With all the talk of doing this or that to cut spending or raise taxes to somehow get our national budget in order, I decided to take a look at what we would actually have to do to balance the budget. It ain't pretty, but it is not impossible.
We will take a look at the 2010 budget, as the 2011 is still sort of nebulous.
- Total Receipts for 2010 was $2.81 Trillion Dollars. This comes from: $1.061 trillion (45%) – Individual income taxes, $940 billion (40%) – Social Security and other payroll tax, $222 billion (9%)– Corporation income taxes, $77 billion (3%)– Excise taxes, $23 billion (1%)– Customs duties, $20 billion (0.8%)– Estate and gift taxes, $22 billion (9%)– Deposits of earnings, and $16 billion – Other
- Total Spending for 2010 was $3.55 Trillion. Of that, $2.841 is mandatory spending on items like Social Security and Medicare. The remaining $1.368 Trillion is for discretionary programs, from the Department of Defense to the Bureau of Indian Affairs.
- That leaves a defecit of $1.42 Trillion, or $1,420,000,000,000.00
For some budget details, take a look here.
- Mandatory spending already exceeds all reciepts.
- All discetionary spending is pure deficit. Of all discretionary items, The Department of Defense represents about 49% of all of that type of spending.
What we could have to do to Balance that Budget:
- Fix Social Security by increasing funding by realigning and increasing taxes to stabilize the fund. Currently, only the first $106,800 of income is taxed by SS, by replacing that cap with a flat tax on 92% of all earnings with no cap would generate $682 Billion annually (note that if you make less than $106K now, you pay on 100% of your earnings!) This makes SS more fair and sustainable.
- Reduce discretionary spending across the board. Apply a 30% reduction to each and every discretionary program. It has to be all programs so we don't fight about which and which other to reduce. This would be a savaings of $410 Billion dollars, and our defecit is now down to $1.01 Trillion.
- In 2010 The Bush Tax cuts cost the US $442 Billion. Let them expire and now we are down to $568 Billion in defecit.
- Above that, increase all personal and corporate income tax by 44% (for example, if you are paying $1000 in taxes today, the new total would be $1440, a 23% tax rate would become 33%) earning the last $568 billion. Done!
- Cutting 30% of federal funding would probably mean a 20-30% decrease in federal jobs. This would leave 400,000-600,000 people unemployed. However, saving many of those jobs could come from combining, redistrubuting or eliminating departments as long as the overall reduction is maintained.
- Changing the way that Social Security is collected, there will be a modest decrease (8%) in deductions for both employees and employers.
- You can balance the reduction in goverment size with additional taxes, my outlook here is balancing cuts with new taxes. This should please (or piss off) proponents of opposing strategies equally.
- This suggestion does nothing to reduce the Public Debt, but will at least not add to it. That is a task for another day.
What say you?