The 2007 Solution: Senator LeMieux’s plan for the federal budget

Republican senator George LeMieux of Florida has done the math. If government spending were reduced to its 2007 level, we’d have a balanced budget (with a $163 billion surplus). Returning to the 2008 level of spending, the budget would be balanced in 2014 (a $133 billion surplus). And in both cases, that’s while keeping the Bush tax cuts across the board and indexing the loathed alternative minimum tax for inflation.

“Could we live with what we did in 2007?” LeMieux asks—the “we” a collective reference to Congress, the federal government, and the country. He thinks so. Because of the recession, “most Americans are living with less than they had in 2007.”

LeMieux’s ideas on curbing spending haven’t gotten much attention. That’s because of who he is, a 40-year-old appointed rather than elected senator filling out the final 16 months of the term of Mel Martinez, who resigned. He’s not running for election this November. In fact, he’s never been elected to any office. (Nor is he related to Mario Lemieux, the hockey legend.)

When LeMieux arrived in Washington last September, he was struck—appalled, really—by one thing. “You come in thinking Washington is out of control,” he says. “And spending is out of control.” But it’s actually much worse than that. After working as chief of staff for Florida governor Charles Crist, then managing a large law firm in Ft. Lauderdale, LeMieux found the spending habits on Capitol Hill “bizarre.”

“It stands in sharp contrast to what the real world is like,” he says. For the state government in Florida, “the biggest thing in town” is the quarterly report of how much revenue has been collected. “We could only spend what was coming in.”

Seriously, I've figured out a plan that I think will work. It should not upset Conservatives as it does not raise any taxes. And it should not upset Liberals as spending is not cut, nor are programs eliminated. Best of all, it's simplicity itself, insanely easy to calculate, model, and follow. Are you ready for it?

Peg annual Federal budget increases to be no more than inflation plus population growth.

That's it. Seriously, if we want to solve the deficit nightmare, all we need to do is cap spending at a reasonable rate, a rate that does not dictate a single program being cut. Costs of each program are allowed to increase at the rate of inflation, and also to account for more users.

Let's look at the raw data over the period from 1974 to 2007 (latest data available):

This graph shows annual inflation, population growth, the combination of the two, and the GDP annual change. As we can see, the GDP annual change tends to be higher than the combination of inflation plus population. Clearly, there is something good to be said!

Now, how do we capitalize on that GDP growth? What tax rate do we need to set? Well, there's something called Hauser's Law which essentially states that for all recent (last 50 year) tax rates, the Federal Government will get approximately 20% of the GDP. Meaning that the receipts the Federal Government can count on - taxes - are pretty much a function of GDP and not of the tax rate.

So, where does that leave us? Well I propose we leave tax rates where they are - at the current Bush 2003 tax cut levels. No need to increase OR decrease them. That will mollify Conservatives (they aren't going up) and Liberals (they aren't going down). And the growth the US experienced over the last 5 years show that it's a pretty good level.

In fact, what if back in 1974 we had adopted this very approach? Well, this graph will help:

The blue line shows the annual deficit (if positive) or surplus (if negative). This is based upon taking the actual annual GDP, and multiplying by the factor of (inflation + pop growth) - (GDP growth). Meaning what is the amount of annual increase in the GDP above inflation + population growth. Then we use our Hauser's Law factor of 20% to assume that 20% of that "gain" would be available for debt/deficit reduction.

An what do we see? Well, the annual deficits tend to actually be surpluses! And over the course of that 34 year timeline, we not only would have NOT added any deficits since 1982, but actually accumulated nearly $1 TRILLION in surpluses!

And here's the interesting data point: what was the national debt in 1982? Well, according the US Treasury, it was just $1.14 trillion. Meaning that if we started this plan back in 1974 we would be nearly debt free at this time - in fact, we would have a national debt of $220 billion; less than 2% of the current national debt!

I propose we adopt this policy as soon as possible; historically, if you look back at inflation, population growth, and GDP growth, the GDP ALWAYS outpaces inflation and population growth (which makes sense, since that is the only way our standard of living can increase). If started now, and you use the projections of the last 34 years as your guide (which includes the Carter years, the recession of 1981/198, the recession of 1990/1991, the recesssion of 2000/2001, and the hit of the 9/11 attack) we would eliminate our deficit within 6 years, and the national debt within 45.

This is a common-sense plan. It does not raise any additional taxes, nor turns over more control to the Federal Government. The "Beast" is capped. And it does not cut a single program in terms of service provided (inflation) or the number of people served (population growth). I truly believe this common sense plan is the ONLY way to solve our rapidly mounting deficit and debt fiasco. Urge your Congressmen to push for this common-sense approach to solving our financial nightmare!

There’s a good-sized contingent here on FR who see any compromise as outright failure, and that unless you support radically scale back everything right now you’re a RINO and to be tossed out.

Unfortunately they don’t understand that the radical change that has occurred has been a journey of many little steps, and that my plan is the same - you scale back Government by taking a small step every year. It got us here, we can use the same technique to get us back.

I’m pretty sure that it wouldn’t fly with the boss here (as he’s often one of the biggest “RINO killers” around here, never mind you cannot get anyone to deny just what a RINO is), and I’ve had more than a few tell me outright I was a socialist for not wanting to cut any programs at once. Idealism trumps reality for those folks, unfortunately...

Well, when practical politics meets ideologue ideologue loses.

I love your idea and believe it is the road home. What happens is when either side overreaches you get voter backlash. People don’t want revolutions and usually regret them when they do get them.

What socialists know is if you let them get the camel’s nose under the tent eventually you get the whole camel. We’ve used the same philosophy to walk the 2nd Amendment back to its rightful place and we’re still not there until the right to carry is automatic without government complicity.

Eventually, conservatives have to remember that although we’re right we don’t support dictatorships nor believe in utopias, even when their our own. We need a sustainable majority to work your plan and I cannot see a liberal argument against it. “Independents” would love it, at least that is what the polling/feedback groups are indicating- Stop spending and get the deficit down.

The country is ready. Do you have any political outlet for your idea?

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