My half-baked budget proposal

Great Debates
1

I haven’t thought this through much at all, so I trust in the gentle souls of the straight dope to ream it a new butthole through your cogent criticisms. Here’s the background:

-Most folks in US politics give lip service to wanting to balance the budget.
-Conservatives as a whole hate the idea of raising revenue.
-Liberals as a whole hate the idea of cutting programs.
-A good compromise doesn’t give anyone all of what they want.

Here’s the proposal:
-With about a 10% allowance for wiggle room, any bill that raises revenue must ALSO, dollar for dollar, cut spending by an equal amount.
-And vice versa: with the same wiggle room, any bill that cuts spending must ALSO, dollar for dollar, raise revenue by an equal amount.
-And contrariwise: any bill that reduces revenue must reduce programs by an equal amount, and any bill that reduces programs must reduce revenue by an equal amount.

What are the problems with this proposal?

2

Did you write that correctly. Any bill that RAISES revenue must CUT spending by an equal amount?

3

Yep. The idea is that budgets may not be cut without a tax increase. Right now, everyone is terrified of increasing taxes, and everyone also knows that you can’t balance the budget without increasing revenue. A bill like this would provide cover for the necessary tax increases.

4

That’s a caricature. Most politicians, of all shades, prefer to lower taxes. At best, they regard taxes as a necessary evil. And most politicians don’t want to cut programs, or at least not those that serve those that vote for them.

What about a bill that increases spending? I think you’ve left that out., and that kind of bill is one of the major causes of a deficit.

5

nm

6

Oops–I meant to include that one under the “contrariwise” option. Yes, any bill that increases spending must increase revenue by an equal amount.

As for the caricature, I don’t think so. I didn’t say that liberals like to raise taxes; of course you’re right that nobody much likes taxes. I’m just saying that Democrats tend to object to program cuts more than Republicans, and Republicans tend to object to tax increases more than Democrats, and that a proposal linking the two would provide both political cover and a place for negotiation.

7

In other words, this would be like matching funds in a sense - it would double the contribution of either revenue increases or spending cuts to balancing the budget.

It might work if the goal of the Republicans was actually to balance the budget. Since throughout the country we see them proposing tax cuts or opposing the extension of current taxes, and then turning around and demanding cuts for the now even worse situation, I suspect your proposal won’t fly.

My proposal for California is to cut spending a lot, but to focus the cuts in the districts of anyone who votes against revenue increases. (Not to apply to education funding, since school kids can’t vote.) The majority of voters in these districts either want something for nothing, or think state services are useless, so we should give them what they want. Maybe waiting for hours to get service at the now open one day a week DMV office will knock some sense into their heads.

8

What I meant to say is that budget gimmicks like this that force two tough decisions, when perhaps only one might be really needed, is going to cause more gridlock. So, let’s say that we want the tax cuts for the wealthy to expire so 1990’s level tax rates are restored for millionaires. Let’s just say for this discussion that such a policy would bring $100 billion a year into government coffers. Those who support such a policy are now going to have to find $100 billion in cuts to Social Security and Medicare. You’re going to find very, very few people who think we both need to raise taxes by a very modest amount on the rich, and also need to make quite substantial cuts to the social insurance programs. Nobody in their right mind is going to go along with such a proposal, whether they are liberal or conservative.

Congratulations, you’ve just made it twice as difficult to solve any budget problems.

9

Wait, this is getting confusing to me:

What’s the difference between cutting spending and reducing programs? Seems the same to me, but you have contradictory guidance on whether taxes would have to be increased or cut.

10

Eesh, I really messed this up, didn’t I? I told you it was half-baked.

Forget that part of the contrariwise. It should say that increasing spending must increase revenue.

11

But if I want to increase revenue, I have to cut spending?

How do we know which came first, the chicken or the egg?

12

That’s sort of the idea. It would force politicians to work with those across the aisle from them, and it would force them to compromise if they wanted to further their agenda. You may be right that it would lead to gridlock, but alternatively it might force people to advance smaller, more modest proposals that have a chance of bipartisan support.

13

I have a bill to increase taxes by $100 billion and increase spending by $100 billion. It would seem that such a proposal would be acceptable under your rules.

I have another bill to increase taxes by $100 billion and decrease spending by $100 billion. It would seem this, too, is acceptable.

But a proposal to increase taxes by $100 billion and cut $50 billion in spending would not be allowed, even though it may be a good and popular idea to do so. I submit that a rule that allows spending to either go up or down by the full amount of a tax increase, but would prohibit a more modest $150 billion deficit reduction package, isn’t practical.

14

So? Your proposal to increase taxes and decrease spending wouldn’t fly anyway, because Republicans would never go for it. Propose, instead, an even more modest $50 billion tax increase and the same $50 billion spending cut, and you’re good to go.

15

But you’re trying to institute a rule that is actually more restrictive than what the political process might allow. If I whip up the votes for a $100 billion tax increase and $50 billion spending reduction, why should there be a rule forbidding that proposal?

However, if I can’t get the votes for the proposal, then why is there a need for a rule to prohibit it from passing, if it isn’t going to pass anyway?

16

So there’s no room in there anywhere for someone who wants to just make government smaller? The only way I can cut the size of government is to increase the amount of taxation? And it must be a 1:1 ratio? That would never fly.

Canada was in the same kind of mess as the U.S. is in. We got out of it by cutting government size and increasing taxes - but the ratio was $7 in cuts for every $1 in tax increases. Then, once we got the budget roughly in line with reality, we slowly grew our way out of the problem by holding government spending growth a couple of percentage points below GDP growth, so that government as a share of GDP eventually declined from 53% to 34%. In addition, as GDP grew in relation to government, our deficit shrunk, and eventually turned into a surplus. We used the surplus to pay down the debt, and as our debt-carrying costs declined, we took the saved interest and turned it back to the public in the form of tax cuts.

Along the way, we fixed our own social security insolvency by increasing the payroll deduction and by separating it into a basic stipend and an income supplement for low income people - essentially means-testing half of it.

That’s how you do this kind of thing rationally. You can’t gimmick your way out of it. In my adult lifetime there have been numerous proposals for balanced budget amendments. There have been spending limitation bills passed, like Gramm-Rudman, Gramm-Rudman-Hollings, etc. None of them mattered. Hell Obama even had a ‘paygo’ rule - which was quickly violated.

The way out of the quandary the U.S. is in required honest leadership. It requires a president willing to attack the third rail of politics by proposing reforms to Medicare and Social Security - and then to SELL it to the country. The leadership has to change public opinion - not be buffeted around by it.

That’s the biggest problem I see in American politics. Every politician has his finger in the wind, trying to figure out which way the wind blows so he can go with it. But real leadership means changing the polls. It means taking your case straight to the people, explaining the problems, the potential solutions, and the price of not doing something. Reagan did it, Clinton did it, Bush didn’t and neither has Obama.

So long as politicians in the U.S. continue to be pawns of special interests and terrified of bucking public opinion, you can come up with all the gimmicky rules and laws as you want, and they’ll find a way around it.

Also, you’re not going to get buy-in from any Keynesians. Your plan is anti-Keynesian - the government cannot borrow money and spend it in hard times. In fact, there’s a double-whammy - to cut spending, it has to raise taxes. Both are anti-stimulative to some degree. That’s fine by me, but I’m not a Keynesian.

17

Yeah, but you Canadians are all nice and friendly and everything. You can’t expect your cousins to the south to behave like that!

As for the OP, I’m going to say it’s quarter baked, at best. I agree with **Ravenman **that you’re only going to make doing anything at all much harder. Better to shrink overall spending, or at least hold it steady, and grow out of the problem. Raise some taxes if needed, but tying the two together just isn’t necessary.

18

Ravenman appears offended that the proposal would force budget cuts before taxes could be raised. Sam (and maybe you) are annoyed that the budget would force tax raises before budget cuts could occur.

That’s kind of my point.

We’ve been stuck in this cycle for a long time: Democrats won’t let programs be cut, Republicans won’t let taxes be raised. So neither has happened. And the budget deficit just keeps getting worse and worse.

Tying them together seems to me to be precisely what IS necessary, because otherwise we’ll continue cutting taxes and raising spending–with brief interludes in which taxes are raised but spending is raised at the same time, or programs are cut, but taxes are cut at the same time. If we’re going to balance the budget, we need to do both simultaneously, and no single party has the will to do both. So tie them together, so that a push to do one necessarily involves a push to do the other.

19

In California, Jerry Brown is basically trying your proposal - not as a rule, just to fix the current budget mess. Though he hasn’t even proposed tax increases, just tax extensions. The Republicans say no. Not only do they say no to the extension, they say no to allowing the people to even vote on the extension.

Until the mainstream of the Republican party is willing to compromise, and until they stop calling any Republicans who are willing to compromise traitors to the party, I don’t think there is much hope.

20

Making a nations economy hum isn’t like balancing a household budget. Macro economics is a different force altogether.