5 years ago
Although this information has been out since last year, in view of the $1.5 Trillion Deficit for 2011 projected by the Congressional Budget Office, it is well worth taking another look at this, updated report from The Cato Institute (and the accompanying video), titled, “New CBO Numbers Re-Confirm that Balancing the Budget Is Simple with Modest Fiscal Restraint.”
(Hat tip to Instapundit).
Here is the money quote:
Many of the politicians in Washington, including President Obama during his State of the Union address, piously tell us that there is no way to balance the budget without tax increases. Trying to get rid of red ink without higher taxes, they tell us, would require “savage” and “draconian” budget cuts.
The Congressional Budget Office has just released its 10-year projections for the budget, so I crunched the numbers to determine what it would take to balance the budget without tax hikes. Much to nobody’s surprise, the politicians are not telling the truth…
The chart below shows that revenues are expected to grow (because of factors such as inflation, more population, and economic expansion) by more than 7 percent each year. Balancing the budget is simple so long as politicians increase spending at a slower rate. If they freeze the budget, we almost balance the budget by 2017. If federal spending is capped so it grows 1 percent each year, the budget is balanced in 2019. And if the crowd in Washington can limit spending growth to about 2 percent each year, red ink almost disappears in just 10 years.
When was the last time that our political leaders found the spine to balance the budget?
… I also examined how we balanced the budget in the 1990s and found that spending restraint was the key. The combination of a GOP Congress and Bill Clinton in the White House led to a four-year period of government spending growing by an average of just 2.9 percent each year.
Mr. Mitchell perhaps gives Bill Clinton and the GOP Congress too much credit. Recall that the 1990’s involved huge cuts to the Defense budget (which came back to haunt us later). The savings in Defense outlays was plowed into all sorts of domestic goodies for both Clinton and Congressional constituencies, but the fact remains that the politicians somehow managed to keep overall spending down even in the midst of increasing revenues from a booming economy.
The lesson seems clear: get the Federal budget in line with revenues and start reducing the overall, Federal debt. This seems to be experience elsewhere in the world:
We also have international evidence showing that spending restraint – not higher taxes – is the key to balancing the budget. New Zealand got rid of a big budget deficit in the 1990s with a five-year spending freeze. Canada also got rid of red ink that decade with a five-year period where spending grew by an average of only 1 percent per year. And Ireland slashed its deficit in the late 1980s by 10 percentage points of GDP with a four-year spending freeze.
As Mr. Mitchell’s article notes, fixing the deficit is not a complicated matter. It simply requires our elected leaders to say no to the ever-growing wish lists of the Left and the President.
Hopefully the new Congress is up to the task.