Six Questions to Ask About the Federal Budget

January 13th, 2010 Scott Bittle

One of the biggest problems in getting Americans engaged on the nations fiscal challenges is that the problem is so hard for most people to get their arms around. The numbers are so huge, the issues so arcane and the problems so daunting that people may get angry about it, but have no idea how to grab onto it.

Thats what makes the approach of the Committee on the Fiscal Future of the United States interesting. Their Choosing the Nations Fiscal Future report, issued by the National Research Council and the National Academy of Public Administration (NAPA) today, is about how to control our national debt, already past $12 trillion and threatening to rise to staggering (and dangerous) proportions. Public Agenda is part of the Choosing Our Fiscal Future project with NAPA, working to build a network of citizens wholl get involved in the discussion and work on solutions.

The nonpartisan committee laid out a goal for a sustainable debt level (keeping it to 60 percent of gross domestic product), four alternative paths for reaching the goal, and six basic questions to ask about any federal budget. The committee argues that if the answers to these questions are yes, were at least making progress.

Here are the questions, taken directly from the report. Consider whether the federal budget meets them now – and more importantly, keep them in mind as new budgets are proposed.

  1. Does the proposed budget include policy actions that start to reduce the
    deficit in the near future in order to reduce short-term borrowing and long-term interest costs?
  2. Does the proposed budget put the government on a path to reduce the federal debt within a decade to a sustainable percentage of GDP? Given the fiscal outlook and the committee’s analysis of the many factors that affect economic outcomes, the committee believes that the lowest ratio that is economically manageable within a decade, as well as practical and politically feasible, is 60 percent.
  3. Does the proposed budget align revenues and spending closely over the long term?
  4. Does the proposed budget restrain health care cost growth and introduce changes now in the major entitlement programs and in other spending and tax policies that will have cumulative beneficial fiscal effects over time?
  5. Does the budget include spending and revenue policies that are cost-effective and promote more efficient use of resources in both the public and private sectors?
  6. Does the federal budget reflect a realistic assessment of the fiscal problems facing state and local governments?

This gives the public something they havent had before: a set of standards for a good budget, or at least as good as it can be given the tremendous fiscal challenges we face. If we give the public more tools to measure the problem, and grapple with real solutions, we can get ahead of this challenge – while theres still time.

To find out more, and to become part of the citizen network working on this issue, visit the Choosing Our Fiscal Future web site, become a Facebook fan, or follow us on Twitter @FiscalFuture.


Rating: 2.5/5 (4 votes cast)

Did you enjoy this article? If so, please subscribe to my blog!
  • rdonovan
    All good questions. The trouble with balancing the budget is that to say we must balance the budget is shooting at the wrong target. What we really need is to run surpluses, which boils down to bigger spending cuts, but the biggest problem with balancing the budget is that there is no enforcible spending cap. Another problem is that that most conventional budgeting systems base current-year spending on prior-year outlays, zero-based budgeting(ZBB) being one well-known exception. The problem with ZBB is that, while it encourages sunset clauses for programs, rigorous annual scrutiny, and alternative funding, all of which are good, it depends on politicians coming up with objective performance criteria in order to work. Absent these, spending caps are the only viable option, but not based on prior-year outlays.

    The spending cap approach most often proposed is prior-year outlays plus inflation and population growth. Given that outlays are now typically 30% bigger than revenue, higher than that in some years, and that the debt is poised to exceed 90% of GDP, this pure growth approach will not work. if we increased outlays for 2009(3.518 trillion) by any amount, sat 3% to put a number on it(3.624 trillion). Receipts(2.104 trillion) must go up by 1.52 trillion just to break even. If they staid the same or went down, the deficit would increase. This simply cant work. Looking at the problem in terms of receipts like this actually suggests a viable, though initially painful long-term solution.

    Limiting spending increases, in terms of receipts, by any amount is essentially the same as taking prior-year receipts as the budget baseline and assuming theyll increase by a certain amount. If they increase by less than whatever amount is assumed, remain neutral, or fall, we get a deficit. Why must the report assume that we cant aim for surpluses? Probably because they are assuming traditional budgeting and prior-year outlays as the base. But what if we threw that out? What if we decided to use receipts as the baseline and assume they would fall by some amount each year rather than rise? In that case, we would have a surplus whenever receipts fell by less than the amount we assumed, and the surplus would be larger if they staid the same or rose. Nominal receipts typically fall during recessions, and usually by around three percent.

    Here is a quick example using a cap of 90% of previous-year receipts. 90% allows for 3% drop in receipts due to a recession, another 3% to cut taxes when receipts fall, and 4% to accommodate unusually severe recessions, natural disasters, and the odd natural disaster or terrorist attack: 2006 receipts were 2.407 trillion. 90% of that is 2.166 trillion. Thats the spending cap for 2007. Actual receipts for 2007 were 2.568 trillion, giving us a surplus of 402 billion. 90% of 2.568 trillion is 2.311 trillion, our spending limit for 2008 and an increase in spending of 145 billion. 2008 didnt do so well. Receipts were 2.524 trillion, basically unchanged, giving us a surplus of only 213 billion. The spending cap for 2009 would be just slightly lower, 2.524*90%=2.272 trillion. This small cut would not have been enough to avoid a deficit in 2009 receipts were only 2.104 trillion, resulting in a deficit of 168 billion. It would also have dictated a spending cut of about 17% to 1.894 trillion for 2010. Accorsing to the monthly treasury statement of receipts, the treasury has colected just over 800 billion in receipts for the first 5 months of the current fiscal year, putting us on track to have a somewhere between a 20 billion dollar deficit and a 10 billion dollar surplus by the end of 2010. This assumes that the increased costs inherent in the newly passed healthcare bill doesnt derail what might have been a weak, debt-laden recovery in revenues, which historically has not been a good bet.

    For those who are interested in exploring these ideas more, read my book available at
    http://www.amazon.com/Blueprint-Prosperity-Mark...

    Either approach will require spending cuts, The first to get us down to a balanced budget, and the second to get us consistent reliable surpluses that can be used to pay down debt quickly, cut taxes, and reduce unfunded obligations, preferably by helping privatize Social Security and most other entitlements. Spending could be increased in any year receipts increased with no danger of running a deficit. Spending would need to be cut in years when revenue went down, but nominal receipts seldom go down by more than 3% in the years they fall.
  • dontpaytaxes
    Please, pass this around!!!!!

    This is the next step, before the full fledged revolution that is coming our way! Threaten our government with this before things get violent:

    To: Congress, the House and the President

    Re: Taxes

    Sign this petition at:

    http://www.ipetitions.com/petition/irefusetopay/


    Over the past year, you’ve ignored the will of the people in many respects. You’ve pushed a monstrosity of a health care bill on us, which we’ve begged and pleaded you stop pushing. You’ve ignored the welfare and security of the people’s ability to find work and instead tossed them enough crumbs to get by through the intermittent passage of a UI bill that barely feeds a family of two, depending on where you live. You’ve pushed every possible anti-small business legislation in an order to crush the middle class and rich to help even out the dire needs of the poor. This is not America. This is class warfare, this is redistribution of wealth, this is tyranny and this is soon to be anarchy. In order to prevent anarchy, in order to prevent the violence and uprisings which we all feel are on the brink of happening, WE THE PEOPLE would like to present you with an alternative. The outcome of this alternative would end up keeping the peace, something we all want, something that is necessary to a civil society. This alternative would also help CONTROL the fanatical and power hungry desires of an out of control government. What is the alternative? Paying taxes. Or not paying taxes!

    The government needs OUR tax revenue for the overall general welfare of the country, which includes the upkeep of America’s infrastructure as well as the funding of our military, something we can all agree brings every man, woman and child protection. The problem that we all understand is that once this health care bill/education passes, among other anti-business bills such as cap and trade, the unionization of all businesses and other atrocious anti-business bills, NO AMOUNT of tax revenue will be enough to feed this out of control beast riddled with social program after social program. Just as Medicare costs were thought to be in the millions when the program first surfaced in the 60’s, in only a few short years we learned that the costs were potentially back bone breaking and today we have somewhere between 50 to 100 trillion in unfunded Medicare and social security liabilities. If it weren’t for the full faith and backing of the Chinese, Japanese and other countries who buy our treasuries and if weren’t for the productivity of the US worker whose pay check the government receives FICA taxes from, we’d had found ourselves in third world economic status in no time. But now that the government is taking away our economic freedoms, our ability to push this country forward without being swamped by social programs that tax us to death, now that the country is on the verge of losing its triple A bond rating, the possibility that those countries stop funding our liabilities is great. The fact that the US economy will be burdened by these bills and thus slow even more is no secret. And these problems equate to the death of the United States. It also means that no amount of tax revenue will keep our head above water and paying even a dollar in taxes will be a dollar wasted.

    So we come to you with this idea. Should you pass health care, should you continue to destroy the economic freedoms this country has enjoyed for two hundred plus years, we will not pay our taxes. If you think that you can control millions and millions of Americans through the IRS, then you’re sadly mistaken. Your IRS agents will be swamped with a convoluted mess of never ending paperwork, case loads and aggravation which means the revenue to the US government, which is drastically dropping due to the recession we’re in, will continue to drop and drop and drop. And let me assure you that soon enough, the US government won’t even have enough tax revenue to put gas in Air Force One.

    So we now present you with two options. The first, continue pushing through your despotic nonsense and chance losing the tax revenue of millions and millions of tax paying citizens. The second, come back to the center and start governing how WE THE PEOPLE want you to govern. I can assure you that should you choose the latter, the country will continue as it has for the past couple of hundred years but should you choose the former, you’re essentially risking civil unrest throughout the country, your political careers and potentially the life of this country. So I leave you with this… The choice is yours…. Choose wisely.

    Truly and Sincerely,

    The People of the United States

    If you would like to sign but don’t want to sign your own name, then sign “Susan B. Anthony” or “John Adams”. If an email is asked for, use ‘dontpaytaxes@live.com’ or any other fake email. The point is to get as many signatures as possible. Thank you for your political patronage AND please, pass this around to anyone you think would be interested in signing it. Thank you!

    Sign this petition at:

    http://www.ipetitions.com/petition/irefusetopay/
  • Chumpper
    In 2012 I hope the Republicans get back in power. They must reduce the size of government by laying off civil service workers, reduce the size of the military, freeze or repeal social security and medicare benefits. As Jim Bunting is doing no more unemployment benefit extensions. People, does anyone get it! Life for the average family is going to be hell under the next Republican President but you will get what you asked for! SARAH PALIN....
  • shane_b1968
    I have my own 6 questions about the budget.

    Why are we paying more than all other countries in the world combined on our military and its taken us nearly 10 years to to fight to a draw with people who are not all that far removed from fighting with spears on camel back? When do I get a friggin refund?

    How come were still giving Blackwater and Halliburton no bid contracts...or any contracts for that matter? Halliburton pays taxes in Dubai. I see no reason why they should be eligible for federal contracts at all.

    Why are we still funneling money into corporate Americas pockets with every bill that gets passed while people are starving in this country instead of getting rid of all private funding for elections and making the politicians answer to us and not the corporate paymasters?

    Why can I call myself a church and skip paying property tax or income while you have to pick up the slack?

    Why do republicans only manage to be fiscal conservatives when it comes to programs that dont benefit corporations, military contractors, rich people and contributors to the republican party?

    Why is it that when republicans whine about spending they are only concerned with the spending that goes to help poor people?
  • shane_b1968
    The answer if you are interested is that conservatives like poverty. They have no plan, nor even a desire to end it. Their whole platform is aimed at a permanent underclass to serve at the whim of the priviledged class they facy themselves ever being.

    They vote against the very programs aimed at bringing the poor into the working class and the working class into the middle class and the middle class into the upper class.

    The poor and working class do it because they are stupid, easily manipulated sheeple who can be bought off with guns and God and racism. The middle class do it because their fantasy that some executive is going to pluck them out of middle management and give them the key to the executive washroom...not.

    The rich...they vote against the rest of the country because they plain dont like you. They like their positition and they dont want to work too hard to maintain it. They have no interest in more middle class people getting wealthy. They like class stratification. They dont WANT you in their country club. They only want people with a "worthy" upbringing who "understand" their "values". They have no interest in dealing with people who work themselves up from the bottom ranks of society. They actively work against it with every policy decision they make.

    Name one republican policy that doesnt service to maintain the privilege for the few at the expense of the rest. You cant do it. Name a policy that is aimed at reducingt poverty. There are none. Name a policy that increases social mobility. Cant do it.
  • Chumpper
    Sir,

    This is one the most brilliant commentaries Ive ever read and Im old. Thank you for understanding whats at hand and the smarts to express it!
  • Give Me Liberty
    Do Liberals or Conservatives give more to charity?
    http://givemelibertyblog.blogspot.com
  • Give Me Liberty
    Do Liberals or Conservatives give more to charity?
    http://givemelibertyblog.blogspot.com
blog comments powered by Disqus