Many House Republicans say they want balance the federal budget in 10 years just cutting spending. And it appears they received a promise from newly elected House Speaker Kevin McCarthy (R-CA) to bring such a plan up for a vote sometime this year.
I can’t wait to see how it looks.
Achieving fiscal balance in 10 years through spending cuts alone is, well, impossible. Of course, many of these House Republicans don’t really want to balance the budget. Their real goal is to drastically reduce the size of government.
If these legislators were serious about reducing the deficit, they wouldn’t have just adopted house rules that make it easier to cut taxes and harder to raise them. But let’s take them literally. How could Congress balance the budget in 10 years without any tax increases?
looking at the numbers
Start with the Congressional Budget Office baseline budget projections since last May. They estimated that the federal government will raise about $56 trillion over the next decade, but spend roughly $72 trillion. But in December Congress added about $740 billion in additional spending over 10 years, assuming that spending continues to rise with inflation. And House Republicans have pledged to make the individual income tax cuts permanent in the Tax Cuts and Jobs Act of 2017 (TCJA). That would cut revenue by another $3 trillion. over a decade, plus additional interest costs on additional debt.
Let’s round it up and say the gap between spending and revenue over the next decade will be about $20 trillion. Here’s how that expense breaks down:
Don’t assume tax increases, which are unlikely in the House. And key House Republicans, including new Appropriations Committee chair Kay Granger (R-TX), they say they won’t cut military spending. That means Republicans would have to fill the entire $20 trillion tax hole by cutting Social Security, Medicare, Medicaid and other national programs, plus the savings they would get from lower interest payments.
What would it take?
How could House Republicans strike a balance? They could cut people’s rights like Social Security, Medicare and Medicaid. Alternatively, if they protect those programs, they would have to eliminate almost all other household expenses. And that would cancel programs beloved by his voters, like farm subsidies, western water projects, border security, and the air traffic control system. We just saw what happened when that failed for only a few hours.
What if the cuts are based on each program’s share of non-interest spending? For example, since Social Security accounts for about a quarter of that pie, projected benefits would have to be reduced by about $4.5 trillion over 10 years.
If the Republicans protect military spending, Social Security benefits would be cut by about 30%. If the cut were to occur this year, the Chamber would reduce the average monthly benefit by $565, from $1,827 to less than $1,300.
The actual cuts from the program would be minor as the Treasury would also see some interest savings. Even if the Republicans really wanted to eliminate just the primary deficit (excluding interest payments), they would still have to cut Social Security benefits by $3.2 trillion and Medicare payments by $2.6 trillion.
any way you tell it
There are many ways to view the problem. He Committee for a Responsible Federal Budget has published an analysis. Their numbers are slightly different but the story is the same. You could look at the shortfall only in year 10, instead of over 10 years. But any way you tell it, the cuts needed are too big to be credible.
And there are other problems.
Some spending cuts popular with the House GOP would increase the deficit. For example, the CBO estimates that the House vote to cut most new IRS funding add $114 billion to the deficit over the next decade, as fewer resources would make it harder for the agency to collect the taxes owed.
Don’t forget how these changes would affect an economy that may be growing slowly or not at all later this year. Do the Republicans really want to cut public spending, which would be strongly contractionary, when the US may be headed for a recession?
Make no mistake, Congress needs to control the federal budget. He public debt now exceeds $24 trillion. Annual interest payments are approaching half a trillion dollars. Years ago, my colleagues at the Tax Policy Center warned against catastrophic budget failure—the consequences of combining wasteful spending with insufficient tax revenue.
But trying to balance the budget in 10 years with only domestic spending cuts is policy and political malpractice. And once it fails, how will the GOP justify letting the nation go over its debt limit? How do you stop new loans when your expenses exceed your income?
House Republicans are about to find out that passing a balanced budget, especially with its self-imposed limitations, is much harder than asking.
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