Getting the Deficit to $0.00

www.fms.treas.gov ^ | 1/8/11 | vanity

[MontaniSemperLiberi]

As part of an effort to figure out what the Republican House SHOULD be doing now, I’ve looked up our current budget (or at least the one that was proposed) and figured out what could be eliminated to get the deficit down to $0.

Here is our revenue

	Budget
	Estimates
Classification	Full Fiscal Year
Budget Receipts	1,031,926
Individual Income Taxes
Corporation Income Taxes	280,396
Social Insurance and Retirement Receipts:
Employment and General Retirement (Off-Budget)	661,919
Employment and General Retirement (On-Budget)	195,771
Unemployment Insurance	54,422
Other Retirement	4,276
Excise Taxes	75,799
Estate and Gift Taxes	25,076
Customs Duties	26,632
Miscellaneous Receipts	89,508
Allowances	-20,000
Total Receipts	2,425,725
(On-Budget)	1,763,806
(Off-Budget)	661,919

The budget goal / magic number is $2.425 Trillion ($2,425,725,000,000.00 for those of you in Rio Linda)

Here are our outlays.

	Budget
	Estimates
Classification	Full Fiscal Year
Budget Outlays
Legislative Branch	5,599
Judicial Branch	7,512
Department of Agriculture	144,490
Department of Commerce	11,768
Department of Defense-Military	723,703
Department of Education	101,692
Department of Energy	45,143
Department of Health and Human Services	926,236
Department of Homeland Security	56,366
Department of Housing and Urban Development	51,219
Department of the Interior	14,382
Department of Justice	32,381
Department of Labor	109,288
Department of State	29,309
Department of Transportation	86,280
Department of the Treasury:
Interest on Treasury Debt Securities (Gross)	464,706
Other	94,921
Department of Veterans Affairs	134,106
Corps of Engineers	11,540
Other Defense Civil Programs	54,862
Environmental Protection Agency	11,541
Executive Office of the President	500
General Services Administration	2,279
International Assistance Program	24,659
National Aeronautics and Space Administration	18,732
National Science Foundation	8,374
Office of Personnel Management	73,676
Small Business Administration	1,465
Social Security Administration	789,034
Other Independent Agencies	47,226
Allowances	37,483
Undistributed Offsetting Receipts:
Interest	-188,784
Other	-89,768
Total Outlays	3,841,920
(On-Budget)	3,259,207
(Off-Budget)	582,713
Surplus (+) or Deficit (-)	-1,416,195
(On-Budget)	-1,495,401
(Off-Budget)	79,206

The starting point is $3.841 Trillion (Again, 3,841,920,000,000.00 for those of you in Rio Linda)

( http://www.fms.treas.gov/mts/mts1110.pdf , table 4)

So the need is to cut the budget by (1 – 2.425 / 3.841 ) x 100% = 36.8%

First, there is only one item that can’t be cut, interest payments on the national debt. If anyone you know says "Hey, maybe we should default on our debt", get a real big stick and beat them into the ground. A judge will rule that self-defense. Interest gets funded 100%, which works out to $464.7 Billion. That means the rest of the budget has to be cut by 49.0%.

Tier 1 Programs and Funding Levels

These are constitutional level functions plus Social Security and Medicare/Medicaid. I couldn’t bring myself to zero those last two out as there are some seasoned citizens that really do need the money to live.

	Budget	Montani's
	Estimates	Funding
	Full Fiscal Year	Level
Department of Justice	32,381	90%
Judicial Branch	7,512	80%
Department of Defense-Military	723,703	80%
Social Security Administration	789,034	80%
Department of Health and Human Services	926,236	70%
Department of Veterans Affairs	134,106	70%
Legislative Branch	5,599	50%
Executive Office of the President	500	50%
General Services Administration	2,279	50%
Office of Personnel Management	73,676	50%
Department of State	29,309	40%

One could find larger cuts in Defense, I suspect.

Teir 2 Programs and Funding Levels

These are programs/departments where we do need some funding, i.e. keeping DOE nuclear labs from going hot, etc.

	Budget	Montani's
	Estimates	Funding
	Full Fiscal Year	Level
Other Independent Agencies	47,226	30%
Department of Energy	45,143	20%
Department of Homeland Security	56,366	20%
Department of the Interior	14,382	20%
Department of Transportation	86,280	20%
Corps of Engineers	11,540	20%
Other Defense Civil Programs	54,862	20%
Environmental Protection Agency	11,541	20%
International Assistance Program	24,659	20%
Department of Agriculture	144,490	10%
National Aeronautics and Space Administration	18,732	10%
National Science Foundation	8,374	10%

Some of these funding levels were bumped up from zero after I took a hard look at Tier 1, cut a bit more and added a few billion to the Tier 2 programs. Someone might ask "Why not zero out International Assistance" and I say that if I can bribe President Achmed to turn on Militia leader Moamed then that’s a lot of savings out of the Defense budget.

Tier 3 programs and Funding Levels

These departments are eliminated. At best, some can get rolled into other departments like NIST for instance (we really do need a weights and measures agency) but that comes at the expense of whatever funding is available in those departments.

	Budget	Montani's
	Estimates	Funding
	Full Fiscal Year	Level
Department of Commerce	11,768	0%
Department of Education	101,692	0%
Department of Housing and Urban Development	51,219	0%
Department of Labor	109,288	0%
Small Business Administration	1,465	0%

That gets us down to a 12 billion surplus!

 

That’s it. That’s my best guess. Feel free to copy these numbers into your spreadsheet and come up with your own funding levels. You will be well armed to inform the next congressman who says, "We can cut $100 billion this year!" that that is a proverbial fart in the wind as far as Federal spending goes.

[MontaniSemperLiberi]

Take a shot. I thought it might be worth a vanity.

[plangent]

Thanks.

On first read I don’t know the real end point, but at least some courageous soul has taken a first step to sift the govt. pubs and put out a framework that helps understanding.

Drilling down into the detail will give more clarity to the % reductions.

[cgbg]

The Republicans need to have a zero-deficit budget in their pocket.

Then they can negotiate on how to get from here to there.

One reason this is necessary is because claims that they will refuse to raise the debt ceiling unless a deal is struck on the budget will not be taken seriously by the administration unless the Republicans show they are ready to make the move if necessary.

This is standard negotiating tactics. You can’t beat something with nothing.

[cgbg]

The Republicans need to have a zero-deficit budget in their pocket.

Then they can negotiate on how to get from here to there.

One reason this is necessary is because claims that they will refuse to raise the debt ceiling unless a deal is struck on the budget will not be taken seriously by the administration unless the Republicans show they are ready to make the move if necessary.

This is standard negotiating tactics. You can’t beat something with nothing.

[cgbg]

Sorry for the double post.

One approach would be to defer interest payments for a few years until the budget is under control.

That should be part of any serious budget cutting proposal.

While critics will howl that this will increase interest rates—that will encourage DC to cut faster and harder—a good thing.

[Politically Correct]

One approach would be to defer interest payments for a few years until the budget is under control.

Dangerous move.
If interest rates spike before the deficits are brought to zero it all may collapse.
I read somewhere that if the interest rates go to 11% at the current debt level then it doesn't take all that long before all revenue will have to go to pay just the interest.
What's scary is that 11% isn't all that unimaginable.

Frankly, if the House doesn't do something much more aggressive than the 100B cut in the budget then it all will eventually collapse. 100B isn't a serious response to deficit spending in the Trillion range.

[harpu]

up4later

[Spiff]

Good stuff, but you haven’t gone far enough. The $12 billion “surplus” would need to be applied to paying down our debt. We can’t just keep paying the interest, we actually need to pay down $14 trillion in debt and $12 billion is a drop in a huge bucket. Even if we could find $500 billion a year to pay off the debt it would take us over a quarter of a century to pay off the debt. What are the chances of staying on the kind of budget that cuts spending far more drastically than what you’re showing for 28 years? It is inevitable that we are going to collapse under this debt, default on the debt, or have blood in the streets over the severe austerity required to come up with $500 billion per year. Decades of criminally insane spending has brought us here and it will be our children and grandchildren who will suffer the catastrophic consequences of it. This makes me so sick about the future of our country that I want to throw up.

[BenKenobi]

FWIW, Greece is at 12.6

So yes, thanks to Obama, the door to bankruptcy has been opened.

They really need to get the inflation rate and the deficit under the year to year growth. With revenues around 3 and spending at 4.5, they would have to cut spending down to around 3.3 trillion. They need to cut about 1.2 trillion or so to get the deficit under control.

[jwparkerjr]

The GOP has a golden moment and window of opportunity to force government to living within its means. What's not being taken into consideration is the benefits to the economy of proof positive that we are determined to stop the madness of spending two and three times what we bring in.

Across the boards cuts sufficient to bring the budget into balance in a year or two would be hard, even disastrous, on many parts of our society and economy. But the total collapse of the house of cards that our budgeting process has become will be even worse.

An honest, good-faith, move toward ending the madness would result in a much stronger economy and therefore rising revenues.

[MontaniSemperLiberi]

Exactly where I am.

We need to get down to $0.00. That’s our end goal.

My timeline to do so is very, very short, i.e. September 2011. Why? Because our Debt to GDP ratio is now 100% (14T in debt, 14T in GDP) and that’s the point most countries default and there ain’t no country that can save us like they saved Greece.

So that gets us into brinksmanship. I posted the Federal Cash Flow situation this weekend http://www.freerepublic.com/focus/f-chat/2653239/posts It ain’t pretty but it is what it is.

Baring a plan to get the deficit down to $0.00, I’m thinking of going Gault. I’ll pull all my cash out of my 401k, convert it to metal and wait for the end times.

[MontaniSemperLiberi]

Let me get my big stick.

Our interest payments are estimated to be $464.7Billion with the interest rate at 2.5%. This is historically low. If interest rates go up to something on the high side, say 7.5%, that interest payment goes up by a factor of 3 to $1,394.1 Billion.

That difference means the end of our defense budget, Medicare/Medicaid or Social Security.

We have to pay off our interest payments.

[MontaniSemperLiberi]

Agree 100%. Even to the sick to stomach point. It really is sad, isn’t it?

Frankly I doubt we have the will to do it. Paul Ryan’s statement that he will have trouble finding $100billion in cuts because we are already 1/2 way into the fiscal year is a joke. What a clown.

[BenKenobi]

I don’t think it’s quite that bad yet. There are plenty of other jurisdictions that are in worse shape than America, so there are plenty of investment dollars that are going to get dumped into the dollar as a flight towards safety.

[MontaniSemperLiberi]

You’re arguing based on transients rather than fundamentals. Yes there is a certain amount of pull to the US. Note however that the foundation has been laid to get off of US currency. Sure it’s small now but the WB has just issued it’s first bond in yuan.

HONG KONG (AP) — The World Bank is issuing its first bonds denominated in China’s yuan in Hong Kong, joining a growing number of borrowers tapping the new debt market as Beijing gradually promotes its tightly controlled currency abroad.

They are setting up the mechanisms and getting over the initial learning curve. When confidence in the US is lost there will be a great sucking sound towards China.

It makes you wonder why we even have a Navy. If China can ruin us now, what good is a F-35B?

[BenKenobi]

I’m watching the Euro and the Yen. When both start falling out against the dollar (as in EU being 80 cents on the dollar), then it will be time to worry about the US.

Fiscal problems will crop up there first, and spread to the US, not the other way around.

[cgbg]

Good comment about Ryan.

Incremental thinking is what got us into this mess.

It will take radical thinking to get us out of it—if we can get out of it.

Waiting for other countries to fail first, waiting for somebody else to do something, that is incremental thinking.
It dosen’t work well when you have flown off the cliff and are halfway down.

You need to reach for the ledge even if it breaks some limbs if you are successful.

(Defaulting on the interest is reaching for the ledge—it is a binding commitment for a future balanced budget—with a 460B a year kick-start towards your goal.)