The government is on an insane spending spree we cannot afford. It needs to reign in spending but politicians do not have the political will to make the tough spending choices. Let me illustrate with real numbers for 2010 the difficulty of returning to fiscal sanity.
Federal receipts are estimated at $2.1 trillion in 2010. If the government were a business or individual household it would hold spending to that level. Now lets look at spending.
The first item is interest on the national debt at $400 billion. We must meet this obligation or see the economy and our currency destroyed. Meeting the interest obligation leaves us with $1.7 billion to spend.
Next, if we were being fiscally responsible we would choose to begin paying down our debt. An annual payment of about $200 billion per year would retire the current debt in a little more than 50 years. Putting $200 million toward retiring the debt leaves us with $1.5 trillion to spend.
Next, national defense. The defense budget for 2010 is $720 billion. Realistically if we are going to spend within our means we cannot afford to spend 30% of federal receipts on defense. China has the next largest defense budget in the world at $100 million. To balance our budget without raising taxes we are going to have to make major cuts in defense spending. This means new priorities. The Founding Fathers warned us against foreign entitlements. To live within our means we will have to stop playing the world’s policeman. Pull troops out of Afghanistan, Iraq, Korea, Germany, Kosovo, Okinawa, and other places around the world. Cut more bases at home. If we returned to a military mission of defending the homeland we should be able to reduce military outlays to something in the area of $400 billion. We would still be spending 4 times what the China spends on its military. Spending $400 billion on defense leaves us with $1.1 trillion to cover the remaining functions and obligations of the federal government if we do not increase taxes.
On to entitlements. The two big ones are Social Security and Medicare. The SS trust fund is a myth, no money was ever saved so the SS checks must come from each year’s tax collections. At current benefit levels Social Security is estimated to cost $720 billion in 2010 and Medicare $460 billion. The combined total of $1.18 trillion exceeds the $1.1 trillion we have to spend, even after draconian cuts in defense spending. Plus we’ve not addressed the funding of other departments and services (operation of government, State Department, Commerce, Labor, Veteran’s Affairs, Education, Health and Welfare, HUD, NASA, FAA, National Parks, etc).
To balance the budget and pay off the debt is going to require significant cuts in defense spending, entitlements, and other government programs or massive tax increases the economy cannot afford.
Let’s continue with the illustration above. Cutting Social Security benefits and Medicare by 20% will free up $210 billion to cover the remaining obligations of government. This is nowhere near enough. To bring the budget into balance, entire departments will have to be eliminated. Some candidates would be the Departments of Labor, Education, Commerce, Agriculture, Energy, and Veteran’s Affairs (incorporate the essential Veteran’s services in the Defense Department budget). Privatize Amtrak, the Post Office, General Motors, AIG, NASA. End all forms of public assistance - welfare, food stamps, public housing. The states will have to pick up social services the people in each state want to fund.
The federal budget for the Department of State alone in 2010 is $52.8 billion or about 25% of the roughly $210 billion we have left to spend in this scenario. Do we need to operate embassies in every nation on the planet? Do we need the number of diplomats and analysts employed by the State Department today. Ten years ago, in 2000, the budget for the Department of State was $6.5 billion. Why would this department require $46.3 billion dollars more to operate in 2010 than it did in 2000? Cut this budget to $10 billion and we have $200 billion left to support all other functions of government.
If you sit down with the budget, you will see that $200 billion is no where near enough. Congress’s operating budget alone in 2010 is almost $5 billion. The Department of Homeland Security budget is $55 billion. The Department of Transportation Budget is $72 billion. The Department of Veteran’s Affairs budget is $56 billion. The Department of Treasury Budget is $13.4 billion. The Department of Interior Budget is $12 billion. The budget for operating the White House is $1.6 billion. The Department of Education budget is $63 billion.
Needless to say $200 billion is not enough to cover the rest of government spending at current rates. Elimination of more programs and huge cuts in others will be necessary to bring the budget into balance without raising taxes.
Unfortunately, I don’t see our politicians as having the ability or will to sit down and make the tough calls. Certainly President Obama doesn’t. He has signed the task to a commission which will report back after the November election.
Cuts of this magnitude will be painful and require redefinition of the government. There can be no sacred cows, not defense, not social security, not welfare. The size and mission of government will have to be diminished dramatically even at a $2.1 trillion dollar spending level.
You should be very careful in estimating Chinese military spending for several reasons. First, we really have no idea what they spend. They say a certain amount but we can only rely upon their word. Second, the price they pay for any item is whatever they want it to be. Third, I’m sure you really wouldn’t want to reduce personnel costs to chinese levels. I rather doubt you’d get many volunteer recruits at those levels or anything approaching that.
Also, as I understand your concept, you will withdraw all us forces from overseas to concentrate on homeland defense. While that strategy sounds good, it means we will fight all our wars on our own territory. Wouldn’t you rather fight on some one else’s homeland than have a war in your backyard?
All fine and dandy but please don’t yak clear past what I was pointing out. The higher taxes WON’T help revenue; they will hurt it.