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The New Path to a Balanced Budget

Sunday December 31st, 2017   •   Posted by Craig Eyermann at 7:34am PST   •  

Following the passage of the Tax Cuts and Jobs Act of 2017, what would it take for the U.S. Congress to put the U.S. government’s spending on a course to zero out the U.S. government’s budget deficit by 2027?

That question is more of a thought experiment than something that we think is likely to happen, but the results of some simple math are shown in the following chart:

Right now, under current law and the CBO’s assumptions for what economic growth will be over the next ten years, the CBO projects that the U.S. government’s spending would increase at an average rate of $258 billion per year, from $3.927 trillion to $6.499 trillion.

But, if the growth of the U.S. government’s spending were restrained to rise by $111 billion per year over the next decade, the U.S. government would balance its annual budget, zeroing out the deficit.

Writing at National Review, Kevin Williamson considers where the U.S. stands today and what that kind of spending restraint would mean:

The United States is on an unsustainable fiscal trajectory. That does not mean that there is an economic crisis right around the corner, today, tomorrow, or in six months. But if nothing is done, entitlement spending will grow beyond our ability to pay for it, even with substantial future tax increases. Military spending is a heavy contributor to our fiscal burden, too, and it could and should be reduced, but that will first require rethinking our national-security posture and our worldwide military capabilities. For the military, the mission determines the budget, but much of federal spending would be more properly organized the other way around. And as much fun as it is to mock Harry Reid’s federally subsidized cowboy-poetry festivals and the critical national effort to get monkeys high on cocaine, basically all of federal spending goes to a handful of programs: Social Security, Medicare, Medicaid, national defense, and interest on the debt. Everything else—from the federal highways to staffing the embassies to the FBI—adds up to about 20 cents on the federal spending dollar. If interest rates go up, then debt service could become a radically larger expense—think about an outlay roughly the size of the Department of Defense budget—very quickly.

Which is to say, there’s no way to fix our finances without doing the things that nobody—especially Republicans—wants to do, meaning some combination of cuts to military spending, reform of Social Security and Medicare, and tax increases. The less you want of one, the more you’re going to need of the others.

There are ideas for reforming the biggest ticket spending categories in the U.S. government’s annual budget out there that would both improve the nation’s fiscal situation and improve the quality of what Americans get from these most costly of government programs. While they may not close the gap between the government’s annual tax collections and its annual spending in the next 10 years, they can succeed in narrowing the gap between the two, which would certainly be an improvement over where we would end up with so much excessive federal government spending on today’s autopilot course.

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December 2017