. I cut two-thirds of the Defense Department (which still leaves it much bigger than China's). I indexed Medicare, Medicaid, and Social Security to inflation, raised the retirement age, and took away benefits for rich people. But I don't have to run for office. Congressmen do, and they can't even manage to cut ridiculous tax breaks like those for ethanol.

Obama predicted disaster if the debt ceiling wasn't raised. Some predict disaster if the ratings agencies downgrade Treasury bonds. I'm dubious. In 1995, President Clinton and Republican Congress couldn't agree on a budget, so the government shut down twice, the second time for three weeks.

Did the economy grind to a halt? No. During the first shutdown, the stock market went up. During the second, it dropped then recovered.

The alarmists screamed that the fight over the debt ceiling would discourage lenders. Wrong. Ten-year Treasury bonds sold for a measly 3 percent interest (versus 15 percent in 1981).

I wasn't worried that Congress would fail to raise the debt ceiling. But I am worried that Congress will keep spending.

John Stossel is host of Stossel on the Fox Business Network. He's the author of Give Me a Break and of Myth, Lies, and Downright Stupidity.

COPYRIGHT 2011 BY JFS PRODUCTIONS, INC.
DISTRIBUTED BY CREATORS.COM

NEXT: Medicare, Medicaid To Cost $1 Trillion In 2011

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. The U.S. Tax Code will never be simplified. Candidates need to be able to exchange tax credits for votes.

    1. Truer words have NEVER been spoken.

      1. What he said about what he said.

        kill all exemptions except the personal one. if pols want to help their favorite group, they should have to appropriate the money in the budget, not be able to slip in a tax deduction.

        1. Try this, for equity, for simplicity, for feaseability:

          1. All persons residing in the U.S. shall come together in “tax units”. Members need not be related, need not reside together, and a tax unit may consist of as few as one person.
          2. Each year congress shall set a “minimum wage” and a “tax rate”.
          3. The following shall not be subject to taxation:
          ? An amount equal to a year’s earnings (2000 hours) at the minimum wage, for each adult (age 20-65), decreasing 10% per year to 50% at age 15, and increasing 10% per year to 150% at age 70.
          ? All payments for necessary health care including medical care, pharmaceuticals prescribed by a health care professional, vision and hearing aids, and fees for health-enhancing entities such as gyms. Health care insurance premiums may be deducted but not health care expense paid for by such insurance.
          ? All educational expenses including day care for children or legally incompetent persons, the portion of state and local taxes used for education, and tuition, fees and educational materials for private school education, including that portion of parochial school tuition and other expenses going for non-sectarian education.
          ? All income saved into an account for investments; withdrawals from this account for the benefit of any member of the tax unit shall be reported as income.
          4. The “tax rate” shall be applied to any income greater than the deductions listed above, regardless of amount.
          5. Any municipality having greater than 100,000 inhabitants or any state may impose on their citizens a surtax which shall be applied the same as the Federal tax.
          6. Tax units whose deductions exceed income, shall be paid a sum equal to the tax rate multiplied by the shortfall in income.
          7. There shall be no federal tax on corporations or other business entities.
          8. The Office of Management and Budget shall compute revenues to be expected using the newly set tax rate and minimum wage, applied to the previous year’s reported incomes. No expenses in excess of that amount may be made without approval by 75% of each house of Congress. This tax shall be the only source of revenue for the federal government.

          1. I agree with #7 since companies just pass on that expense – which is about 20% of the price – to consumers in the form of higher prices.

            Rather than focusing on one’s income, we have a sales tax, which would be a lot less invasive of one’s privacy.

            That is the basic premise of the FAIR TAX.

    2. True, but it’s more than that. People for a long time have thought the tax code could be used to promote certain activity while inhibiting others, and not always in a rent-seeking way…

      1. People for a long time have thought the tax code could be used to promote certain activity while inhibiting others, and not always in a rent-seeking way…

        But always in a government-overreach kind of way.

      2. fuck those people

  2. The $2 trillion in cuts is already hurting our economy. Just look at the Dow!

    1. It’s also making our women(?) uglier. Just look at the Maddow!

      1. that’s a woman?

        1. Tony’s going to be soo disappointed when he finds out. All that wasted seed…

        2. Depends on your definition of ‘that’s’.

  3. How can the federal government be expected to micromanage everyone’s lives with only a paltry $22,000 per second?

    1. By hiring more managers, silly.

  4. They should try entering in promo code: Rome at the check-out

  5. I think that was a scam to get more money.

    *stares at Stossel over eyeglasses*

    Really? Seriously? John – buddy – please tell me something I DON’T know once in awhile.
    This is today’s “Cop Shoots Dog” story, right?

    1. Yeah, while I like Stossel, he’s not very deep in tone.

      1. People always say this about Stossel, but if he gets the libertarian message out to an audience who normally could care less about politics and economics than I have no problem with him lowering the intellectual intensity of the presentations.

        1. People always say this about Stossel, but if he gets the libertarian message out to an audience who normally could care less about politics and economics than {sic} I have no problem with him lowering the intellectual intensity of the presentations.

          Yeah, but he tends to lower it into below silence into negative territory.

          1. Thanks for not correcting my spelling NM. Awful kind.

            he tends to lower it into below silence into negative territory.

            I blame the intrinsically paternalistic nature of it all, personally.

            1. I think it is the nature of the biz frankly. Look at any of the so called reporters who claim to be ‘hard hitting’ and they are similar to stossel in tone of voice. At least his show has political views I can stomach to listen too.

          2. I’ve been very disappointed by Stossel’s articles. I come to Reason for creative and fresh discussions; Stossel’s “libertarianism 101” is just boring and banal. Maybe they thought a celebrity would increase their readership?

        2. Could be. Perhaps it’s just so obvious to me that I find the simplification frustrating.

        3. Can we call this the Standard Stossel Disclaimer?

        4. Stossel: Libertarianism for Beginners.

          Reason: Libertarianism for the Criminally Clueless.

          1. DU is over ————> thataway, JMW.

              1. DemocraticUnderground, you stupid pigfucker.

                IOW… go home.

    2. Stossel always talks like he’s trying to educate a 5-year-old about how something works.

      Which in the case of most people is probably justified.

      1. He has a psychology degree. It shows.

  6. The doubling of spending under Bush and Obama hasn’t gotten enough attention.

    ???? How much more attention could it have gotten????? I guess TMZ didn’t do any stories on it (I am only guessing here, of course).

    1. its the doubling part to which he is referring, i believe.

  7. Tony??

    Goddammit get in here.

    They’re starting all over again.

    1. He had to take the trash out before mom got mad.

      1. Still asleep in the basement, in his spider man PJ’s. Bong in one hand, I am not ‘sayin’ whats in the other.

        Mom is upstairs screaming

        1. “…I am not ‘sayin’ whats in the other.”

          I’ll say it: KARL MARX NUTSACK!

          1. Karl Marx is he the one with the horn?

  8. Seriously?
    This article deserves to be deleted from the internet immediately.

    1. Obama has not yet proposed an internet tribunal.

      That’s scheduled for his second term.

      1. Internet Czar is on the way.

    2. This article author deserves to be deleted from the internet immediately.

      FIFY?

      1. We’re talking about Krugabe right?

  9. Well, now that we have a firm grasp of the obvious.

  10. welcome to our website:

    ——- http://www.ifancyshop.com ——–

    if you like to order anything you like.

    More details,

    please just browse our website Quality is our Dignity;

    Service is our Lift.

    enjoy yourself.

    thank you!!

    ——- http://www.ifancyshop.com —–

  11. welcome to our website:

    ——- h t t p :/ / w w w . i f a n c y s h o p . c o m ——–

    if you like to order anything you like.

    More details,

    please just browse our website Quality is our Dignity;

    Service is our Lift.

    enjoy yourself.

    thank you!!

    h t t p : / / w w w . i f a n c y s h o p . c o m —–

  12. Maybe instead of complaining about how this information is obvious and written for a 5th grader… why not share it with the simpletons who have the reading capabilities of 5th graders?

    Stossel has experience in addressing the masses, and he speaks and writes at that level. The commenters and regulars at Reason.ccom are not his target audience…

    1. Exactly.

  13. You have to remember that liberals always say the opposite:

    “Obama predicted disaster if the debt ceiling wasn’t raised.”

    The Dow is down 650 so far this week…

    1. It’s because the stimulus was too small. Paul Krugman told me on NPR.

      1. We also should remember that the dow doesn’t mean shit about how the economy is actually doing.

        1. It will if it gets low enough.

        2. Unemployment, inflation, housing… None are getting better.

        3. We also should remember that the dow doesn’t mean shit about how the economy is actually doing.

          We do, which is why we ignore Shrike screaming about how great Obama is because the S&P is up over 90%

  14. there are at least three categories of readers on this subject. 1. those who know it already; 2. those who know it, but don’t care (or actually like the current state of afairs [e.g. Tony, China, etc.]; and 3. those who don’t know it. I presume he’s writing for the third category. But do they read Reason? I doubt it.

  15. They don’t but maybe he thinks another online publication will link to his article.

  16. I indexed Medicare, Medicaid, and Social Security to inflation, raised the retirement age, and took away benefits for rich people.

    Okay, a question about means-testing: how do we solve the grasshopper/ants moral hazard problem? In other words, how do you get people to save for retirement if their savings reduce the amount of Social Security to which they will be entitled?

    1. Simple. No body is allowed to save for retirement and everyone is taxed at 75 percent, but no one is allowed to charge anyone over 75 for anything they purchase.

        1. 75 years old.

        2. …years old, I’m guessing.

          1. Hey, I was right.

      1. does all the stuff the old farts freely acquired (excluding consumables) after 75 get returned to the stores or whatnot after their deaths?

        1. To the government, probably.

          1. Department of Estate Sales

        2. Yeah but the family has to pay to have the old-person smell washed out first.

  17. Good article from Stossel but it’s just not going to happen until the system crashes. If there’s no emergency no one will pay attention. Unfortunately the pain from the crash will hurt a lot. Hopefully the feds pull their heads out of their asses soon, but if America reelects the same jokers then we’ll have over 5 more years of entrenched spending. It’s a house of cards now folks. Good luck.

    1. The dow is down 400 – this this the first step to the great ‘thump’?

      1. Fortunately they raised the debt limit so this won’t happen.

  18. Basically, the government’s behavior won’t stop until people simply quit paying taxes. I’m not sure what other remedy there is.

    1. People already won’t pay enough taxes to fund the government’s behavior. That’s why they had to sell tens of trillions of dollars in bonds. Now people won’t even lend them that much money, so they have to sell bonds to the federal reserve.

  19. THEM: USA Credit. This is Peggy. How may I help you?
    ME: I’ve maxed out my credit card, and would like you to increase my limit.
    THEM: Why?
    ME: Well, I’ve maxed out ALL of my credit cards, I’m only earning $60k per year, but I’m spending $100k per year.
    THEM:
    ME: It’s for a good cause, really!
    THEM: What cause would that be?
    ME: Well, I promised my mom that I would pay for all her medical bills, and for her food and housing, too.
    THEM: She can’t live with you?
    ME: But then she wouldn’t be independent.
    THEM:
    ME: And I promised my good-for-nothing cousin that I would pay for all HIS medical bills, food, and housing.
    THEM: He can’t work?
    ME: Well, he CAN, but doesn’t want to take a job that is beneath him.
    THEM:
    ME: And if you don’t raise my credit limit, I won’t be able to do that AND pay you what I already owe you.
    THEM:
    ME: I’ll default on all those obligations to my mom and my cousin.
    THEM:
    ME: Hello?
    THEM:
    ME: Are you there? Hello?
    THEM: …

    The Dow is DOWN 400+. Obviously the stimulus was not large enough, right Toni?

    1. You’ve earned three fantastics.

    2. Except the credit card company is entirely fine with paying. It’s the account holders who couldn’t decide whether to keep paying the bills or not.

      Republicans should have forced what they wanted when they were writing the budget, not when it came time to pay the piper. This is all just political theater.

    3. This is excellent.

    4. Would have added paying the bodyguard for the neighbor down the street but other than that nit pick, excellent.

  20. Bla bla bla bla…… Like in nature, shitroller bug keeps rolling bigger and bigger shit. He stands up finally, when the shit (his food) is 3 times bigger then him, and proudly…… bla bla bla bla This is the economic-politics bases. There is nothing to be done, shitroller bug dropped in hole

  21. The plunge team must have had marching orders to take the day off. I doubt the investors actually get it about this phony deal being a fix.

  22. Do people really rip their bandaids off like that? I keep hearing this cliche.

    seriously I remove them very slowly and carefully. Not making an argument about the budget here.

  23. This article says it all perfectly.

  24. What can America do in traffic to thin the herd?

  25. Our fever is about to crash.

  26. The government needed a ride to the airport.

  27. Kazman! Didn’t they do a squiggly lined cartoon of this guy?

  28. Using less gas isn’t good for Big Oil.

  29. I can increase the MPG on cars right now. Replace your catalytic converters with straight pipes.

    1. Also get these spark plugs, which on the plus side will reduce the emissions enough so you probably could take off the catalytic converters.
      http://tiny.tw/8oI

  30. CAFE rules should force people to stay home.

  31. It’s always a “tragic moment” for the Chevy.

  32. Deans is getting kickbacks for every Chevy Malibu sold.

  33. Szoka, writer of what? Txts?

  34. Plus, texting people will start driving their cars underground.

  35. Wait, you mean I can speak my text into the phone, and be able to hear the text coming to me? In my day, we called that a phone call.

  36. MOST OF THESE PEOPLE WERE AT A STOP.

  37. Speeders in the audience slow to clap.

  38. Szoka wants to censor Chuck Shumer’s right to complain about things you’re doing.

  39. Balko suggests instead of blowing over the limit you should blow the cop.

  40. I never laughed at the guy stumbling drunk out of the bar. I rolled him.

  41. Stossel and his pliable in studio fans.

  42. “Just place it in your mouth for instant results!”

    Things the ladies love to hear.

  43. Adrian Moore of the Reason Foundation? Why haven’t we gotten any Morning Links from Moore yet?

  44. Yeah, like I want to drive underground (see my earlier comment!) through tunnels built by Communist China-men.

  45. “Get to work on time.”

    Every Reason contributor should be required to work a BTO line in their Fox appearances.

  46. It doesn’t look like the Myashi pillow can double as a marital aid.

  47. Illogical morons get the government they deserve.

  48. Speed limits were for insurance companies. They wanted higher premiums.

  49. Don’t give the mic to the punk. Give him a haircut.

  50. I hated my Chevy Blazer ZR2.

  51. I’m hitting the sack. Some of us have to get to work by nine.

    1. Damne, You replied so much that looked like U`r on work allready.

      1. Team Stossel Liveblog, baby. Get onboard the bullet train to Awesomeville.

  52. 1st of all You all guys have to get serious. U`r gonna get us all around the globe down nowhere. All national treasuries are filled with US bonds (Ours has about 4 billion, and we are seize like Main), and simply DOW is crashing down now. We (outside USA) got the picture clearly – Your Budget is with spending and this Rep-Demo debate one chat in a lounge of the Nut Dome. You simply do not have any earnings no more. Solution with War Weappons Economic is at the end. Now, earnings in totall are just Microsoft and on the ground of Microsoft achievement – Porn on-line industry, some mobile GSM spending industry and Food. You simply, used to have a very nice FEDERAL Country, but You gave a shit to think smart about the future, and gave it all for fraud Bank loans and credits. Tea Party farts have bought U all for small money and once again they are gonna do it.

    1. ” You simply do not have any earnings no more.”

      What is amazing is that this seems to be a general perception, yet even last year, U.S. revenue was higher than any year before the Bush tax cuts were implemented.

    2. no the aging baby boomers that are destroying the US budget and soon enough the currency are not the reason for the problems in europe. Europe has their own entitlement-dependent aging populations they made promises they can’t keep to.

      Though it’s true the same bad socialist ideas are responsible.

  53. An argument that we needs to be promoted is how RACIST the current social security tax scheme is.

    For those born in 1970, black men on average die before they can even claim any retirement benefits (60.0 years), while white females live to 75.6 years.

    http://www.census.gov/compendi…..1s0102.pdf

  54. Didn’t I read that the reason the debt ceiling had to be raised RIGHT NOW was because the government had already taken out the sovereign State’s equivalent of payday loans, which were somehow classed as “not borrowing” through accounting tricks, and had to repay them immediately? I’m sure I read something to that effect, recently.

  55. thank u
    thank u
    thank u

Please to post comments

Comments are closed.