By Dr. Harold A. Black
There are those who simply on reflex yell for the federal government to balance the budget. They say that households have to balance budgets (they don’t really) so the government should balance its budget. Ok. Then you ask them “how” and they don’t have a clue because very few people have the intellectual curiosity to learn about how to do it. In reality, there is no reason why the federal government should balance its budget. Just like households and corporations, the budget can be in a deficit so long as the outstanding debt can be serviced without an adverse effect on the borrowing entity. That is, if the household, corporation or government can increase its income sufficiently enough to maintain or increase its well-being while servicing its debt then it can run a deficit forever, paying off old debts while incurring new ones.
Yet let’s insist that the federal government try to balance its budget. That is practically impossible. The two parts of the federal budget are nondiscretionary and discretionary spending. The non-discretionary (mandatory) spending is because Congress has made it so and includes the entitlements Medicare and Social Security. The discretionary spending is everything else. Suppose that Congress decided to balance the budget in 2023 given the spending and revenue levels of 2022. Revenues were $4.9 trillion while non-discretionary spending was $4.1 trillion and discretionary spending was $1.7 trillion. Thus, if the budget were to be balanced then the amount allocated to the mandatory component would be $4.1 trillion of the $4.9 trillion collected leaving only $0.8 trillion. This would mean a 50 percent cut across the board in everything else that the government spends its money on. You can imagine all the yelling and screaming when defense, air controllers, law enforcement, corporate subsidies and social welfare programs are cut in half.
Of course, nondiscretionary spending is nondiscretionary because the government says it is. Everyone knows that in order to control federal spending then the spending on Social Security and Medicare must be corralled. So I offer a few real solutions of my own that will work.
- Eliminate duplication in government programs and spending.
- Eliminate automatic escalators in all government programs including Social Security.
- Raise the full benefit age of Social Security to 70.
- Privatize Medicare and Medicaid.
- Privatize Social Security with a benefit floor guaranteed by the federal government.
- Institute a flat income tax with no exemptions and require a two-thirds vote in Congress to raise it.
- Limit the growth in the number of pages in the federal register (this would limit the number of regulations that could be enacted).
- Institute an aggressive review of all regulations by all federal agencies.
- Mandate that regulatory burdens must be reduced by at least 5 percent per year.
- Limit federal pay (including perks) to no more than 10 percent over the average pay for the same position in the private sector.
- And cap the federal budget to 18 percent of the previous year’s GDP.
Of course, there is virtually no chance that any of this will ever come about because Congress has no interest in curtailing spending and no interest in fiscal discipline. The federal budget is a giant cookie jar to keep constituents and donors happy. Doing so gets politicians reelected and the administrative state in power doling out billions like manna from heaven. There are hardly any positive consequences to either politicians or federal employees for being frugal but severe ones if they try. Politicians would not be reelected and replaced by ones who would promise to restore the largesse of yore while federal employees would be fired and would have to find real jobs. Bummer.