GUEST POST BY DAVE MILLER

 

Dave Miller:

Our friend Skud makes it a regular part of his comments to moan about the inability of Congress to cut spending. This is part of the supposed GOP fealty to balancing the budget, something only accomplished during one administration in the last 50 years.

That of course was when Bill Clinton was president in the 1990’s. Early in the Clinton Admin the Dems pushed through a series of tax increases, which every single House member of the GOP opposed, claiming those tax increases would wreck our economy. We know of course that did not happen. In fact the economy boomed, the budget was balanced and we paid down our debt.

Then George W. Bush was elected president and the era of massive budget increases was born with a tax cut that deprived the US Government of the money it had been using to balance our budget and continue to pay off the US Debt. 

However, balancing the budget and cutting spending continues to be a standard GOP and conservative talking point, even if they don’t mean it. But to really understand how difficult the process is, take a  look at the chart below from the inimitable Steve Rattner.

Very clearly, it shows where our federal tax dollars are spent.

By all accounts, the entire federal budget equals about 6.5 trillion dollars. In any book, that’s a lot of money spent each and every year by the federal government. According to US Government figures, we are currently spending about 1.5 trillion dollars more each year over what we bring in.

That means to balance our annual US budget, we need to do one of three things…

• Cut spending 1.5 trillion dollars
• Raise revenue 1.5 trillion dollars
• Enact some mix of spending cuts and revenue increases

There’s no other way.

Now, for those who advocate making that happen by only cutting spending, here’s what that means. In the chart above, the yellow section represents what all politicians currently call discretionary spending. Here are some of the programs it includes.

• Title 1 education grants for the poor
• WIC nutrition assistance
• Affordable housing subsidies [Section 8]
• Immigrant Refugee aid
• Head Start
• EPA Clean water programs

That yellow block of budgetary spending is about 14% of the federal budget, or 900 billion dollars. If we add President Biden’s proposed Ukraine spending of about 60 billion dollars, we can round up and say US discretionary spending comes in at a cool one trillion dollars.

Cutting every penny from those discretionary programs would leave is about 500 billions short of a balanced budget. That money would have to come from cuts to defense and entitlements.

Conversely, if we decided to keep that spending as is and make up the difference in tax increases, we would need a net across the board tax increase of approximately $5000 for every person living in the United States of America.

Neither of those two approaches are possible, or sustainable and even if they were, that would just balance the annual budget, doing nothing to actually lower the US debt.

Both Joe Biden and Donald Trump have said that entitlements, which include Medicare, Social Security and all the other needs based income security programs in Rattner’s chart are off the cutting table, as is defense. Economists say we somehow need to eliminate our spending/income gap of 1.5 trillion dollars and get an additional 500 billion to apply to our debt. Otherwise with increased interest on the debt, we are in danger of real US default, which would be a global calamity.

So what do we do?

The US financial house is in a pinch. Right now the economy is growing, even if only at a small amount. This is when we should be getting our house in order and paying down debt. We’re not at war and while inflation is still too high and people may not “feel” like it, Americans by and large are doing pretty well.

Most people can look at the numbers above and realize we’re going to need a reasonable solution of some spending cuts and some tax increases. In a word, America’s political parties and leaders are going to have to compromise.

Conservatives will get some cuts and progressives will get some tax increases. And then both sides will figure out how to live with those results.

Sadly, like a lot of the thorny issues we face today, immigration and election security among them, our political parties are pulled from the center outward to the partisan edges, fracturing the more centrist governing coalitions we need to survive and solve the real world challenging problems we face.

Additionally, right now, there seems to be only one party that seems to be serious about even trying to govern. Skud and conservatives are right. We do need to cut spending. But talk of balancing the budget purely on the cutting side of the equation, without considering revenue increases is both irresponsible and short sighted.