12 Days of Solutions, Day 10: The 19% Solution
In March 2011, Reason Magazine published an essay entitled “The 19 Percent Solution.” Written by Nick Gillespie and Veronique de Rugy, it pointed out a very simple fact related to the federal budget: we can balance the budget without raising taxes, and do it in a way that accepts political reality.
According to Gillespie and de Rugy – admittedly, in March 2011, so the exact figures may be different 21 months later – the Congressional Budget Office (CBO) expects federal revenues to reach 19% of Gross Domestic Product (GDP) in the near future. As such, federal spending needs to go down to 19% of GDP.
Let’s do some calculations to see how this would work:
- According to USDebtClock.org http://usdebtclock.org/, America’s GDP is $15.52 trillion.
- The Fiscal Year 2012 budget was $3.538 trillion, according to Fox Business.
- Using these numbers, the federal budget was 22.8% of GDP in Fiscal Year 2012.
- Thus, spending needs to go down by 3.8% of GDP – or about $590 billion – to bring spending to 19% of GDP.
- Unfortunately, this would still would leave a massive budgetary imbalance, as revenues in 2012 were about 16% of GDP. But just over half of the deficit would be gone, a worthy accomplishment.
Now, de Rugy and Gillespie argue lowering spending to 19% of GDP can be done over a certain period of time, in order to live within political reality. As Tea Party Patriots, we know that political reality has little bearing on actual fiscal reality. Additionally, reality can be changed by outside influences – after all, political reality is based entirely upon what politicians vote for, and activists can be influential in changing who and what politicians support. So we’ll look at how this can happen in one year.
First and foremost, low-hanging fruit in the budget should be cut. Tens of billions are spent on farm subsidies, unused federal property, other corporate welfare, etc.
Second, defense spending must be cut. Reformation of the contracting system, closing bases overseas, better oversight on programs, and a simple one-year audit should show that well over 10% of defense spending can be cut in one year.
Third, a 2010 Heritage Foundation paper estimated $47 billion could be saved simply by bringing federal employee compensation in line with private sector equivalents.
Bringing spending within constitutional boundaries – a key part of the Tea Party Patriots’ platform – includes eliminating unconstitutional departments, or at least aspects of them. It would be simple to cut huge parts of the Department of Education, Department of Transportation, Department of Homeland Security, and other agencies. This could easily save $100 billion annually.
Selling federal lands, especially west of the Mississippi River, would diminish federal spending and provide a temporary boost in federal revenues that should go to deficit reduction. This would have the added benefit of allowing more energy and other land cultivation that would expand employment and the federal tax base. The potential here is unknown, but clearly enormous.
Reformation of the federal grant system would claw back billions in unused grant dollars. A report by Senator Tom Coburn (R-OK) estimates almost $700 billion is sitting unused, but the federal government has no way of bringing the money back to the Treasury without legislative changes.
At the end of the day, the federal government has a tremendous waste, fraud, and duplication problem. Duplication may, according to Senator Coburn’s office (based upon two GAO reports) account for almost 10% of federal spending. This is at least $300 billion in annual spending that could and should be eliminated.
Welfare spending – such as that found in the still-dangerous farm bill legislation sitting in Congress – should be drastically reformed.
Obamacare should be repealed.
Finally, Social Security, Medicare, and Medicaid must be reformed. Most importantly in the short-term, means-testing to both Social Security and Medicare should be implemented. Also, better oversight in both Medicare and Medicaid would help to diminish the $70 billion in improper payments found in the combined spending of both programs in 2010.
At the end of the day, more than $590 billion needs to be cut from the federal budget. But the measures listed above would be a good start to actually balancing the budget, especially as the economy slowly improves. Also, all of the above spending cuts do not include interest savings, which would be significant, especially over time.
The 19% solution still has the federal government spending too much. But if Washington ever gets serious about cutting spending, it can look to this blog post – and Tea Party Patriots as a whole – for ways to actually bring the federal government back to fiscal sanity.