Balance federal books by adopting ‘Penny Plan’

[Brian4Liberty]

Balance federal books by adopting ‘Penny Plan’ (http://www.postandcourier.com/20160719/160719408/balance-federal-books-by-adopting-penny-plan)
BY MARK SANFORD - Jul 19 2016 12:01 am


The American economist Herb Stein once observed, “If something cannot go on forever, it will stop.”

I don’t know when the stop will come, but I know that we are rapidly approaching a financial day of reckoning with regard to federal spending. And if Washington doesn’t act before financial markets do to stem the tide of spending, there will be horrific consequences for everyone of us — in the value of the currency we hold, in inflation, in the worth of our savings, and in our way of life. Each day, we take one more step toward a day of financial Armageddon, yet we are sleepwalking our way there in Washington.

Today, it’s estimated that our country’s liabilities are greater than our assets and that we have roughly $120 trillion in unpaid political promises. It’s shown that our federal debt is more than $19.3 trillion — $9 trillion more than it was eight years ago. The Congressional Budget Office predicts that 10 years from now, the federal debt will have grown by another $10 trillion. More significantly, the federal debt-to-GDP ratio is expected to grow from its current level — 75 percent — to almost double that over the next 20 to 25 years. This would put our country at Greece’s debt level at the time its crisis began a few years back — but without a big (financial) brother like the European Union to save us, as was their case.

Because of the growing federal debt, interest costs for the federal government are projected to more than triple over the next ten years from $255 billion this year to a projected $830 billion in 2026. As a reference point, that is greater than what we currently spend on national defense.

Quite simply, we are on Herb Stein’s course that indeed cannot go on forever, and the question is what are we going to do about it?

The key will be removing at least some of the politics that make doing so seemingly impossible.

Accordingly, one option for fixing the problem lies in a bill Sen. Mike Enzi and I just introduced called the One Percent Spending Reduction Act of 2016. It’s also known as the Penny Plan because it proposes to cut just one penny of every dollar in federal spending. Do that for the next five years, and we would have a balanced budget. In the sixth year, spending would be capped at 18 percent of Gross Domestic Product, preventing further overspending while allowing the budget to grow in step with the economy.

Finding ways to trim back is what families do around the kitchen counter. Businesses do it too. The question we have to ask is whether or not we believe cutting a penny a year for the next five years is too big a lift for Congress to avoid spiraling debt and spending problems that I believe will be the consequence of doing nothing.

The Penny Plan has several attributes....
...
More: http://www.postandcourier.com/20160719/160719408/balance-federal-books-by-adopting-penny-plan

[jllundqu]

I'm hesitant to support anything Sean Hannity supports. But if it balances the budget, it can't be all bad. lol

[presence]

This was part of Austin Petersen's platform
http://austinpetersen2016.com/petersen-reduce-taxes-balance-budget/

[tod evans]

I have my own 'penny plan' for politicians......

Every politician that votes to spend any money before it's physically in the coffers and backed by gold is forced to eat one penny for every dollar he/she wants to spend.

That penny plan would shut DC down in 4 hours!

[r3volution 3.0]

Rand's been talking about this for years.

It's a good plan, has better political legs than a lot of other plans, because it can be perceived as "fair" with cuts across the board.

[puppetmaster]

I'm hesitant to support anything Sean Hannity supports. But if it balances the budget, it can't be all bad. lol rand supported this i beleive.

[Zippyjuan]

Accordingly, one option for fixing the problem lies in a bill Sen. Mike Enzi and I just introduced called the One Percent Spending Reduction Act of 2016. It’s also known as the Penny Plan because it proposes to cut just one penny of every dollar in federal spending. Do that for the next five years, and we would have a balanced budget. In the sixth year, spending would be capped at 18 percent of Gross Domestic Product, preventing further overspending while allowing the budget to grow in step with the economy.

Just to run some math to check the theory out. Current spending $4 trillion and deficit $475 billion. We will assume that everything stays the same like tax revenues and other spending. Can we balance it in five years? We would need to get spending down to $3.525 trillion in five years or 2021.

2016- $4.00 trillion
2017- $4.00 trillion minus $4 billion= $3.96 trillion in spending
2018- $3.96 trillion minus $3.96 billion= $3.92 trillion
2019- $3.92 trillion minus $3.92 billion= $3.88 trillion
2020- $3.88 trillion minus $3.88 billion= $3.84 trillion
2021- $3.84 trillion minus $3.84 billion= $3.8 trillion

But we needed to be at $3.525 trillion so we are still running a $275 billion yearly deficit. We have reduced it- but by less than half. It takes eight more years (2029 or 13 years in all) to get there. Meanwhile we have added a few trillion to the debt. But continuing as we are, even more trillions would be added.

Deficit has been declining (by more than half in dollar terms) since the worst of the recession.

http://cloudfront.mediamatters.org/static/uploader/image/2015/10/16/wsjfed.png

There is no easy, magical, painless way to get there.


In the sixth year, spending would be capped at 18 percent of Gross Domestic Product, preventing further overspending while allowing the budget to grow in step with the economy

How much spending is that? Current GDP is $16.77 trillion. 18% would be $3 trillion which is 25% lower than it is today and another half trillion in cuts from our 13 year series of one percent reductions. If you jumped to that amount after year six of the program, you would have to cut about 24% of the budget all at once. That would include Social Security and Defense- cuts very hard to get through Congress.

[erowe1]

Just to run some math to check the theory out. Current spending $4 trillion and deficit $475 billion. We will assume that everything stays the same like tax revenues and other spending.

Why would you assume that revenue would stay the same?

[TheCount]

Why would you assume that revenue would stay the same?

Just eyeballing the graph that Zippy posted, it looks like current revenue is somewhere around the average for the last 20 years.

[erowe1]

Just eyeballing the graph that Zippy posted, it looks like current revenue is somewhere around the average for the last 20 years.

Where do you get that? Revenue isn't shown on that graph.

In fact, revenue trends upward over time, along with GDP. As a percent of GDP it fluctuates in within a range and stays fairly constant within that window. But in dollars, it tends upward.

http://www.usgovernmentrevenue.com/recent_revenue

I assume that Sanford's math was based on the Congressional Budget Offices projections for future revenue. And I assume that those projections are for it to increase each year.

[erowe1]

How much spending is that? Current GDP is $16.77 trillion. 18% would be $3 trillion which is 25% lower than it is today and another half trillion in cuts from our 13 year series of one percent reductions. If you jumped to that amount after year six of the program, you would have to cut about 24% of the budget all at once. That would include Social Security and Defense- cuts very hard to get through Congress.

Again, you're making the mistake of using today's GDP instead of a projection of the GDP 6 years from now.

If spending is cut 1% per year for 6 years, then using your own number of $3.8 Trillion and dividing that by the projected GDP for the year 2021 of $22.5 Trillion (http://www.statista.com/statistics/216985/forecast-of-us-gross-domestic-product/), that gives us a projected federal spending that will already only be less than 17% of GDP. So capping it at 18% will give it leeway, rather than require an additional 24% cut, like you say.

[erowe1]

2016- $4.00 trillion
2017- $4.00 trillion minus $4 billion= $3.96 trillion in spending
2018- $3.96 trillion minus $3.96 billion= $3.92 trillion
2019- $3.92 trillion minus $3.92 billion= $3.88 trillion
2020- $3.88 trillion minus $3.88 billion= $3.84 trillion
2021- $3.84 trillion minus $3.84 billion= $3.8 trillion


Also 1% of 1 trillion is not 1 billion. It's 10 billion. Fortunately, this didn't mess up your results, since you still used the right numbers when expressed in trillions.

[JustinTime]

I have my own 'penny plan' for politicians......

Every politician that votes to spend any money before it's physically in the coffers and backed by gold is forced to eat one penny for every dollar he/she wants to spend.

That penny plan would shut DC down in 4 hours!

That sounds good too.

[angelatc]

Just to run some math to check the theory out. Current spending $4 trillion and deficit $475 billion. We will assume that everything stays the same like tax revenues and other spending. Can we balance it in five years? We would need to get spending down to $3.525 trillion in five years or 2021.

2016- $4.00 trillion
2017- $4.00 trillion minus $4 billion= $3.96 trillion in spending
2018- $3.96 trillion minus $3.96 billion= $3.92 trillion
2019- $3.92 trillion minus $3.92 billion= $3.88 trillion
2020- $3.88 trillion minus $3.88 billion= $3.84 trillion
2021- $3.84 trillion minus $3.84 billion= $3.8 trillion

But we needed to be at $3.525 trillion so we are still running a $275 billion yearly deficit. We have reduced it- but by less than half. It takes eight more years (2029 or 13 years in all) to get there. Meanwhile we have added a few trillion to the debt. But continuing as we are, even more trillions would be added.

Deficit has been declining (by more than half in dollar terms) since the worst of the recession.

http://cloudfront.mediamatters.org/static/uploader/image/2015/10/16/wsjfed.png

There is no easy, magical, painless way to get there.



How much spending is that? Current GDP is $16.77 trillion. 18% would be $3 trillion which is 25% lower than it is today and another half trillion in cuts from our 13 year series of one percent reductions. If you jumped to that amount after year six of the program, you would have to cut about 24% of the budget all at once. That would include Social Security and Defense- cuts very hard to get through Congress.

Zippy, the CBO says that the decrease in the deficit is only temporary. Just so you can stop pretending that everything is ok. https://www.cbo.gov/sites/default/files/cbofiles/images/pubs-images/51xxx/51580-land-figure1.png

[Zippyjuan]

That is only 30 years from now. They have troubles forecasting three years ahead accurately.

[TheCount]

Where do you get that? Revenue isn't shown on that graph.


Wups, misread it. You're absolutely right.

[oyarde]

The US does not have a penny it has a Cent :) , pennies are English .

[tod evans]

//

Wrong thread :o

[erowe1]

That is only 30 years from now. They have troubles forecasting three years ahead accurately.

Who are you replying to? I can't find a post where anyone talked about something 30 years from now.

[Zippyjuan]

Who are you replying to? I can't find a post where anyone talked about something 30 years from now.

Angelatc's chart. It projects the deficit for 2046 compared to 2016.


Zippy, the CBO says that the decrease in the deficit is only temporary. Just so you can stop pretending that everything is ok. https://www.cbo.gov/sites/default/files/cbofiles/images/pubs-images/51xxx/51580-land-figure1.png

[oyarde]

In 1964 the US Budget was about 649 Billion , Revenue was 616 Billion. The yearly deficit was .9 % of the GDP . What have you learned since then ? I have my Goldwater 100 common cents Dollar here on the desk.

[Zippyjuan]

Historic data:

http://thumbnails-visually.netdna-ssl.com/united-states-debt-as-a-percentage-of-gdp-19402012_50290c7b3f0c4_w1500.jpg

[oyarde]

I'm hesitant to support anything Sean Hannity supports. But if it balances the budget, it can't be all bad. lol

Its a start .

[nobody's_hero]

The problem with any long-term plan to pay off the debt is that you have to have the same people in government, steadfast in their commitment to see it through, and the problem with that is boobus is a schizophrenic self-abusing voter with the attention span of a goldfish on crack.

[angelatc]

That is only 30 years from now. They have troubles forecasting three years ahead accurately.

OMFG. They always assume that nothing will change, but things always change. On fact, they predicted the deficit would shrink for a few years then start to grow again. So it appears they're actually right.


If current laws remained generally unchanged, the United States would face steadily increasing federal budget deficits and debt over the next 30 years—reaching the highest level of debt relative to GDP ever experienced in this country.


In CBO’s projections, deficits rise during the next three decades because the government’s spending grows more quickly than its revenues do (see figure below). In particular, spending grows for Social Security, the major health care programs (primarily Medicare), and interest on the government’s debt.


Federal debt held by the public, which was equal to 39 percent of gross domestic product (GDP) at the end of fiscal year 2008, has already risen to 75 percent of GDP in the wake of a financial crisis and a recession. In CBO’s projections, that debt rises to 86 percent of GDP in 2026 and to 141 percent in 2046—exceeding the historical peak of 106 percent that occurred just after World War II. The prospect of such large debt poses substantial risks for the nation and presents policymakers with significant challenges.


So, Einstein - which of those areas do you not think will grow? Or are you just pretty confident that debt doesn't matter?

[Zippyjuan]

The problem with any long-term plan to pay off the debt is that you have to have the same people in government, steadfast in their commitment to see it through, and the problem with that is boobus is a schizophrenic self-abusing voter with the attention span of a goldfish on crack.

To reduce the debt, you have to first get rid of the deficit and then take in more in taxes than you are spending. Congress doesn't like that. We had a slight chance coming out of the Clinton administration to put money towards the debt but Bush decided to reduce taxes on the wealthy and fight in two wars. Suddenly we went from near balanced budget to $1 trillion deficits in just eight years.

To pay off the debt, we would have to take in $1 trillion more in taxes than we spend every year for more than 20 years. Likelyhood of that happening?