Category Archives: U.S. Congress

One-sided approaches won’t stabilize the debt

By Steve Brawner
© 2014 by Steve Brawner Communications, Inc.

Is it possible to bring the government’s debt under control by focusing only on one area – raising taxes, for example, or cutting defense spending? Let’s return to the Debt Stabilizer to find out.

I wrote last week about the Debt Stabilizer, an online tool created by the Committee for a Responsible Federal Budget that lets average citizens make tax and spending choices – hopefully better ones than Congress has made – in order to reduce the public debt.

Currently $12.6 trillion, the public debt is the portion of the $17.6 trillion national debt that doesn’t include what the government has borrowed from itself, such as from Social Security. It’s currently 78 percent of the size of the economy and headed to nearly 150 percent by 2050. Historically, it’s been 40 percent.

The goal of the Debt Stabilizer exercise is to reduce the public debt to 60 percent of the economy by 2024. Doing so requires improving the government’s balance sheet by $4.84 trillion over 10 years – equal to $1.54 million for every American.

I managed to reduce the public debt to 59 percent of the economy, mostly by cutting spending while raising the gas tax and closing tax deductions, and then wrote about it in my last column. After I emailed the link to the CRFB, communications director Jack Deutsch replied with an observation: Try playing various roles – the defense cutter, the tax raiser, etc. You’ll see how one-sided approaches don’t work well.

Let’s see if he’s right.

I started by trying sort of a House Republican approach: Oppose most defense cuts, support most spending cuts, and support most tax cuts. That approach left me at 69 percent of gross domestic product by 2024 and at 60 percent by 2028. However, some of those spending cuts, including the steeper ones for Social Security and Medicare, are unlikely to materialize.

I next was more of a congressional Democrat – cut defense, increase social spending, tax the rich, etc. That option reduced the debt to 73 percent of the economy but did not put the country on a path to 60 percent. “Uh oh! You failed to reduce the debt to a sustainable level,” the Debt Stabilizer said.

Other imbalanced approaches were unsuccessful. I tried one that would be popular with many Americans – cut taxes and spending without touching Social Security and Medicare. That got me to 73 percent, same as the congressional Democrats. The same percentage was reached when I cut defense spending and pulled us out of Afghanistan but left everything else alone. Doing almost nothing but cutting foreign aid left the debt at 78 percent of the economy. Foreign aid is 1 percent of the budget.

There were several imbalanced approaches that reached 60 percent. Raising every tax on the list and ending every deduction reduced the debt to 57 percent of gross domestic product. Cutting spending wherever I could and leaving taxes alone reduced the debt to 56 percent. Cutting all the taxes and all the spending reduced the debt to 60 percent.

However, those spending cuts included politically unpopular reductions for Medicare, Social Security – even $30 billion less for school breakfasts. Realistically, they wouldn’t happen. My tax increases included similarly unlikely scenarios such as ending deductions for the powerful oil industry and reducing the amount that average Americans can deduct for charitable gifts.

When I started this exercise, I hoped to play the parts of Rep. Tom Cotton and Sen. Mark Pryor, but I soon decided I couldn’t do their positions justice – particularly Pryor, who can be hard to pin down. Safe to say that Cotton takes pretty much the congressional Republican approach, which requires a number of unlikely spending cuts. Pryor – at least based on how he’s campaigning – is somewhere in the neighborhood of congressional Democrats, who, as the Debt Stabilizer makes clear, “fail to reduce the debt to a sustainable level.”

If a family’s debt needed stabilizing or a small business were in trouble, everyone would gather around the table to consider what to cut and where extra income could be found. Probably no one would get everything they wanted, and if one tried to dictate, the rest would not buy in.

At some point, Americans and their elected officials hopefully will realize that the government is no different – that choices and compromises must be made. If that happens, the debt will be reduced to a sustainable level.

And if that never happens? Uh oh.

Could you spend money better than Congress?

By Steve Brawner
© 2014 by Steve Brawner Communications, Inc.

It’s been 13 years since Congress and the White House balanced the federal budget. Could you do better in 20 minutes?

The Committee for a Responsible Federal Budget (CRFB), a Washington-based group dedicated to finding solutions to the country’s long-term debt problems, offers a budget-balancing tool for citizens, the Debt Stabilizer, at its website, crfb.org. According to the site, the Debt Stabilizer has been visited more than 600,000 times since it was created.

Users are given a series of choices to reduce the public debt from its current 78 percent of gross domestic product to a more manageable 60 percent by 2024. Historically, the debt has been 40 percent of GDP. At its current pace, it will reach 100 percent by 2035 and nearly 150 percent by 2050, according to the CRFB.

The public debt, currently $12.6 trillion, is the portion of the $17.6 trillion national debt that doesn’t include what the government has borrowed from itself, such as from the Social Security Trust Fund.

To reach 60 percent, you must come up with $4.84 trillion over 10 years using a combination of savings and increased tax revenues. That’s $1.54 million for every American man, woman and child, or about $6 million for a family of four. That’s how deep in debt we are.

The exercise shows the range of actual, difficult choices that would address the problem, as opposed to the much easier solutions many Americans mistakenly believe exist. Polls show Americans are aware the national debt is a serious issue. However, in a survey last year by the Pew Research Center listing 19 options for reducing spending, not a single one was favored by a majority.

Want to give it a shot?

The Debt Stabilizer starts with a page featuring unavoidable policy decisions, such as what to do about Afghanistan. Brief explanations are provided about the options. Eliminating war funding entirely after 2021 would save $820 billion. Choosing that gets you one-sixth of the way to $4.84 trillion.

The next page features a series of options regarding defense and foreign policy spending. Those include ending the military’s new Joint Strike Fighter plane, which is very late and far overbudget. You can either cut veterans’ benefits $50 billion, or you can increase them by $50 billion.

There’s an option to cut foreign aid by 25 percent – certainly a popular choice among Americans. A Kaiser Family Foundation poll last year found the average American believes foreign aid is 28 percent of the budget. It’s actually 1 percent. Cutting it 25 percent would save $150 billion.

The next page gives you a chance to cut various kinds of domestic discretionary spending – basically what the government doesn’t spend on defense, Social Security and health care programs. Want to create a moon colony? That would add $250 billion to the public debt. You can cut highway spending or increase it. Reducing food stamps to 2008 levels saves $140 billion.

The next pages cover Social Security, Medicare and the government’s health programs. Social Security and Medicare politically are very difficult to touch, as Rep. Tom Cotton is discovering in this year’s Arkansas Senate race, but together they are 38 percent of the federal budget. Leaving them completely off the table requires very deep cuts elsewhere and/or higher taxes.

By enacting all my spending cuts, I saved $3.5 trillion, which is apparently far more than the average American would choose. And yet as tough as I was, I still needed to find $1.1 trillion to stabilize the debt.

That means I had to increase revenues, which I did by increasing a few taxes, such as the gas tax to fix our roads and bridges, and by eliminating some big tax deductions. I saved $510 billion by gradually phasing out the mortgage interest deduction we all use, including me. That would be political suicide if I were running for office.

I more than met the goal. I lowered the 2024 public debt by $5.03 trillion, which would be 59 percent of the projected gross domestic product that year.

See if you can do better at crfb.org. Email me at brawnersteve@mac.com and let me know how it goes.

Shrink government by actually paying for it

By Steve Brawner
© 2014 by Steve Brawner Communications

Do you want to reduce the size of government? I mean, really reduce it, instead of just talking about it? There’s one surefire way. Pay for the government we’re buying. If that means raising taxes, so be it.

It’s simple economics. To reduce consumption of a product, raise the price.

I’ll explain. For decades, Americans have been buying big government at what has felt like a steep discount. Since 2001, we’ve fought wars, deposed dictators, and created huge government programs under Presidents Bush and Obama. Meanwhile, thanks to the Bush tax cuts, Americans have been paying historically low taxes.

In the meantime, the national debt has increased $11 trillion just since Sept. 30, 2000 – equal to more than $35,000 for every American currently living, or $140,000 for a family of four.

None of this is a coincidence. When something is cheap, people consume more of it, and that includes government. During the past 14 years, we’ve gotten $11 trillion of government for which we did not pay. Naturally, we’ve done what consumers always do when given free stuff: Accept it, and expect more. That will continue as long as we keep using this national credit card that never seems to come due. But come due it will.

The only way we’ll ever shrink government, and the only way we’ll stop increasing the debt, is if Americans finally understand the true costs of these national policies. That will only happen when they pay for them. Imagine if the average family of four had been required to pay $140,000 more in taxes these past 14 years. Don’t you think there would have been a much more vigorous debate about whether the United States could afford these military actions and big government programs?

In 2004, the late William Niskanen, chairman of the Cato Institute, made the same argument. The Cato Institute is not a left-wing outfit; instead, it supports greatly reducing government. Niskanen studied the growth of government from 1981 to 2000. He found that federal spending increased by half a percent of the nation’s gross domestic product for each one percentage point decrease in tax revenues. In other words, as taxes were reduced, government grew. We were running deficits almost every year then, too.

Unfortunately, while both Republicans and Democrats like increasing the size of government, they don’t like making Americans pay for it. The latter is especially true among Republicans. Years ago, the conservative movement adopted a theory known as “starve the beast.” The thinking was by reducing the tax revenues sent to Washington, government naturally would shrink.

Conservatives weren’t thinking like economists. Government did not shrink. Why would it? We weren’t paying for it.

Even though it hasn’t worked, “starve the best” remains the dominant strategy among conservatives. Many Republicans at the federal and state levels have signed the Americans for Tax Reform’s “Taxpayer Protection Pledge,” stating they will resist efforts to raise taxes. Every current Republican member of Arkansas’ congressional delegation has signed the pledge, as have the two Republicans challenging for seats in Congress: French Hill in the 2nd District and state Rep. Bruce Westerman in the Fourth.

The pledge been an effective tool for keeping Republicans in line on tax increases. Unfortunately, there hasn’t been an equally effective “No spend pledge” where elected officials promise not to spend money the government doesn’t have.

Don’t you see the problem with that? Members of Congress can cut taxes but spend all they want because those most affected, the upcoming generations, don’t vote yet.

I don’t want to pay higher taxes any more than you do. But taxes aren’t the real problem. Big government is. If it grows like it’s projected to grow, eventually taxes must be raised, regardless of who has signed what pledge.

Let’s close by proposing two principles. First, if taxes are cut, spending should be cut at least that same amount. And second, except in extraordinary circumstances, Americans must pay the full price for the government we are buying. It’s the only way we’ll make wise decisions about how much of it we want.

Who got us into this debt?

By Steve Brawner

Who was the last Republican president to preside over a budget surplus throughout an entire fiscal year? When was the last time a Democratic Congress created a surplus? And when did a party create a surplus while controlling both the White House and the Congress?

It’s been a while in all three cases.

Let’s start by explaining the terms. The federal government’s fiscal year starts Oct. 1 and ends the next Sept. 30. A budget surplus occurs when the government collects more than it spends during a single fiscal year’s time. Most years our government runs deficits, which over time have created a $17.5 trillion national debt – an amount equal to more than $50,000 for every American. If the government were to run a $100 billion surplus this year (which it won’t), the national debt then would be $17.4 trillion.

The last time the federal government ran a surplus was 2001, when it collected $128 billion more than it spent, according to the White House Office of Management and Budget.

That was President George W. Bush’s first year in office, so he’s the last Republican president to preside over a surplus, right? Well, not really. The fiscal year began Oct. 1, 2000, nearly four months before Bush was president. His predecessor, Bill Clinton, signed almost all the bills that funded the government for 2001. Bush can’t get much credit for something that happened under Clinton.

The federal government also ran surpluses from 1998 to 2000 under Clinton’s watch. During that time, Republicans were in charge of both the House and Senate, so those surpluses occurred under a Democratic president and Republican Congresses.

Before that, the federal government had run budget deficits every year since 1969. That means that, each year, the overall debt grew larger. Working backwards, those deficits occurred annually under Republicans George H.W. Bush and Ronald Reagan, Democrat Jimmy Carter, and Republicans Gerald Ford and Richard Nixon.

Fiscal year 1969, a surplus year, ended during Nixon’s first year in office, but at that time the fiscal year started July 1, 1968, so Democrat Lyndon Johnson was president for more than half of it. Democrats controlled Congress the entire fiscal year.

That was the last time a Congress controlled by Democrats created a surplus. It was the year the United States first landed on the moon, and it was 45 years ago.

The previous surplus occurred nine years earlier in 1960 under Dwight Eisenhower, who also presided over surpluses in 1956 and 1957, working each year with Democratic-controlled Congresses.

Eisenhower therefore was the last Republican president to preside over a surplus during an entire fiscal year – 54 years ago. I like Ike.

When was the last time a surplus occurred when a single party controlled both the White House and Congress? The surplus year of 1969 started under Johnson and occurred under a Democratic Congress. You could say it was that year.

However, the last time a party ran a surplus throughout an entire fiscal year while controlling Congress and the White House was 1951, when President Harry Truman and a Democratic Congress were in power. The last time Republicans balanced a budget while running everything was 1930 under President Herbert Hoover.

This is, admittedly, a simplistic analysis. The sample size is small. Since 1930, there have been only seven Republican presidents and only seven Democrats, and it’s relatively rare for a party to control the White House and both houses of Congress. Also, the fact that fiscal years don’t align with election years complicates things. Finally, budget surpluses and deficits are dependent on many factors a president and Congress can’t really control, including the actions of their predecessors.

Still, it should be clear that both parties share the blame for this $17.5 trillion debt we’re passing on to our children. Just getting rid of that Democrat in the White House or firing only those Republicans in Congress will not solve this particular problem.

Both Republicans and Democrats led us into this hole. So who’s going to lead us out?

Arkansas Week, June 6

I appeared on AETN’s “Arkansas Week” Friday with host Steve Barnes, longtime journalist Ernie Dumas, and KUAR’s Ernie Dumas. We discussed the upcoming runoff elections, the Pryor-Cotton Senate race, state revenues and the possible upcoming special session about school employee insurance.