Sunday, July 31, 2011

John Stossel's Chainsaw Budget

Before I get to an interesting take on the budget, I wanted to briefly comment on the state of play on the debt ceiling. Looking at what little information that is available on the debt ceiling deal proposed by McConnell, I am pretty certain that no one will be happy. Failing to make structural reforms to medicare and social security will be a long term disaster, along with back loading the budget cuts. From the AP:

Big cuts in government spending would be phased in over a decade. Thousands of programs — the Park Service, Internal Revenue Service and Labor Department accounts among them — could be trimmed to levels last seen years ago.

No Social Security or Medicare benefits would be cut, but the programs could be scoured for other savings. Taxes would be unlikely to rise.

Meanwhile John Stossel says that he can balance the budget next year. His proposals are too radical to pass, but I think they form a decent starting point to allow the tea party movement to point to specific things we would support. Here are some highlights from his web site along with specifics.
  • Reduce Social Security outlays as follows ($85.7 billion per year)
- Price index initial benefits (the current CPI overstates inflation, increasing pay outs unnecessarily)
- Raise the normal retirement age
- Cut Social Security disability program by 10%

  • Means test social security $170 billion per year
  • Eliminate Department of Education $106 billion per year.
  • Medicare/Medicaid reform $441 billion annually
- Increase deductibles for medicare services and increase Part B premiums
- Make medicaid a matching block grant program that caps the amount a state receives.

  • Eliminate Dept of Transportation - $84.8 billion
  • Cut defense spending by 2/3 - $475 billion (Yes, I am opposed to such a deep cut in defense, but in fairness, we should acknowledge that it is a big part of the budget.)
  • Cut federal civilian compensation costs by 10% - $29.6 billion
  • Eliminate Fannie/Freddie Subsidies - $14 billion
Stossel has many more cuts that would actually result in a surplus, but there is no way this would pass as a package. Still this is a worthwhile exercise to show that cutting spending will solve the deficit problem without tax increases. It doesn't mean that simplifying the tax code wouldn't produce more growth, just that we can actually manage this problem if we get the votes to rip out huge swaths of the federal government, especially those that are constitutionally suspect, like the Dept of Education.


  1. That Medicaid thing just passes the debt onto the states.

  2. Pick and choose, passing debt/ responsiblity to a more local government should be part of the plan. They shouldn't have taken money in the first place. Maybe passing on the debt will make them realize, the job of the representative is not to bring home the bacon, but stop sending it there to begin with.

  3. KT,
    I agree half way. It depends a great deal on how the bill is structured. I have read proposals that would free the states to spend the block grant on Medicaid as they see fit, so that might encourage innovation and saving. If the block grant is tied to how much they spend, then you are correct, there is no help.
    You make a good point about it easier to get control at a more local level.