How to Balance Federal Budget

Economics
1

The budget deficit for fiscal year 2024 came in at 1.8 trillion dollars. Please correct my calculations if needed.

How much money is spent due to corruption and waste is not something for which there can be a firm estimate. Surely there is corruption, such as payoff of officials to not interdict imports of illegal narcotics into the country. I doubt the amount of money going to corruption and waste is a significant portion of the federal deficit. Any talk about closing the deficit by rooting out corruption and waste would seem to be merely a distraction from serious thinking about how to balance the budget.

Eliminating the DEA saves 3.3 billion dollars.

There are are around 2 million federal employees who are civilians. The average salary is around one hundred thousand dollars. By my reckoning, eliminating all those jobs would save the government 0.2 trillion dollars per year. (Eliminating those jobs eliminates Treasury and IRS, which sounds suspiciously like an increase in federal deficit or elimination of the government, including paying the military.)

Supposing the federal government could keep running after eliminating virtually all of its civilian work force, the fiscal year deficit would be brought down from 1.8 to 1.6 trillion dollars. So talk of eliminating large portions of the civilian work force would also seem to be a distraction from what must be done to balance the budget.

Politicians don’t like to talk about what really has to be done. They prefer to distract from or ignore the problem. The real solution, I suspect, is not pretty, politically speaking: cut payouts to the citizens and raise taxes on them.

 

2

2 hours ago, Boydstun said:

The budget deficit for fiscal year 2024 came in at 1.8 trillion dollars. Please correct my calculations if needed.

How much money is spent due to corruption and waste is not something for which there can be a firm estimate. Surely there is corruption, such as payoff of officials to not interdict imports of illegal narcotics into the country. I doubt the amount of money going to corruption and waste is a significant portion of the federal deficit. Any talk about closing the deficit by rooting out corruption and waste would seem to be merely a distraction from serious thinking about how to balance the budget.

Eliminating the DEA saves 3.3 billion dollars.

There are are around 2 million federal employees who are civilians. The average salary is around one hundred thousand dollars. By my reckoning, eliminating all those jobs would save the government 0.2 trillion dollars per year. (Eliminating those jobs eliminates Treasury and IRS, which sounds suspiciously like an increase in federal deficit or elimination of the government, including paying the military.)

Supposing the federal government could keep running after eliminating virtually all of its civilian work force, the fiscal year deficit would be brought down from 1.8 to 1.6 trillion dollars. So talk of eliminating large portions of the civilian work force would also seem to be a distraction from what must be done to balance the budget.

Politicians don’t like to talk about what really has to be done. They prefer to distract from or ignore the problem. The real solution, I suspect, is not pretty, politically speaking: cut payouts to the citizens and raise taxes on them.

 

“cut payouts to the citizens and raise taxes on them.”

Ha, besides cutting the payouts, you almost sound like a mixed economy type….

Why not take a view through an Objectivist lens?

If what is moral and proper is a government wielding its monopoly on the use of force solely to protect individual rights, the broad category of “corruption and waste” properly defined includes any and all violation of the individual by imposition of force exceeding the metes and bounds of proper government fulfilling its proper role.

With that in mind, and keeping in mind America, even at her founding never met the high standard of an ideal laissez-faire capitalism, one could look at various aspects of America’s past, and conclude it should be better, i.e. greatly reduced or eliminated.

Countless departments, regulatory agencies, licensing bodies, every part of the welfare state, none of which are proper branches of government should be eliminated. All funding and government grants to any cause or NGO should be eliminated.  I have no stats but a proper government in broad strokes, should be much smaller than a tenth of what it is now, and in a free and prosperous productive nation such would  be able to shrink even smaller.

It’s not a question of reducing corruption and waste “in” government, but excising whole portions of so-called government because they themselves constitute corruption and waste.  Afuero!

That moral and proper exercise is the “real solution” to the problem.

 

1 Like
3

I agree that cutting out services of government beyond its proper functions is key to balancing the federal budget. But it should be described as I did just now. Not put under an inflated title of “corruption and waste”, which evades stating what actually needs to be done and the moral part of why it needs doing. Pretending that the problem will be solved by a fake to putting elimination of programs under the umbrella of what people understand as corruption and waste will not avoid the pain of what really must be done if it is done. It is in fact only a soothe-saying, not any real marching.

Usually, of course, the elected officials preaching that the budget should be balanced know that what they are doing is not going to balance the budget. Talking of vast new riches for the government due to a coming uptick in the economy is an old wishful dream put about again and again, with no fruition in reality. That song is an evasion. Also an evasion, and avoidance of responsibility, is coming up with plans for a balanced budget that will only eventuate 10 years from now.

The nuts-and-bolts problems I see are: No leaders are willing to make balancing the budget top priority, and the voters don’t much want to hear that that is your top priority. Passing major legislation, speaking practically, requires a two-thirds vote in the Senate. A preponderance of the citizens does not want to hear the true historical record of Social Security and need to eliminate it (Capitalism in America – A History [2018] by Greenspan and Wooldridge). There would also be widespread resistance to higher income taxes. One workaround to that would be to revise the schedule to a flat rate and no exemptions, which might not end up as an increase for most people. And then adjust the rate such that expected revenue matches expected expenditures. Fall of progressive income tax rates, however, would likely be filibustered in the Senate. 

In 2026 it is likely, by recent historical patterns, that control of the House will return to the Democrats (supposing there is not some trumped up “national emergency” delaying the election). Halley was right that Republicans, not only Democrats, were responsible for the inflation, though the biggest blame should go to the Democrats. I’m pretty sure the same goes for present budget deficit, and when Democrats again control the House, they will put about the usual pipe dream that if we raise taxes on the rich it will be enough to supply everyone with their heart’s desire and fulfill the ideal of Jesus of loving your neighbor as yourself. Their insinuation, of course, is that it is they who oppose soaking the rich who are to blame for the budget shortfall.

4

If we want the population to drive political action toward lessen the ‘government’, in this context spending and manipulation of financial and capital markets put taxation ‘in the face’.

Federal withholding and matching by employers should be severed. At present commercial interests that pay employees are the collection agencies and the ‘system’ is the default. Generations of wage earners have come and gone with ‘gross pay’ as a basically ignored abstraction. 
 

Without even changing the current rates or schedule pay employees their gross amount and requiring them to distribute the monies from their own accounts would focus the population’s attention on the actual costs of government expenditures , return the power of the purse back to the purse.

 

Heck it’s way more constitutional to receive all of one’s property regardless of any ‘government ‘ imposed obligation.
 

 

5

The trivial answer is to only spend money for proper purposes, and we know what those purposes are. However, money is also spent to cover prior obligations, for example the government borrows money from citizens with the promise to pay interest on that loan (savings bonds for example). The government also steals money under the promise to return a portion of it in the future (social security). The government has numerous contracts with individuals and businesses, which create an obligation to pay in return for goods and services. Sure, you can declare that the government has no right to make such promises and no person has the right to rely on such promises, because anyone should know that these are improper functions of government. The underlying premise of that thinking would be that a contract is automatically void if a party should know that it is morally suspicious.

Oh, also, we do not know for sure whether it is morally proper for the government to spend money enforcing contracts. That is because there is no existing pre-payment for litigation plan (i.e. the option of “buying enforceability” for property rights). We know that you have the right to have your contracts enforced, it is not determined whether you have to pay for exercising that right.

Clearly, the first step, which is strictly political, is to not authorize future improper expenditures. Dealing with past expenditures and the liquidation of existing booty to satisfy debts is a second and later step. Repudiation of debt is highly immoral, and is not under discussion. Evil acts have severe consequences. Youi, youj and youk all advocated the existing regime of “infinite government-supplied free stuff”, and thus bear moral responsibility for the severe consequences of government expenditure.

2 Likes
6

Balancing the budget could just be done mathematically. I think Singapore does something like that:

  • Have Congress spend “points” instead of dollars
  • When the amount of revenue becomes known, determine how many dollars each point will be worth.

This can get complicated for various reasons: it might still be necessary to use dollars for some things (e.g., interest on the debt), and there might need to be different types of points. Still, it should be possible.

1 Like
7

Let me be more specific. The real solution to making up the 1.8 trillion dollar deficit will come from the OMB under its new director. That will be actual serious stuff such as reducing the amount that people are receiving in their SS checks. I doubt he will propose increasing taxes directly. The rub for the fiscal conservatives in Congress and the head at OMB is that Trump likes to be popular. So they may have to settle for the small-potatoes show-time distractions of Trump/Musk cuts in government payroll and the usual phony talk about just gaining by greater efficiency and routing out corruption. Then budgets in the red will continue, translating into continued inflation, and Trump’s affection for tariff power is going to continue to bolster financial uncertainty and higher prices.

PS – I calculate that the amount we would have to reduce SS payments annually to each recipient is about $28,000. That would cover the 1.8 trillion dollar shortfall in the annual budget. But that reduction is $4,000 more than the SS annual incomes of the recipient. So there will have to be additional cuts, such as to Medicare, and/or there have to be big rise in taxes. There is also the alternative of more inflation which steals from people’s life savings and their pensions. Readers of Heinlein remind us “there is no such thing as a free lunch.” Rand reminds us “reality is not cheated.”

1 Like
8

I’ve read that the US Treasury could be paying as much as $100 billion (yes, with a b) to people who don’t even have social security numbers – not even temporary numbers.

If that’s true, why not get rid of that? (If only half of that $100 billion is fraud, get rid of the half that is fraud. Oh, and possibly, arrest people for committing fraud.)

I’ve also read that there are 6.5 million Social Security recipients 112 years old or older. Who is cashing those checks?

The reason this is important is not just because you could save money from just them. It’s because a system that allows that is probably allowing a lot more stuff. For every cockroach you see in the kitchen, there are ten you don’t see.

It seems like there’s going to be a lot more waste and fraud than anyone thought.

9

If SSA knows the age of recipients , they may not be ‘sending’ them out. Who would miss them ? Just think of all the postage they are ‘saving’ us.

10

8 hours ago, necrovore said:

I’ve read that the US Treasury could be paying as much as $100 billion (yes, with a b) to people who don’t even have social security numbers – not even temporary numbers.

If that’s true, why not get rid of that? (If only half of that $100 billion is fraud, get rid of the half that is fraud. Oh, and possibly, arrest people for committing fraud.)

I’ve also read that there are 6.5 million Social Security recipients 112 years old or older. Who is cashing those checks?

The reason this is important is not just because you could save money from just them. It’s because a system that allows that is probably allowing a lot more stuff. For every cockroach you see in the kitchen, there are ten you don’t see.

It seems like there’s going to be a lot more waste and fraud than anyone thought.

Keep the faith, but here’s the real deal: Balancing the budget, assuming taxes are not increased, will require cutbacks in federal payouts to the US citizens, such as through SS, Medicare, FEMA, USDA. Since the latter two are intermittent, there might be enough votes in Congress to abolish them. I see that Musk has moved his aim away from balancing the budget to reducing the shortfall by only .5 trillion dollars. And the Washington Times imagines that the Trump proposed budget will not be a balanced one. We’ll see before long. Perhaps it will be the usual dodge: a plan for a balanced budget in some number of years of which the present budget is the first step. 

1 Like
11

Every year, most adults directly pay many thousands of dollar to the federal government in income taxes. Then there are state income taxes, various wealth taxes, innumerable excise taxes. One of those taxes is FICA. There is confusion among people over whether they have a “right” to direct federal give-aways, such as free peanut butter (only if you claim a certain income level), housing and so on, but usually people understand that at best there might be some indirect benefit such as a paying job resulting from some federally subsidised program. FICA is special, though: it is a direct tax on income with the promise of a return. It is structured to deceive people into thinking it is an investment program, in that your return is a function of your payments, and not a function of your “need”.

In relation to balancing the budget and in search for a single big-ticket cut that could at least temporarily reduce the deficit, there are two obvious solutions. One would be to stop SS payments entirely and reassign all of those 4 trillion dollars to the general fund, which could slightly reduce the federal debt by about 10%. The other obvious solution is an increase of taxes. Neither would be particularly popular as a solution, but at some point, reality will become self-enforcing and popularity be damned. In terms of “fair share” where all people are burdened equally, each us us currently owes around $100,000. To pay down this debt, a repayment plan will be necessary, stretched over multiple years. This might be realized as a tax of $10,000 per person per year over 10 years – more and longer of course if the goal is to actually pay the debt. The problem is that for every $10,000 paid into the government, Congress will think “Oh boy, free money! Now we can spend more on programs!”, so the debt will increase exponentially and the debt-tax will have to increase to keep pace.

There is a bold alternative, though, and it would be very popular: shift the burden to the top 20% of earners. People whine about the 1%, but let’s get real, they could just confiscate 50% of everything held by the 20%, and the vast majority could be entirely free of the burden of taxation, with no loss of government entitlements. They could adjust those numbers variably, depending on the level of whining that results from rich people being forced to finally pay their “fair share”.

The focus on “inefficiency” and “fraud” is just plain populist fraud, a side-show to appease the masses. The cause of the sky-rocketing federal debt is the fraudulent premise that the government can create wealth by requiring money to be spent, then printing more money to cover those expenditures. Since The People are unwilling to forego ever-expanding federal benefits and they are unwilling to have their own property subject to increased confiscation, the only solution is going to be to go after the 20%. But even then, after you have wiped out the top 20% and there has been no decrease in federal spending, they will have to next go after the top 40%, and at that point your chances of being unaffected by wealth-nationalization have plummeted, and you might be receptive to one of those other unthinkable solutions. Like, put an end to government spending.

 

1 Like
12

Just let the federal government , the government of, by and for the people, confiscate all unrealized fossil fuel deposits and then sell the fuel. 

13

1 hour ago, tadmjones said:

Just let the federal government , the government of, by and for the people, confiscate all unrealized fossil fuel deposits and then sell the fuel.

Or, just have the government of by and for the people confiscate all unrealize or underutilized resources and exploit them for The People.

14

Well yeah , just like turning to the 40%, but this would be real wealth, confiscating the property of the 1-20 %s would only have utility when liquidated into currency.

15

 

“fiscal responsibility” – balanced budget in ten years!

16

President Trump will soon have a budget bill on his desk from the Congress for signature. He could balance the budget this year, if he would send the bill back to the House and tell them to cut all outlays by a certain same percent such that the expenditures match the expected revenues in this fiscal year. He neglected to do that in 2017, when Ryan was the Speaker. But perhaps a balanced budget is just not really that important to these contemporary Republicans when it comes down to actually doing it.