So You're a Fiscal Conservative...

[Virgil Showlion]

It's July of 2016. The US economy has slipped back into recession and the BEA is predicting an end-of-year deficit of $550 billion, with an additional $100 trillion in new agency debt, bringing the total shortfall to $650 billion.

An itemized, categorized list of all US federal government spending is viewable at: www.usgovernmentspending.com/year2016_0.html

You are honourary US President, tasked with cutting $750 billion dollars out of federal government spending (in perpetuity, effective at the end of 2016) in order to run a $100 billion surplus. Interest rates are currently low and hence you'll never have a more opportune time to act.

You've pored over the books and determined that you can cut $150 billion out of the US defense budget before you start hitting bone. Meaning: you may cut more than $150 billion out of the defense budget if you wish, but your advisers assure you the majority of this will necessarily be taken from programs such as veterans' care, rehabilitation, upkeep of equipment and military bases, and soldier pay. In other words, it will be the veterans and troops on the ground who bear the brunt of cuts in excess of $150 billion, not military contractors.

This is an exercise in fiscal conservatism and hence i) you may not levy new taxes, ii) you may not sell or lease national assets, and iii) you must cut a full $750 billion from the federal budget, immediately (i.e. effective by the end of the year). Assume that you have the administrative authority to make any cuts you propose a reality. You're welcome to note where you would ordinarily violate i, ii, and iii if you were permitted to do so, but for the sake of this exercise, the restrictions stand.

You may, if you wish, divert funds earmarked for Social Security into reducing the deficit (a la Pres. Clinton).

You may also assume if you wish (and I'm being generous here) that the US economy--and in particular, federal tax revenues--will not contract significantly as a result of your cuts.

If you have any questions about other measures to raise revenues or cut costs, don't hesitate to ask. Please limit your proposals to measures where you can reliably quantify the money saved. A proposal such as "I would promote healthy eating, and Medicare/Medicaid spending would drop by 10% because Americans were living healthier lifestyles." is speculative at best and not valid for the sake of this exercise.

What do you cut to make up the $750 billion? This question is particularly relevant to those who call themselves "fiscal conservatives".

Disclaimer: If you have no use for such hypothetical exercises, please find another thread to post in and leave this one to those who do.

My thanks to all who participate.

[dondub]

This is an exercise in fiscal conservatism and hence i) you may not levy new taxes

 When a household has too much debt for their income don't conservatives preach that spending should be cut and a part time job should be acquired to help pay down the debt load? Raising taxes to increase revenues is that equivalent. In fact, until all the conservos started slashing taxes we had much lower deficits. And under Clinton a combination of less spending and higher taxes did wonders for the deficit.

[Deleted]

If I were going to cut deficit spending I would limit growth of all programs to 2% per year, and let time take care of things.  Any extra spending has to come out of current spending.

If i had to cut spending this year,
 I would end department of education.  Whatever money goes to that, I would send 3/4 of it back to states and save the other 1/4. ~Eighteen billion there.

 I would end participation in NATO.  I would close 90% of foreign bases. 

I would cut department of energy in half. 13 billion there.

 I would end department of homeland security. 55 billion there.   

I would cancel any new highway construction, and give half that money to states, save the other half.

I would end DEA and ATF.

I would end NSA,  Send 1 billion to Edward Snowden, save ~$50 billion

I dont know about the rest.

[tallguy]

I think for an exercise of this magnitude we'll need to call in Dave.  He'll call Murray, and it'll be done by morning.

Dave: I don't want to tell some eight-year-old kid he's gotta sleep in the street because we want people to feel better about their *car*. Do *you* want to tell them that?

Secretary of Commerce: [quietly] No sir.

[sits back in his seat and reflects]

Secretary of Commerce: No I sure don't.

[Virgil Showlion]

Feb 4, 2016 21:45:13 GMT -5 dondub said:

This is an exercise in fiscal conservatism and hence i) you may not levy new taxes

 When a household has too much debt for their income don't conservatives preach that spending should be cut and a part time job should be acquired to help pay down the debt load? Raising taxes to increase revenues is that equivalent. In fact, until all the conservos started slashing taxes we had much lower deficits. And under Clinton a combination of less spending and higher taxes did wonders for the deficit.

You can start a "fiscally liberal" thread to blue sky the merits of raising taxes. In fact, I welcome it.

The working assumption in this thread is that personal and corporate income tax levels stay where they are, and the damage comes through cuts. This is a reflection of the fact that taxes have never gone up any time in the past 75 years without a greater-than-commensurate increase in spending (even if the increase lags by several years). In light of this reality, we deem tax increases off-limits for this exercise.

Alternatively, you can assume that $X billion in new taxes have already been levied and the minimum acceptable surplus has also risen by $X billion.

[gregintenn]

How far do I get eliminating the epa and the dept of education? Might as well enact a flat tax with no exclusions or deductions. This would eliminate the irs. Let's cease all foreign aid as well. Care to tally that up for me?

[mroped]

In 2010 just 22.5% or 154.5 billion out of the defense budget went to payrolls and services provided to all serviceman. I don't believe the VA funding comes from DOD budget.
The point is that the DOD could stand a lot more trimming than $150 billion before claiming that you'd have to cut payrolls. Ofcourse that's where would be the cuts first because there is no way we would give up on some useles equipment that nobody uses or cares for!

Discretionary budget for 2015 was $1.1 trillion so assuming that you cut $150 billion on defense(which is doable), you'd be hard pressed to find another $600 billion to cut since the remainder is just $500 billion altogether.
Because of that you'd have to go to mandatory spending and that means SS, unemployment and labor, Health Care and Medicare.

Your demand for a $750 billion cut it is unattainable!
Anybody that would claim that is doable under the present conditions won't last in office.

You could put a dent into that $750 billion by closing all tax loopholes and stop all tax breaks for a year.
In 2015 all tax breaks were more than discretionary spending.
Revenue from taxes was $2.05 trillion where $1.48 was personal taxes and a mere $348 billion in corporate taxes. Imagine closing the loopholes on corporations and raising the rates back to pre Bush era(not gonna say pre Regan!)!

At that point you might have something going!

[Virgil Showlion]

Feb 4, 2016 21:51:22 GMT -5 @hickle said:

If I were going to cut deficit spending I would limit growth of all programs to 2% per year, and let time take care of things.  Any extra spending has to come out of current spending.

If i had to cut spending this year,
 I would end department of education.  Whatever money goes to that, I would send 3/4 of it back to states and save the other 1/4. ~Eighteen billion there.

 I would end participation in NATO.  I would close 90% of foreign bases. 

I would cut department of energy in half. 13 billion there.

 I would end department of homeland security. 55 billion there.   

I would cancel any new highway construction, and give half that money to states, save the other half.

I would end DEA and ATF.

I would end NSA,  Send 1 billion to Edward Snowden, save ~$50 billion

I dont know about the rest.

That's a good start, but you have about $550 billion to go, generally speaking.

I appreciate your candor.

[Deleted]

If you  really want to save money, limit growth of budgets and let time pass.  We got into the mess over a long time, spend a bit of time fixing it.  Every department of whatever can get by next year at 101% of this years budget. Do the same increase every year. Time passes.

[Virgil Showlion]

Feb 4, 2016 22:01:20 GMT -5 mroped said:

In 2010 just 22.5% or 154.5 billion out of the defense budget went to payrolls and services provided to all serviceman. I don't believe the VA funding comes from DOD budget.
The point is that the DOD could stand a lot more trimming than $150 billion before claiming that you'd have to cut payrolls. Ofcourse that's where would be the cuts first because there is no way we would give up on some useles equipment that nobody uses or cares for!

Discretionary budget for 2015 was $1.1 trillion so assuming that you cut $150 billion on defense(which is doable), you'd be hard pressed to find another $600 billion to cut since the remainder is just $500 billion altogether.
Because of that you'd have to go to mandatory spending and that means SS, unemployment and labor, Health Care and Medicare.

Your demand for a $750 billion cut it is unattainable!
Anybody that would claim that is doable under the present conditions won't last in office.

You could put a dent into that $750 billion by closing all tax loopholes and stop all tax breaks for a year.
In 2015 all tax breaks were more than discretionary spending.
Revenue from taxes was $2.05 trillion where $1.48 was personal taxes and a mere $348 billion in corporate taxes. Imagine closing the loopholes on corporations and raising the rates back to pre Bush era(not gonna say pre Regan!)!

At that point you might have something going!

As I said to Don, raising corporate taxes is off-limits for this exercise. If you prefer, you may raise corporate tax rates provided you assume the increase is exactly offset by corporations moving to more tax-friendly environments (a la Apple, Pfizer, et al.).

Closing tax loopholes is permissible if you can procure a reliable (as in, backed by an article or paper somewhere) estimate of how much additional revenue this would generate.

You can make cuts to mandatory spending, and you aren't accountable to the voters. You can cut as much as you want.

[Virgil Showlion]

Feb 4, 2016 22:08:00 GMT -5 @hickle said:

If you  really want to save money, limit growth of budgets and let time pass.  We got into the mess over a long time, spend a bit of time fixing it.  Every department of whatever can get by next year at 101% of this years budget. Do the same increase every year. Time passes.

...and interest rates go up.

Believe me, you don't want to know what the US's balance sheet looks like if interest rates go back up to anything reasonable.

[mroped]

Greg, the whole budget for education in this country was in 2015 $70 billion while DOD got their mittens on $598 billion. We don't spend money on educating people, we spend money on tools to kill people!
On energy and environment-which encompasses the so much despised EPA- we spent $39 billion or 3% of the budget.
International Affairs-$40.9 billion!

On the other hand- Lockheed Martin has a contract for the infamous F35 for $400 billion

There it is Virgil: $400 billion from the F35 and we'll find the rest tomorrow!

[Virgil Showlion]

Feb 4, 2016 22:16:57 GMT -5 mroped said:

Greg, the whole budget for education in this country was in 2015 $70 billion while DOD got their mittens on $598 billion. We don't spend money on educating people, we spend money on tools to kill people!
On energy and environment-which encompasses the so much despised EPA- we spent $39 billion or 3% of the budget.
International Affairs-$40.9 billion!

On the other hand- Lockheed Martin has a contract for the infamous F35 for $400 billion

There it is Virgil: $400 billion from the F35 and we'll find the rest tomorrow!

The $400 billion is over more than a decade, and it's a one-time cost.

Assuming you're willing to scrap the program entirely (as in: the $400 billion already spent flushed down the toilet), I'll give it to you for $40 billion.

[Deleted]

It is going to be sad if we get this figured out and everyone expects Virgil to send the solution on to congress, but Virgil doesn't do anything because he is Canadian and doesn't really care about us. 

[Aman A.K.A. Ahamburger]

Well, Hickle I'm a Canadian and I care about you guys - so there's that! Something tells me if, VtL didn't care about you guys he wouldn't bother posting here..

VtL,

I hate to say it because I'm one that solves problems, but there is no answer here - like mroped said.

It's fiscally impossible to cut 750 billion from the budget in one year and not have the entire US - or the world economy for that matter - run right off the rails.

Heck, we could refinance the entire deficit through monetization and with remittance it would be a few hundred billion short.(haven't run the actual numbers but I'm sure this is the case)

From there we could tell OPEC and others (aside from Canada) to go huck themselves, get the oil patch reved up(forcing welfare recipients that can't find work to hit the patch), cut the BS limits on coal and get that industry up and going, cut military spending to the bone.. and I think we are STILL short by a hundred or so....

On the flip side, in reality this scenario won't be necessary as the fiscally conservative team in TX has real world solutions to the Baby Boomer Bubble.. If I told ya those though, I'd have to kill ya.

Great thread, BTW, VtL. God bless.

[djAdvocate]

the projected budget deficit is $400-500B for this FY.

military spending is $600B.

cut military spending until the budget is balanced.

you're welcome.

[djAdvocate]

Feb 4, 2016 21:45:13 GMT -5 dondub said:

This is an exercise in fiscal conservatism and hence i) you may not levy new taxes

 When a household has too much debt for their income don't conservatives preach that spending should be cut and a part time job should be acquired to help pay down the debt load? Raising taxes to increase revenues is that equivalent. In fact, until all the conservos started slashing taxes we had much lower deficits. And under Clinton a combination of less spending and higher taxes did wonders for the deficit.

i don't actually see why raising taxes is not a fiscally conservative thing to do when revenues are below historical norms.  the historical norm is about 18% of GDP, and we are still below it- we have been since 2002, when W simultaneously went to war and cut taxes, the first president to ever engage in that act of stupidity in the history of the US, and hopefully the last.

[Lizard Queen]

The government is too big of a player for cuts during a recession not to have a detrimental effect on the economy.  The time to cut and pay down debt is during periods of big growth, which the idiots in Washington didn't do in the past.  (Yes, I was aware of it then, and it pissed me off that they cut taxes and boosted spending instead.)

[gregintenn]

Feb 4, 2016 22:16:57 GMT -5 mroped said:

Greg, the whole budget for education in this country was in 2015 $70 billion while DOD got their mittens on $598 billion. We don't spend money on educating people, we spend money on tools to kill people!
On energy and environment-which encompasses the so much despised EPA- we spent $39 billion or 3% of the budget.
International Affairs-$40.9 billion!

On the other hand- Lockheed Martin has a contract for the infamous F35 for $400 billion

There it is Virgil: $400 billion from the F35 and we'll find the rest tomorrow!

The difference is that the military should be under the purview of the federal government. It should not have a single thing to do with education.

[djAdvocate]

Feb 5, 2016 12:53:06 GMT -5 Lizard Queen said:

The government is too big of a player for cuts during a recession not to have a detrimental effect on the economy.  The time to cut and pay down debt is during periods of big growth, which the idiots in Washington didn't do in the past.  (Yes, I was aware of it then, and it pissed me off that they cut taxes and boosted spending instead.)

precisely right.  they are all Keynsians....when the economy is less than stellar.  but they are NEVER Keynsians when it is really good.  NEVER.

[djAdvocate]

Feb 5, 2016 13:16:19 GMT -5 gregintenn said:

Feb 4, 2016 22:16:57 GMT -5 mroped said:

Greg, the whole budget for education in this country was in 2015 $70 billion while DOD got their mittens on $598 billion. We don't spend money on educating people, we spend money on tools to kill people!
On energy and environment-which encompasses the so much despised EPA- we spent $39 billion or 3% of the budget.
International Affairs-$40.9 billion!

On the other hand- Lockheed Martin has a contract for the infamous F35 for $400 billion

There it is Virgil: $400 billion from the F35 and we'll find the rest tomorrow!

The difference is that the military should be under the purview of the federal government. It should not have a single thing to do with education.

but the military doesn't have anything to do with education. 

[Deleted]

Feb 5, 2016 13:16:19 GMT -5 gregintenn said:

Feb 4, 2016 22:16:57 GMT -5 mroped said:

Greg, the whole budget for education in this country was in 2015 $70 billion while DOD got their mittens on $598 billion. We don't spend money on educating people, we spend money on tools to kill people!
On energy and environment-which encompasses the so much despised EPA- we spent $39 billion or 3% of the budget.
International Affairs-$40.9 billion!

On the other hand- Lockheed Martin has a contract for the infamous F35 for $400 billion

There it is Virgil: $400 billion from the F35 and we'll find the rest tomorrow!

The difference is that the military should be under the purview of the federal government. It should not have a single thing to do with education.

the middle east should be under the purview of the middle east, not our federal government.

[djAdvocate]

Feb 5, 2016 13:29:02 GMT -5 @hickle said:

Feb 5, 2016 13:16:19 GMT -5 gregintenn said:

The difference is that the military should be under the purview of the federal government. It should not have a single thing to do with education.

the middle east should be under the purview of the middle east, not our federal government.

leaving out the second amendment argument, which provides an even STRONGER case against standing armies, the federal government is responsible for defending us, not acting as global cop.  a small defensive force would cost a small fraction of what we pay for our bloated military, and defend us just as well.

edit: i am agreeing with you, hickle, in case you are wondering.

[gregintenn]

Feb 5, 2016 13:29:02 GMT -5 @hickle said:

Feb 5, 2016 13:16:19 GMT -5 gregintenn said:

The difference is that the military should be under the purview of the federal government. It should not have a single thing to do with education.

the middle east should be under the purview of the middle east, not our federal government.

Absolutely!

I was arguing a constitutional principle, not foreign policy.

[Deleted]

Feb 4, 2016 22:11:54 GMT -5 Virgil Showlion said:

...and interest rates go up.

Believe me, you don't want to know what the US's balance sheet looks like if interest rates go back up to anything reasonable.

What will happen?  I used to think interest rates have to go up to deal with all the debt.  I have finally figured out I have little idea what the future holds.

[gregintenn]

Feb 4, 2016 22:11:54 GMT -5 Virgil Showlion said:

Feb 4, 2016 22:08:00 GMT -5 @hickle said:

If you  really want to save money, limit growth of budgets and let time pass.  We got into the mess over a long time, spend a bit of time fixing it.  Every department of whatever can get by next year at 101% of this years budget. Do the same increase every year. Time passes.

...and interest rates go up.

Believe me, you don't want to know what the US's balance sheet looks like if interest rates go back up to anything reasonable.

I'd love to see interest rates go back up.

[Virgil Showlion]

Feb 5, 2016 11:32:22 GMT -5 djAdvocate said:

the projected budget deficit is $400-500B for this FY.

military spending is $600B.

cut military spending until the budget is balanced.

you're welcome.

You need to cut $750 billion.

You can cut at most $550 billion from the military. Still $200 billion left to go.

And you're really going to destroy America's army, navy, and airforce at the end of 2016 (which is what cutting the military budget by 100% would do)? It would mean laying off every last serviceman, disbanding the national guard, and abandoning bases and military assets, including aircraft carriers, tanks, and jets to whomever may find them.

Just so we're clear.

[Deleted]

Feb 5, 2016 14:27:55 GMT -5 gregintenn said:

Feb 4, 2016 22:11:54 GMT -5 Virgil Showlion said:

...and interest rates go up.

Believe me, you don't want to know what the US's balance sheet looks like if interest rates go back up to anything reasonable.

I'd love to see interest rates go back up.

The US owes 19 billion dollars at a variable rate.   The interest rate could easily triple. Maybe quintuple.

[gregintenn]

Feb 5, 2016 14:30:32 GMT -5 @hickle said:

Feb 5, 2016 14:27:55 GMT -5 gregintenn said:

I'd love to see interest rates go back up.

The US owes 19 billion dollars at a variable rate.   The interest rate could easily triple. Maybe quintuple.

Then I could buy CDs and get out of the stock market.

[Virgil Showlion]

Feb 5, 2016 14:27:55 GMT -5 gregintenn said:

Feb 4, 2016 22:11:54 GMT -5 Virgil Showlion said:

...and interest rates go up.

Believe me, you don't want to know what the US's balance sheet looks like if interest rates go back up to anything reasonable.

I'd love to see interest rates go back up.

So would everybody. But the fact remains that if interest rates went back up to 5%, where they were in 2000, the US would be paying a little under $1.2 trillion per year just servicing the interest on public debt and agency debt.

Technically speaking, that goes beyond "unrealistic" to "impossible".