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Forum Post: Balancing the Budget

Posted 2 years ago on April 16, 2012, 2:12 p.m. EST by gforz (-43)
This content is user submitted and not an official statement

I'm a generally conservative person, I would say what liberals would call a ".moderate" conservative because I'm mostly concerned about fiscal issues and not social ones. I'm trying to see if we can "cut to the chase"and figure out a way to reduce our deficit and debt and get a relatively balanced budget without killing any constituency entirely. That would be ideal. Regardless of what you may have heard or read from the talking heads who like to gin up us vs. them hatred, mostly to keep their ratings, conservatives and liberals agree on more than they disagree I believe. There are extremes of course, but the vast majority of Americans believe in basic common-sense values like doing what you say you're going to do, honoring an agreement, paying what you owe, assisting others when they can not do so, etc. It's usually a matter of degree that is the difference. It is possible to look at the big picture and adjust both tax and spending levels and come pretty close to balancing the budget without axing entire programs. The biggest issue is Medicare, whose growth cannot be sustained through tax increase in the next couple of decades. Here are some rough figures:

Gross National Individual Income- $13.3 trillion (broken as follows) Top 1%- $2.26 trillion, $318 billion taxes paid( over $343k) 2%-50%- $9.31 trillion, $757 billion taxes paid ($32-$343k) Bottom 50%- $1.728 trillion, $25 billion taxes paid ($32k and below) Total individual tax receipts- $1.1 trillion

U.S. Corporate Profits (annualized)- $1.67 trillion, $180 billion taxes paid Another $800 billion in social security and medicare taxes Excise and estate taxes- $200 billion approx.

Spending- $3.6 trillion annually Medicare, Medicaid, CHIP- $835 billion Social Security -$725 billion Defense/Nat. Security -$700 billion Other safety net programs-$466 billion Federal employees/veteran$252 billion Interest on Debt $230 billion Transportation $108 billion Education $72 billion Science and Medical research $72 billion "Other" programs $144 billion

So, we're about $1.3 trillion in the hole each year.It looks like the top 1% could pay more. Let's say we double their tax from the $318 billion (it looks like that would put the average up to a bit over 28% of their total income), then let's dip into the next 49% and try and get a 50% increase, which would take the average from 8% of income to 12% of income and raise an additional $375 billion. Then, just so everyone can say they're contributing, we get $5 billion from the bottom 50% of Americans or about $92 per household per year. So far, we've raised revenue $698 billion. Then we go to U.S. corporations, who, from the looks of it, make $1.67 trillion and pay $180 billion, or about 10.8% in effective taxes. How about we lower the tax rate to 15% across the board and take out all the loopholes and subsidies. That should raise another $66 billion in corporate taxes, so we have a total of $764 billion in added revenue. So we need approximately $536 billion in spending cuts to balance our budget. Let's take the savings from getting out of Iraq and Afghanistan- $159 billion to start with. Now from a baseline defense budget of around $536 billion let's take an additional 10%l something I would think could be easily attained without risking our national security. That cuts another $53 billion. Now let's take a similar 10% cut to the discretionary spending budget, which would cut another $64 billion. We're already at $276 billion in cuts without anyone having been hurt terribly. The rich are paying 28% of their gross income, the next 49% are paying 12% of theirs, and the less well off are paying about 1.7% of theirs. The corporations have had their rates lowered as they wished from 35% down to 15% but with no deductions, a very fair trade off and one that raises revenue. The military has 90% of its budget and so do the Congress critters in spending discretionary income. We've reduced the annual gap to around $300 billion and no one has touched SS, Medicare, or the other safety net programs. I would think we could tweak a combination of those, limit their growth, etc. and eliminate that deficit over time. Where am I wrong?



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[-] 3 points by geo (2638) from Concord, NC 2 years ago

Taxes do not fund expenditures in a fiat based monetary system. You are using macroeconomic concepts that apply to a commodity based monetary system like gold.

Federal budgets are not subject to the same constraints that household budgets, city, county, or state budgets are. The difference is that the Feds are the sole issuer of currency, thus they can not go bankrupt nor be insolvent.

Debt levels have no meaning unless compared to real GDP, and right now there is a large productivity gap as unemployment is high and underemployment is rampant.

A balanced budget would result in zero private sector savings.

[-] 1 points by doitagain (234) from Brooklyn, NY 2 years ago

keep it simple. reduce the expenses

[-] 1 points by geo (2638) from Concord, NC 2 years ago

You do understand that what happened in Greece and whats happening in our country is apples and oranges right?

Greece is part of the EU. Greece does not issue its own currency but uses Euros... therefore Greece does not operate under the same fiscal constraints as our Federal Govt does. Budget wise Greece is more comparable to how our state budgets are constrained... they too do not issue their own currency. Therefore, like a state, yes they are able to become insolvent.

Add to that, Greece was burdened with a high degree of debt that was payable only in foreign currency. A huge problem. The vast majority of the US Govt debt is payable in US dollars... something we don't run out of, ever. Now I'm not saying that the value of the dollar does not become affected by overprinting, what I'm saying is that we can not suffer the same fate as Greece... apples and oranges.

[-] 1 points by doitagain (234) from Brooklyn, NY 1 year ago

you said it. US debt in US dollars. sovereign part of the EU is different than one of the states, for example California. Like apple and Oranges. the relations between the countries inside the EU zone were build in accumulative profit. Where our allies makes Gees out of Greece dept.

[-] 1 points by MattLHolck (16833) from San Diego, CA 2 years ago

the US government does not control the FED

[-] 1 points by geo (2638) from Concord, NC 2 years ago

Despite rumors to the contrary the Federal Reserve is overseen by Congress. Congress maketh and Congress can unmaketh the central bank at any time. While Congress can not dictate day to day operations, there is that degree of independence, ultimately the Fed answers to Congress.

[-] 2 points by hchc (3297) from Tampa, FL 2 years ago

I applaud you though for taking some time out of your life to put this together.

Its more than about 99% are willing to do.

[-] 1 points by gforz (-43) 2 years ago

Thank you. It didn't take that much time. Just decided to look up the basic categorical income and expenses for the nation as it stands. You'll get slightly differing versions depending on exactly which year you look up, but the nuts and bolts are there. Bottom line, only $700 billion out of $3.6 trillion is our military. Most of the spending are entitlements or safety net programs of some kind. And most of the income in America comes from people earning between $32,000 and $154,000 ($9.5 trillion out of the $13.3 trillion total), far into the red zone of political danger for talking about tax increases. You don't get many comments from liberals to posts like these because it just lays out in bare terms the math. I actually think we could do much better than we are now with some short term pain in cutting some departments by 10%, let the Bush tax cuts expire, and use some of the funds to target specific growth industries like energy and healthcare and information technology, and get people trained to do those jobs. That seems smart to me, but hey, I know every hand is going to be out wanting to keep their whole piece of the pie, so I'm not naive.

[-] 0 points by hchc (3297) from Tampa, FL 2 years ago

$276 T is only about 25% there. You would have to quadruple that, just to break even.

SS and Medicare are set to explode, fairly quickly. Here is graph of the boomers population http://hypertextbook.com/facts/2002/SamuelBernard2.gif

We've been in a spot where the SS and Medicare growth, by sheer numbers, was declining. NOw its going to explode. And so are costs, plus the Ins companies have no incentive to control costs, because we are forced to buy regardless.

Interest rates right now are at .04%. The markets wont allow it forever. A rate up to 4% (reasonable) would increase that debt payment buy leaps and bounds.

Your math was all good. But it didnt come close to breaking even. And the spending is going to have to skyrocket, due to pop shifts and interest rates.

It is impossible to get our way out of this. Its already falling apart. I dont think there is going to be that one moment where all hell breaks loose, rather just a slow decline into something we will all be ashamed of.

[-] 0 points by gforz (-43) 2 years ago

I'm not following you. If you have a $1.3 trillion deficit, then you could cut spending by $650 billion, and raise revenue by $650 billion and the budget would balance. According to my math, I left a deficit of around $300 billion to be discussed as to how to get there with SS, Medicare, etc. because I essentially already raised revenue where possible from individuals and corporations, and cut spending mostly where liberals want (the military) I realize that mechanism have to be put in place to deal with entitlements in the next couple of decades, that's why I left it out. I don't think it's impossible to get out of this. I think we're going to have to work a bit longer, probably raise the cap on SS, and either deny some medical services to people or somehow lower the extreme cost of healthcare. It's just not sustainable with the Medicare rolls expected to go from 47 million to 80 million in the next 20 years.

[-] 0 points by Pequod (17) 2 years ago

Raising taxes never yields the income you expect. Lets say in a perfect world you raise the percentage enough to EXPECT a $300 billion yield, you might get $75 billion. There is a ton of evidence confirming this, Total income for the Federal government has rarely topped 19% no matter how high the tax rate. A lot of people in the high income brakcets self report their income and if they think the rate are unfair they just dont report income. You might get $200 billion of the $698 you seek.

I doubt Iraq and Afghanistan cost $169 billion a year now. Can you provide a non biased link?

$54billion in non discretionary income cut and no one is hurt? Think again.

[-] 0 points by gforz (-43) 2 years ago

$64 billion was a 10% reduction in discretionary income. Tell me that our science and medical research, education department, interior department, and all of the other programs will be decimated by only getting $9 out of every $10 they're getting now. You could be right on the tax yields. I thought the percentages were reasonable and would average 13.5% of gross national individual income across the board. I would have thought most of the rich would think a 28% tax rate is fair and would pay it. Maybe I'm wrong.

[-] 0 points by Pequod (17) 2 years ago

Yes they would, but no one on this forum wants to confront the simple truth that inorder to get any money from taxes, the bottom and middle are where the real money is.

I dont think they would be decimated but there are incredibly powerful lobbies for everyone of the programs you mentioned. There is a reason why we have all these bi partisan commissions that look at both raising taxes and cutting spending and then their suggestions are completely ignored.

[-] 0 points by gforz (-43) 2 years ago

I agree with everything you said. The real money is in the percentages of the population between 2% and 50%, where about $9.5 trillion of the $13.3 trillion in individual income reside. I don't mind trying to get some from the top if only to show liberals that they won't get it. I think it's probably fair, but I don't know if they'll get it. And I also realize about the imbedded constituencies for every dollar out there. All the more reason to not have a lot of the programs in the first place in my opinion.