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How About Some Real Cuts? (The grass was trimmed but alas, the landscaping postponed)
National Review ^ | 08/05/2011 | Jonah Goldberg

Posted on 08/05/2011 8:31:03 AM PDT by SeekAndFind

Uncle Sam now owes more on his credit cards than he makes in a year. The national debt passed the total U.S. GDP this week. Mull that over for a bit.

Now mull this over: Until the budget deal this week, the federal government borrowed 40 cents for every dollar it spent.

And the budget deal didn’t do very much to change that. It “cut” $2 trillion over ten years, which means Uncle Sam will overspend slightly less. If we hold to the deal — and who among us doubts that Congress won’t keep its word? — spending will “only” increase by $1.8 trillion over ten years. That’s because in the topsy-turvy, laugh-clown-laugh world of so-called baseline budgeting, we’ve been talking about trimming the rate of increase. Think of Uncle Sam walking in a wind tunnel leading to insolvency. The cuts increased the headwind he has to walk into, but they don’t do anything that forces him to turn around.

More importantly, there are no structural reforms. It’s the difference between trimming the grass and re-landscaping the lawn.

Now, the one great advantage the forces of the status quo have had in the budget debates over the last year is that they like the current system. Recall that the Democrats’ preferred position was a “clean” debt-ceiling hike (no spending cuts at all), and President Obama’s original budget called for increasing the deficit and extending the status quo until he was reelected, if not into retirement.

In May, when House minority leader Nancy Pelosi was asked what her plan was to fix Medicare, she responded, “We have a plan, it’s called Medicare.”

And whenever someone proposed serious reforms to the current system — i.e., actual landscaping — the Pelosi crowd responded that the reforms wouldn’t solve the problem. And since they don’t go far enough, why do anything at all?

Rep. Paul Ryan came up with one such plan. It was once called “The Path to Prosperity” but is now known as the only budget that has actually passed a congressional vote.

Anyway, the response from Democrats and liberal policy wonks was ridicule. It doesn’t solve the problem! It actually increases the debt over the next ten years! It ends Medicare as we know it! Republicans are hypocrites! Oh, and: Bush!

They sounded like slacker teenagers sitting on the couch mocking your inadequate techniques for putting out the fire in your living room. “Get back to me when you have a real plan to put out the fire, Dad.”

So, look, if the intelligent and sophisticated position is that your budget numbers don’t have to add up, can’t we do a lot better than this? Over the last ten years the federal government doubled in size, in terms of spending. Doubled. Do you feel as if you’re getting twice the value out of government you got ten years ago? Is it really so absurd to suggest that we didn’t live in a state of government-deficient anarchy in the year 2001? I mean, it wasn’t quite Thunderdome, was it?

Opponents of radical changes to the tax code — say, the Fair Tax, or a flat tax, or a VAT system, or some other variation — whine that such schemes wouldn’t raise enough revenue. It seems to me there are two reasonable responses to this. First, no one really knows if that’s true. A truly radical change to the tax system that doesn’t punish work or savings just might generate massive growth (or at least a lot more growth than the non-growth we have now). A lot more growth, even with lower tax rates, would generate a lot more revenue. Certainly the one thing we’ve all learned from the last few years is that no expert is infallible, and the ones who’ve defended the status quo are very fallible.

Second, the current system is doing a pretty terrible job already. Seems to me that if it’s okay to take in $1 for every $1.40 you spend, that leaves a pretty big margin of error for us to try out a better system, right? I mean, surely we can bankrupt ourselves less expensively?

While I don’t think you can throw seniors currently dependent on the system under the bus, it’s time to think big. Really big. But that requires leadership that amounts to more than talking “Yes We Can!” while walking “No We Can’t!”

— Jonah Goldberg is editor-at-large of National Review Online and a visiting fellow at the American Enterprise Institute

TOPICS: Business/Economy; Constitution/Conservatism; Government; News/Current Events
KEYWORDS: debt; debtceiling; spendingcuts

1 posted on 08/05/2011 8:31:11 AM PDT by SeekAndFind
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To: SeekAndFind

There will be no “real cuts.”

It is to every politician’s advantage that his constituency be as dependent upon him as possible.

This will only end when the State is brought to its knees under the weight of its own excesses, as happened in the Soviet Union and China, and is now happening throughout the so-called European Union.

2 posted on 08/05/2011 8:50:53 AM PDT by Jack Hammer
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To: SeekAndFind
such schemes wouldn’t raise enough revenue.

NO scheme will raise enough revenue.

Federal revenue is always 15-20% of GDP. Always, for many decades. We're around 18% right now, giving us a max possible revenue boost of 2 points - that's $282B. Max. Realistic optimism should plan on 1 point - that's $141B.

Eyeballing the chart, more likely that no matter what is done we'll have a revenue DROP of 2 points ... or, given economic trajectories, maybe even 4.

So at best, whatever the scheme, we can plan on anywhere from a $141B increase to a half-trillion-dollar decrease in revenue. Any variation in those numbers depends on changes in GDP, which is pretty stagnant now. BTW: to squeeze that out of "the rich" would require raising the top tax brackets on anyone making over $200,000 to 57% - and that's really optimistic; approaching that would slow the economy to stay within the 15-20% revenue/GDP curve.

We're not going to tax our way back to prosperity, no way, no how. The realistic upper limit of about $150B revenue increase is only one-tenth the $1500B we need to cover.

3 posted on 08/05/2011 8:54:26 AM PDT by ctdonath2 ($1 meals:
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To: Jack Hammer


Between posts #2 & #3, there isn’t a viable polite solution.
Max revenue increase: $150B.
Max spending cuts: negative*.
That gets us nowhere.

* - S 365 gave us an alleged $150B cut in the rate of increase, down to an average $2600B increase over baseline per year.

4 posted on 08/05/2011 9:03:02 AM PDT by ctdonath2 ($1 meals:
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To: SeekAndFind
A truly radical change to the tax system that doesn’t punish work or savings just might generate massive growth

Per prior graph, the change would have to DOUBLE the GDP just to cover the deficit. Via this chart it took 15 years to double GDP to where we are now, 11 years to double prior, 6 years before that. (BTW: GDP has always increased - until 2009. For sake of argument I'll ignore that anomaly.) For a SWAG, figure GDP will grow at $1T per year for now; a "truly radical change [which] just might generate massive growth" could, with wild optimism, increase that to $2T/yr, boosting federal revenue (always 15-20% of GDP) by at best $0.4T/yr.

[begin tangential blather]

Linking that to some of my other boundary-condition posts of late, we're looking at an optimistic all-inclusive scenario where a "soak the rich" plan would net $0.15T additional revenue, and a "truly radical change to the tax system" (or whatever plan can be devised) to "generate massive growth" boosting revenue another $0.40T.

OK. From one side the feds squeeze as hard as they can. From the other we double the economic growth rate.
That gives us new federal revenue of $0.55T/yr.
That still leaves spending $1T/yr in the hole.

Or something. My head hurts now. Time to go get eye drops for the dog.

5 posted on 08/05/2011 9:50:59 AM PDT by ctdonath2 ($1 meals:
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To: SeekAndFind

Uncle Sugar Overextended

6 posted on 08/05/2011 1:27:33 PM PDT by Sybeck1 (BE BOLD SARAH)
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