In this election season, and the one that starts the day after the midterms are done, you will hear a lot of self-righteous chest-thumping about federal spending and the need to bring it down.
Now, a warning, kids. I am going to use a lot of numbers, but then again the budget has a lot of them, so...
“…if Republicans take charge of the United States Senate [in 2022], I will do everything in my power to make sure we have a vote on a Balanced Budget Amendment to the [U.S.] Constitution. Senator Lindsey Graham (R- Belle Reve).
So, what is the Republican from Tara's specific record on reigning in out of control spending? It's enough to give you the vapors.
From an NBC report...
During George W. Bush's presidency, the Republican administration added about $5 trillion to the national debt in eight years. At the time, Sen. Lindsey Graham of South Carolina stood by the White House, backing the Bush/Cheney tax cuts and spending bills without regard for deficits.
During Donald Trump's presidency, the Republican administration added over $7 trillion to the national debt in four years. Once again, Graham gladly went along, voting for tax breaks and spending packages, indifferent to budget shortfalls or rhetoric about "fiscal responsibility."
That didn't stop the South Carolina senator from speaking at a press conference this week and endorsing a constitutional amendment to prevent Congress from doing what he's been doing for years. The Associated Press reported:
U.S. Sen Lindsey Graham returned to where his political career started to ask South Carolina lawmakers to pass a proposal amendment to the U.S. Constitution to require a balanced federal budget. Graham said Tuesday that states need to put pressure on the U.S. House and Senate to stop them from spending more money than they take in.
But then, he has always depended on the kindness of strangers.
Then there is Senator Ted Cruz (R-Cancun).
And the good Senator's specific plans? The Committee for a Responsible Federal Budget took a look and this was their conclusion.
Most of the Cruz proposals are predictably vague in nature, though some disastrous specifics include a flat tax, which would not begin to cover our obligations, which I'll explain in a moment. Then there are delicious generalities like...”Promote Growth through Regulatory Reform, An Energy Renaissance, and a Stable Dollar.” Someone explain to me what that means in reality?
Meanwhile, those wild-eyed drunken sailor Democrats have cut the deficit this year by $1.7 trillion, representing the single largest decline in the federal deficit in American history, the Office of Management and Budget says.
Now that's a good thing and some fortuitous circumstances in the economy helped a lot, but indeed, the critics say we are spending too much more than we are taking in and they are right. So, what to do? Republicans, almost to a man and woman, say we must cut drastically while at the same time advocating cutting taxes. So, in individual terms, let's cut our household budget and I'll take a salary cut at work. Problem solved, right?
Many in the GOP point to the tax cuts and economic boom under Ronald Reagan. The initial Reagan tax cut was huge. The top rate fell from 70 percent to 50 percent. The tax cut didn’t pay for itself. According to later Treasury estimates, it reduced federal revenues by about 9 percent in the first couple of years. In fact, most of the top Reagan administration officials didn’t think the tax cut would pay for itself. They were counting on spending cuts to avoid blowing up the deficit. But they never materialized. In fact, Reagan had to raise taxes that, if you add them all together, were almost as big as or even bigger than the 1981 cuts.
And while it's popular to blame the Congress for the spending increases during the 80's, the difference between Reagan's budget proposals and the final congressional budgets amounted to 1.7% over 8 years.
So, it might be instructive to look at the last time the budget not only had no deficit, but was in surplus and we were paying down the overall national debt. That would be under, hold on, let me look it up. Ah, a Democrat named Clinton. Did he do it alone? Of course not. Well, unless you count the tax increase on the wealthiest at the beginning of his term. Every Republican voted against it, but federal revenues began to climb as spending was held in check. So, by 1998 and through 2001 we had budget surpluses, started paying down the debt and enjoyed the longest period of economic growth (8 years) up to that time.
By the way, it was the first budget surplus since a guy named Johnson was in the big house on Pennsylvania Avenue.
Then in 2001 and 2003, President Bush signed two tax cuts, and like a bad reality show, the deficit was renewed for another season. The lesson here would seem to be, if you get a raise or a bonus, like a budget surplus, fix the roof, don't buy a boat.
But let's go along with the prevailing and lockstep mantra of most on the right today, and assume we can cut our way to prosperity. Where exactly would you cut the budget? What can we live without or at least, with less of? And what is untouchable, more to the point?
That last part is easy. Defense for Republicans and Social Security and Medicare for Democrats. Let's presume that both get their way. What does that leave in the budget to cut?
Since for now at least, and until my plan explained in my last piece is instituted, Social Security and Medicare have their own sources of funding separate from the rest of the budget which is funded by income tax revenue and some other things like tariffs, gas taxes and such. OK, here's a pie chart of the budget for the current year, so let's haul out the ax.
This is what's known as the “discretionary budget,” which means Social Security and Medicare are left out since they don't draw on federal revenues and what's left is voted on every year, and therefore, cutable. Well, the math is easy here. Even after cutting the deficit in half this fiscal year, we are left with $1.4 trillion in red ink, with only $1.5 trillion in cut-worthy budget to work with.
Social security roughly is a break even proposition, Medicare a little less so, but both have their own funding. That's why they aren't included in the discretionary budget, unless you want to start using SS money to buy tanks. Their funding will hit a crisis point down the line with no changes, but I explained in my last piece, the problem is easy to solve. For Social Security simply raise the income cap for SS taxes from $147,000 a year to include all income. That will raise enough to keep the program solvent indefinitely.
For Medicare, open it up to all citizens with those under retirement age paying premiums near, but below what private insurance is currently costing them. They will get a plan with no pre-existing condition restrictions and without the need to make a profit. Doctors still work for themselves, hospitals are still owned by whomever owns them now, and those doctors have only one insurer to deal with, except for Medigap policies. Problem solved.
By the way, let's again mention the loathsome Senator Rick Scott, whose apparently irresistible impulse to lie rather simple-mindedly, I explained in my last essay. Well, he did it again this morning, as I write this on Sunday.
In defending his proposal to, in essence, phase out Medicare and Social Security by making them renewable every five years, he told CNN's Dana Bash unabashedly, that the Democrats had cut Medicare by $280 billion this year. I know, you probably missed it.
But Rick was referencing the proposal to allow Medicare to negotiate for better drug prices like it does for medical bills, and like the VA is able to do. That would save the program an estimated $280 billion in expenses, and patients as well. But Scott was trying to posit that saving the program that amount of money was the equivalent of cutting the program by that amount of money. It's the kind of math that no doubt led to the hospital corporation he headed being hit with the largest fine for Medicare fraud in the history of the program up to that time. Anyone who votes for Scott and is over 65, needs to take Trump's “Person. Woman. Man. Camera. TV” cognitive test.
As to the deficit, well, unless you want to run the government, defense and all, on $100 billion, the best we can do is whittle away. Where to start? Assuming we give Republicans their way on this, and defense is untouched, that leaves about $735 billion to play with.
Even though Rick Perry couldn't remember which departments he wanted to eliminate, we can help him. Most Republicans want to eliminate the Energy and Education Departments. There's $166 billion gone, along with any environmental programs, which Democrats will fight. It also means no more Pell Grants or federal student aid for those who are smart, but poor. So do you really want to eliminate it all?
OK, you don't like Pete Buttigieg, so eliminate transportation. Well, along with federal highways and help for city transportation projects, but you save $43 billion.
The Labor Department? Well, no more OSHA making sure your workplace is safe, child labor laws enforced, or disputes arbitrated. So there's another $41 billion.
Science, NASA, the State Department and it's embassies, federal housing for the poor, food stamps for the hungry, veteran's benefits, yeah, we could cut them all and save a bunch. Not enough to come close to balance, but a bunch.
Here's the whole budget with mandatory spending included.
Now, we have had a rolling referendum on all these things over the years, and decided they are worth doing. So maybe the plan is to raise more money. Economic growth is one part of the equation, but many are proposing a different tax system.
That different system is a so-called flat tax. Everyone from Bill Gates to you will pay the same percentage of their income. No more federal income, sales, gas or Social Security taxes. Just one simple bit of math to figure what you owe.
We in the US earn collectively about $21 trillion a year. Our government takes in from all sources roughly $4.1 trillion a year. Simple. A roughly 20% tax on everyone, top to bottom would do it. Of course, state and local taxes are not affected. And, truth be told, that $4.1 trill isn't enough since we still have a deficit, but let's see what we have for now.
So, is that fair? Yes, Jeff Bezos loses 20% of his $1.7 billion a year, and you lose 20% of your $44,000 a year, which is the median family income in the country. Who in this scenario is hit harder? You and Jeff pay the same amount for gasoline, bread, milk, beer, college, mortgage and state sales tax. OK, he doesn't have a mortgage. Of course, you're now doing it on $35K and Jeff is scraping by on $1.3 billion. I'm not begrudging Jeff that money, well maybe just a little. But to say it impacts everyone equally is fatuous nonsense.
And to raise enough with the flat tax to erase the deficit, the rate climbs to roughly 25% of your income.
Under the current system, after deductions, the average tax rate for folks making under $44K a year is 3.5%. Your average tax rate doesn't hit the flat tax 20% until you make over $150,000 a year (the top 10% of earners) and doesn't hit 24% until you are over half a million (the top 1% of earners).
Here's the table from the Tax Foundation.
|Top 1%||Top 5%||Top 10%||Top 25%||Top 50%||Bottom 50%||All Taxpayers|
|Number of Returns||1,482,459||7,412,296||14,824,593||37,061,482||74,122,965||74,122,965||148,245,929|
|Adjusted Gross Income ($ millions)||$2,393,383||$4,269,727||$5,621,027||$8,177,266||$10,517,131||$1,365,719||$11,882,850|
|Share of Total Adjusted Gross Income||20.1%||35.9%||47.3%||68.8%||88.5%||11.5%||100.0%|
|Income Taxes Paid ($ millions)||$612,027||$938,429||$1,117,856||$1,367,843||$1,530,288||$48,373||$1,578,661|
|Share of Total Income Taxes Paid||38.8%||59.4%||70.8%||86.6%||96.9%||3.1%||100.0%|
|Income Split Point||$546,434||$221,572||$154,589||$87,917||$44,269||$44,269|
|Average Tax Rate||25.6%||22.0%||19.9%||16.7%||14.6%||3.5%||13.3%|
So, folks, there are no silver bullets, no easy answers. That won't stop your duly elected charlatans from convincing you there is one.
Now, he is part of the Texas Outlaw Writers, and if this doesn't pan out, the outlaw part will still work as he will indeed resort to robbing banks.