Skip to comments.New CBO Numbers Show a Remarkably Simple Path to a Balanced Budget
Posted on 02/07/2014 7:06:57 AM PST by Kaslin
A just-released report from the bean counters at the Congressional Budget Office is getting lots of attention because the bureaucrats are now admitting that Obamacare will impose much more damage to the economy than they previously predicted.
Of course, many people knew from the start that Obamacare would be a disasterand that it would make the healthcare system even more dysfunctional, so CBO is way behind the curve.
Moreover, CBOs deeply flawed estimates back in 2009 and 2010 helped grease the skids for passage of the Presidents failed law, so I hardly think they deserve any applause for now producing more realistic numbers.
But todays post isnt about the Obamacare fiasco. I want to focus instead on some other numbers in the new CBO report.
The bureaucrats have put together their new 10-year baseline forecast of how much money the government will collect based on current tax laws and the latest economic predictions.
These numbers show that tax revenue is projected to increase by an average of 5.4 percent per year.
As many readers already know, I dont fixate on balancing the budget. I care much more about reducing the burden of government spending and restoring the kind of limited government our Founding Fathers envisioned.
But whenever the CBO publishes new numbers, I cant resist showing how simple it is to get rid of red ink by following my Golden Rule of fiscal restraint.
Heres a chart showing projected revenue over the next 10 years, along with lines showing what happens if spending (currently $3.54 trillion) follows various growth paths.
The two biggest takeaways are that a spending freeze (similar to what we got in 2012 and 2013) would almost balance the budget in 2016 and would definitely produce a budget surplus in 2017.
I also highlight what would happen if politicians merely limited spending so it grew at the rate of inflation, about 2.3 percent per year. Under that scenario, the budget would be balanced in 2019 (actually a $20 billion surplus, but thats an asterisk by Washington standards).
In other words, there is no need to raise taxes. Its very simple to balance the budget without extracting more money from taxpayers.
This means the Simpson-Bowles people are wrong. The Domenici-Rivlin folks are wrong.Senator Patty Murray is wrong. Jeb Bush and Lindsey Graham are wrong. And (heres a surprise) the Obama Administration is wrong.
And we have some additional evidence. Its a chart taken directly from the CBO report and it shows that revenues over the next 10 years will be above the long-run average. This is because even weak growth slowly but surely produces more revenue for Washington, in part because it gradually pushes people into higher tax brackets.
And this chart just looks at the next 10 yeas. If you peruse the long-run fiscal projections, youll see that the tax burden is projected to increase dramatically over the next several decades.
The moral of the story is that there should be tax cuts (ideally as part of tax reform), not tax increases.
P.S. Just in case you think I was being unfair in my description of the Congressional Budget Office, keep in mind that these are the bureaucrats who advise Congress that economic performance increases when taxes go up.
P.P.S. And even though CBO is finally admitting some of the flaws in Obamacare, the bureaucrats are still unrepentant Keynesians. Check out this excerpt from a story in yesterdays Washington Post.
Rep. Chris Van Hollen (Md.), the top Democrat on the committee, cited the CBOs finding that the law will boost overall demand for goods and services over the next few years, This is because people benefiting from its expansion of Medicaid and insurance subsidies will likely have extra money to spend, which will in turn boost demand for labor over the next few years, the report says.
So CBO would like us to believe that the more money the government redistributes, the more growth well get. I guess this explains why France is such an economic dynamo.
More seriously, this is the same flawed analysis that allowed CBO to claim the so-called stimulus was creating jobs as employment was falling.
You can understand why Ive written that Keynesian economics is the lefts perpetual motion machine.
P.P.P.S. Heres a Center for Freedom and Prosperity video that I narrated back in 2010, which explains why it is simple to balance the budget. The numbers in the video obviously need to be replaced with the ones I shared above, but the analysis is still right on the mark.
It's Simple to Balance The Budget Without Higher Taxes
P.P.P.P.S. And if you want to know how to achieve the modest spending restraint needed to balance the budget, the Swiss debt brake would be a good place to start.
Its really a spending cap, and its worth noting that the Swiss budget has increased by only 2 percent per year since voters imposed the law back in 2001.
Or maybe we could somehow hope that politicians would simply be responsible, like lawmakers in Canada and New Zealand in the 1990s. Or we could reincarnate Reagan. Or even bring back Clinton.
P.P.P.P.P.S. Since we started this post by talking about how Obamacare is undermining the economy, lets close with a great example of Obamacare humor.
Remember Pajama Boy? Well, hes back for an encore performance thanks to some very clever people at Americans for Prosperity.
Theres no update, by the way, on whether being without a job impacts his chances of getting a date with Julia. Theyd make such a good couple.
This is amusing, but it surely isnt as funny as President Obamas Chief Economist, who actually argued with a straight face that it was a good sign that Obamacare was leading people to drop out of the labor force because unemployment might be a better choice and a better option than what they had before.
Sort of reminds me of this Chuck Asay cartoon, or this famous set of wagon cartoons.
Dependency for more and more people. Such an inviting concept
until this happens.
Dependency for more and more people.
Dependency. It good for everyone. Its good for America. And its good for you.
Bring jobs back from China.
Buy things made in America.
When you plan to post a photo of pajama boy, please include a BARF ALERT!
Otherwise... most excellent post. THANKS!
You know... that IS how the budget was balanced back in the 90’s. The Contract With America Republicans took the House in 1994. They SLOWED (not stopped) the rate of growth in spending... and, SHAZAM! They all got shell-shocked with a surplus two years later.
The same would happen now, IF......
Why just China?
We currently are running a 300 billion a year deficit with China, and that is constantly getting worse.
Go in any store, and everything you see on every aisle, is made in China.
China is our major trading competitor, and America’s corporations have all sold out. I say we need to fix our trading relationship with China first.
China does not allow Americans to immigrate. China does not allow Americans to operate corporations there, except as minority owners.
China has five times America’s population.
We need to fix, our broken trade relationship with China.
Bring back American jobs.
You mean like bakery products, milk, eggs, sugar, cheese and stuff like that? You know grocery stores are stores too.
Speaking of other stores like Wal Mart for example. I find stuff that is made here in the US. Maybe you are not looking hard enough. One store whose inventory is entirely from China is Hobby Lobby. Maybe not entirely, but I have never found anything in there that is made in the US
I have the chart in my .sig of the American / Chinese trade figures for the last 10 - 20 years or so.
(it’s a government website, fwiw)
We are badly, badly losing ground to China.
That is all I am saying. Bring back American jobs.
The deficit decreased in the late 1990s, but there hasn’t been a fiscal-year decrease in the national debt since the Eisenhower administration.
I’ve been trying to avoid buying products made in china, especially food, and it’s not an easy process.
Perhaps we could work together to find products from other countries and we could publish a running list as we come across them.
There are some formerly trusted companies I’m learning to avoid, one being Dole. I recently discovered some diced pears that were processed in one country (not sure if it was china, or not) but the company was based in Iran.
Very true.. they REPORTED a surplus. But, somehow... magically, the debt continued to increase. I never fully understood that. But, I think it was because SS is "off budget"??
I believe you are correct in the “off-budget” conjecture.
Note to self, California has a “balanced budget”. Need more cash, raise taxes! I admit, I didn’t look at the chart, I am naturally skeptical... and hopefully wrong. Maybe this is the Wisconsin Model, yes?