Fixing the deficit, billions at a time
A few hours before the Sept. 30 deadline to avert a possible government shutdown, Congress managed to pass a continuing resolution to keep the government going until Nov. 17. Now that the Nov. 17 deadline is fast approaching, there is increasing pessimism that there will be any long-term solution to our budget crisis — even if in the short run a shutdown is again averted. Consequently, Moody’s bond rating service, while not actually reducing the U.S. government’s AAA rating, has issued a “negative” forecast for that rating.
Moody’s “negative” forecast stems from the unfortunate reality that so far no party — not Democrat, not Republican, not Tea — has presented any credible plan that would actually, significantly reduce the deficit. We must, however, solve this problem before it becomes a major crisis. That solution will require that every party’s posture will have to change significantly, and every citizen — whether rich or poor or somewhere in between — will feel some real pain.
When we speak of billions and trillions of dollars, it is easy to get lost — especially when the figures reach the trillions. To clarify, a billion is $1,000 million, and a trillion is $1,000 billion. Thus, any changes to the budget must be more like ten billion or a hundred billion in either spending cuts or revenue increases to get to a balanced budget. Remember, the $1.7 trillion deficit is $1,700 billion.
So, just where do we get the hundreds of billions in reduced spending?
It won’t come from cutting funds to the favorite conservative targets, Corporation for Public Broadcasting (CPB) or Planned Parenthood. Their total allocation is only about $1.1 billion. Another favorite target is the Environmental Protection Agency, which draws $10 billion (hardly a significant amount to reduce), and its total elimination could mean returning to the early ’70s when a grossly polluted river in Cleveland twice caught fire and Los Angeles had a dozen or more smog alerts each year.
The total “Children and Families” payments (i.e. welfare) plus “Supplemental Nutrition Assistance Program (i.e. food stamps) and housing assistance is $650 billion or about 8% of the total spending of 6.1 trillion. Cutting those programs by 20% by stiffening eligibility requirements would be very painful for some but would save nearly $100 billion. A similar 20% cut in the approximate $500 billion Federal share of Medicaid’s would save another $100 billion.
The Defense Department budget is $1.2 trillion. Yes, there are threats to our security, ranging from small bands of terrorists to an expansionist China, but mobile missile-carrying submarines and surface ships with cruise missiles would seem to be a better deterrent than missiles in easy-to-target silos. Without, admittedly, an in-depth knowledge of the defense budget, it still seems a 20% cut here would save $240 billion without making us 20% more vulnerable.
The Social Security Administration pays $1.2 trillion to retirees and survivors. Warren Buffet has admitted that he doesn’t need his Social Security payments, so a means test could easily save another $150 billion. Yes, some who paid into the system would be left out, but one pays pay school taxes even if with no children in school because everyone benefits from an educated population. Likewise, all Americans would benefit if the national debt stopped increasing.
Total savings of the above cuts total $600 billion, but we’ve still only reduced the deficit by one-third.
Before we go any further, however, we must dispel the notion, firmly held by some, that ending the “Holy Trinity” of Waste, Fraud and Abuse will magically balance the federal budget. The three are often spoken of as though they were line items in every department’s budget. To belabor the obvious, this isn’t the case.
Now for the really bad news: We can’t balance the budget without some significant increases in revenue. Reducing the $1 trillion in tax evasion (as estimated by both the IRS and Bloomberg) would increase revenue without raising the taxes paid by honest people. The IRS has said they have only been targeting those earning more than $400,000 per year as that’s where the money is. Conservatives have tried to scare average Americans that they will be targets, but so far I don’t believe there is any evidence of that. Assuming that the IRS could manage to collect half of that $1 trillion we would be at the $1.1 trillion mark in closing the deficit.
Lacking any other large targets, the final piece in the puzzle has to be a repeal of the Trump and Bush-era tax cuts. The George W. Bush tax cuts in 2001 turned a $200 billion surplus into a $400 billion deficit in three years. That surplus was generated despite the Reagan era tax cuts, so perhaps we can let those cuts remain.
In any event, we need to restore the country to a balanced budget — better yet a surplus. At the end of World War II, the total federal debt was 122% of GDP. By 1981, the total debt had grown, but the GDP had grown much faster so that total debt was 32% of GDP. During that period, we built the Interstate Highway System, fought a war in Vietnam, and put men on the moon.
Now, we’re back to 126% of GDP, but we struggle to find the money to repair an aging bridge. And, until recently, we had to rely on 1990-era Russian rockets to get our astronauts to the International Space Station. To put this 126% figure in more personal terms. imagine that you are earning $1 million per year, but you have debts totaling $126 million. That’s where we are at right now.
Most figures cited above came from the website usgovernmentspending.com. Other websites provide slightly different numbers or break them down differently. Nevertheless, I challenge letter writers from either the left or the right who disagree with the above proposals to now provide their own numbers toward a balanced budget.
— — —
Tony Goodwin lives in Keene.