Be Smart – Ask How They Balance the Budget – Not If They Want a Balanced Budget
Some of us love math and some of us hate it. I personally enjoy math (I hold my CPA license) and simple revenue and expense comes naturally to me. However, as a person who practiced publicly for three years – many people just don’t understand federal taxes and do not try. They just say ‘do it and tell me what I owe’. Friends, that can be fine for some of the time but the subject of the national budget is not one of those topics with which to play the ignorance card. I need you, if you don’t understand math, to find someone who does. We are being sold two approaches; neither balance the budget. Democrats on the whole want to tax more and keep spending (some moderate Democrats want to watch spending to be fair). The Republicans on the whole say we need to tax less, meet our current obligations (after eliminating Obamacare), and grow ourselves out of this situation. Neither of these approaches work if we are going to have a balanced budget this decade. Unfortunately, we continue to believe the passionate rhetoric that suits our ear without doing the math.
If we look at the last election, Senator Deb Fischer won the election handily. Bob Kerrey had some surprisingly conservative fiscal ideas but unfortunately his views on the Affordable Care Act were off (this is the biggest poison pill to the budget and was an error in judgment). However, he uncovered several of the mathematical facts of the unsustainability of our entitlement programs that she would not address. Let’s look at Senator Fischer’s stances (since she was the overwhelming winner) and digest how we would balance the budget.
Senator Fischer wants a constitutional amendment of 18% of GDP (Gross Domestic Product or what the country produces). Our GDP (simple Google search) is $15.68 trillion. 18% of this number is $2.82 Trillion dollars. For easy math our spending is roughly $3.5 trillion in 2013 (and we have not fully enacted Obamacare yet). As a result, with Deb’s proposed amendment, presently, the government would spend roughly $700 billion more dollars in a year than taxed revenue. This number could be an easy understatement as it does not take into account the quickly accelerating amounts of entitlements and health care.
Let’s look at the history of GDP growth. Our average GDP growth since 1943 is 3.2%. Alan Greenspan (20 Year Chairman of the Federal Reserve) said over the history of time a civilization can only advance its production by 3%. In the last decade our economy has struggled. Our GDP has only raised by an average of 2.0% a year the last 10 years.
Let’s say we pass some amazing legislation, workers and companies are freed up to create, we get International trade growing, and we are able to grow our GDP growth rate from 2% to 3% (50% improvement). We would be back to a solid long term growth rate in our country. We may have a hot year and hit 5% or 6%, but let history be our guide—3.0% is a good long term target. If we enacted Senator Fischer’s balanced budget amendment of 18% we would hit $2.9 trillion in revenues the next year, $3 trillion, and so on. It would take between 7 and 8 years to just reach the current expenditure limits of $3.57 million. This does not address the growth and acceleration of the entitlements as well as COLA’s (yearly inflation of the same spending) of the current budget (written before the passing of the current budget). It does not take a genius to figure out that we need some cuts.
This is the problem with the Republican platform. We hear lower taxes is the key. Friends, history has proven we can only grow our GDP by 3% a year. If we tie our budget to GDP (I like the idea—I just think we need to be realistic) we have to make some cuts. If we lower our tax bill that is just an additional gap we have to make up (we would benefit from growth but remember our historical growth rate of GDP) and we haven’t addressed the debt. Growth can and will happen with conservative implementation of reducing harmful regulations, repealing Obamacare, and improving our country’s intangible and tangible infrastructure. PS–I pray to God to bless this country and do some tremendous things and help our situation with obedience to His will. However, the prudent realist in me knows that even with good solid growth we can’t get to a balanced budget without making cuts. I feel if we get our legislation right, show some stewardship of God’s resources, we can accelerate the shrinking of our deficit gap but we can’t do this on hoping for growth alone.
The Republicans want to win your vote. They are no better than the Democrats in telling people what they want to hear to win the election. The rhetoric is the same: we will meet 100% of social security needs (against the prudent guidance of most all economists), we will meet 100% of Medicare needs (a bigger problem than social security and why we must get proactive proposals to economically stimulate lower costs in healthcare), we will meet our defense needs (assuming Iran or North Korea does not get more feisty), and we will lower taxes. They cite some politically backed economist to paint a rosy picture and presto we solve the problem.
Let’s not be naïve. History is a solid guide for what we can and cannot do. I think we can make conservative adjustments to policy and get our economy to improve our GDP growth rate by 50% or more!!! What a huge accomplishment that would be! However, we can’t be so foolish to think not making adjustments in our major spending programs and the sole growth of our economy will solve the budget problem alone. Friends, shame on anyone who buys the ‘we will all be OK argument with no sacrifice’ argument. The politics sounds nice but the math does not add up. I’m not going to present that lie to win.
This leads me to the next point. What do we cut? Todd Watson, Independent for United States Senate, has already presented some tough stances–let’s review. We must make cuts to the welfare state. Perpetual handouts is no way to end poverty. We need cuts in our social programs.
We believe in a strong but smaller defense. We need to end our role as the world police and focus on being a strong force to enforce rules pertaining to “significant world conflict.” Our job is not to make sure citizens of foreign countries get along. That is that government’s job. We can lower our defense budget if we will sit at the table and scope what and where our forces should be involved in.
Finally, social entitlement programs have to be augmented. Delaying the date we take social security is a stance we believe has some merit. We heard from Senator Fischer that no one over the age of 40 should have their social security changed. The burden of social security solvency should be borne by those under the age of 40. This wins an election but does nothing in solving a balanced budget.
This is not a moral position either. This country revolted on taxation without representation and that is exactly what we are doing if we are going to target the younger people of this country to shoulder the entire burden of the older portion of the population (many of the younger people not being eligible to vote). Furthermore, why do we want to reduce the incentive to work even more? The raising of the payroll tax would have to be large or we would have to dramatically reduce the benefits of these workers to keep that program intact. This is bad policy for today’s struggling labor market. The rhetoric works to be elected but the details (or lack thereof) fail in achieving a balanced budget.
We have to make the tough decisions with a love of others. Since I wrote this piece the Republicans have agreed to a new budget with the Democrats. Surprise–they raised spending and the House Republicans overwhelmingly approved the budget. They had no cards to trade with the Democrats–so neither side cut the budget. Another 2 years of failure.
We must share equally in the sacrifice for the long term future–kids and older adults alike. My problem with Republicans is that they don’t list any of their own programs to cut to get us there. When it is time to face reality they pass the buck down the road as they have nothing to cut of their own. They expect all Democrat programs to be changed to balance the budget. This is not realistic. Cutting many welfare programs does not come close to solving the problem (plus the political possibility of this is not likely). We are going to have to make changes in Republican stronghold areas in addition to cutting an equally strong portion of Democratic welfare interests. Simple math tells us this is necessary. I’d prefer a conservative agenda if possible but we have to accept reality that this is not likely to be the case with divided government and we must compromise to lower spending across the board.
The next time you hear the balanced budget rhetoric—you must ask that candidate what in particular he or she is going to cut and how much in savings will this create. (While I’m on my soapbox—no more 15 year projected back loaded savings. I have seen that failed language too many times. Let’s get cuts on the books as quickly as possible—not 15 years down the road.) We need to find $700 billion in cuts to get us a balanced budget. If you don’t hear specifics—you are being sold a bag of goods. Ask yourself this: How would you lower your expenditures in your house by 20%? Would you say we just need to cut back on our kid’s movie budget and rely on the growth of our wages next year to make up the difference? This is highly unlikely to work and it will be highly unlikely to work in our government. We are going to have to make tough choices just as you would have to do at home to reduce your spending by 20%.
For the record, I’m ok with compromise. However, this weeks compromise was bad news. The compromise should have been to dramatically lower the budget with both parties giving some of their interests a haircut. I’d like to see a 7% cut in expenditures each year until we get back to balance. I think this will be painful enough approach as we try to digest the cuts in our economy. $250 billion in cuts a year would be a monumental achievement for this body. This is a tough, but a manageable yearly pill in my opinion to work us to balance.
Friends, I will write on this topic again. However, if you come to my meetings I don’t want to hear that you want a balanced budget. I will tell you I want that too. I want to hear what you are willing to give up that directly affects you to achieve this. Raising taxes is a fair argument. For the record, I will not raise taxes and will concede that this a viable option but not an option I’m in favor of. I’m in favor of spending cuts. Augmentation of entitlements, cuts to the welfare state, and adjustments to defense that sustain a solid military but a reduced scope is my approach. There are a lot of people that want a balanced budget but at the same time do not want to sacrifice anything to get there. These people are not part of the solution. Here is the guidance the CBO gave on how to lower the budget. Find a way to get to $700 billion that you like. Personally I’m against tax hikes so this takes out revenue options (unless you eliminate deductions which is an indirect tax hike).
Keep in mind you can target items that don’t pertain to Nebraska but they are met with resistance from those states. This is why I’m in favor of shared sacrifice with some consciousness to states that pay in more than they obtain (this is Nebraska—especially in 2013). Contributing states should make up less of the difference than the taker states (this was the intent of the original constitution). This is the most political realistic approach we have.
We are going to have to lead the conversation as the strong majority of Republicans and Democrats do not have the strength or will to say the tough things. My apologies to former Republican Senator Simpson, current Republican Senators Gregg, Coburn, and Crepo, and current Democratic Senator Conrad who voted for a measure to move us closer to balance. I wish I was there to help take the FIRST step (not the last) towards fiscal balance with each of you. It is time to usher in a new generation of solid thinkers who are independent of party and strong enough to face a problem–not dodge it.
Instead we have a Senate that passed a resolution of a budget this year that leads us from $17 trillion to $24 trillion in national debt the next decade. This is not stepping up and making the tough call.
This problem also cites the problem in leadership in Washington. Paul Ryan AND Obama were against the Simpson Bowles proposal in 2010! This step would have improved the budget situation through compromise several years ago. Instead we passed a compromised approach this week that does not come close to dramatically improving our fiscal situation 3 years later. The Simpson Bowles plan was not perfect but it was a positive bipartisan step that was met with resistance from Democratic and Republican leaders. This was classic moderate improvement that was shot down by party extremists. We need more solutions like these that get us closer to our goal. It is going to take working together and compromise to achieve a goal of a balanced budget. Real proposals with real numbers is key. Today’s budget was a win for compromise but a loss for fiscal responsibility. Compromise to lowering cuts on both sides of the aisle was the politically correct thing that should have been done.
I apologize if this is a long post for you, but this budget is a complicated topic. Friends, if you like what you are reading-please join the campaign today. We need volunteers getting the word out. We need money to continue to support the activities of the campaign. We need people willing to get signatures. We are off to a great start but we need more help. Many of us conservatives are against those that mooch but we have our fair share of moochers in this campaign. We have people approving of the material but sitting on it. If we are going to make this happen–we need common sense people to mobilize the campaign–not judge the merits of it. I’d appreciate your service!