When the senate voted 52-46 in March not to eliminate duplicative government programs, they sent us all a message. If a paltry $10 billion in costs could not be eliminated then all of us should give up hope that the runaway budget can be brought under control. Enter the 20 percent solution that I suggested in this space on February 13, 2010. Recall, this was a suggestion that federal spending be limited to 20 percent of the previous year’s GDP. I had made that suggestion on local radio and tv. On one of those radio shows, I shared time with senator Bob Corker. Well a year later Corker introduced legislation along with Claire McCaskill to limit federal spending to 20 percent of GDP. I guess I would have appreciated some recognition by Corker but the good senator chose not to. But I am used to making suggestions and having others take the credit for them. I am more interested in getting things done than in receiving credit. Well Mitt Romney has just demonstrated that he cannot do math. He embraced the 20 percent solution recently in a speech and when questioned afterwards, reiterated his support for it. On the other hand he has also embraced the Ryan budget. But the math for the two is very different. Romney said that he would cap federal expenditures at 20 percent of GDP by 2016. The math says that this would translate to a cut in projected expenditures of $500 billion. However, Romney said he would leave defense at 4 percent of GDP and would not touch Social Security or Medicare which would mean spreading the decrease in spending over the rest of the government - a cut in 25% of everything else. While all the pundits on the left have then said that this would mean a cut in this program or that program that would be crippling, that is nonsense. What it would mean is that the congress would finally do its job of deciding what and where to cut given a finite rather than an unlimited budget. But what about the Ryan budget that has been called draconian? Well that budget calls for cuts of “only” $333 billion by 2016. So Romney is actually to the right of Ryan! Lastly, I really do hope that Romney is serious about my 20 percent solution. If he gets elected, remember that because of his background in hedge funds, he is the most qualified candidate to get the budget under control. Let’s hope that he is and that he institutes the Harold Black solution.
Harold A. Black is professor emeritus in the Department of Finance, University of Tennessee, Knoxville having retired after 24 years of service. He has served on the faculties of American University, Howard University, the University of North Carolina - Chapel Hill and the University of Florida. His government service includes the Office of the Comptroller of the Currency and as a Board Member of the National Credit Union Administration. He also has served on the boards of directors Home Savings of America and its parent company, H. F. Ahmanson & Co., Irwindale, California prior to its merger with Washington Mutual Savings Bank, on the board of New Century Financial Corporation, Irvine, California, then the nation’s largest real estate investment trust and as director and later chairman of the Nashville Branch of the Federal Reserve Bank of Atlanta. He writes an occasional article for the Knoxville News-Sentinel at http://www.knoxnews.com/staff/dr-harold-black/. His web page is haroldablackphd.com