There is a video that describes why balancing the budget is impossible. No it is not akin to my posting regarding rejecting the proposed balanced budget amendment. Recall that you can balance a budget either by decreasing spending or increasing taxes or both. As I observed when the senate rejected a reduction in the budget by a paltry $10 billion, our politicians cutting spending is virtually impossible leaving increasing taxes as the only choice. What the video shows is that federal nondiscretionary spending (social security, medicare) is equal to tax receipts. This means that if you would have to eliminate federal spending on everything else, to have a balanced budget. Of course, nondiscretionary spending is nondiscretionary because the government says it is. Nonetheless, everyone knows that in order to control federal spending then the spending on social security and medicare must be corralled. After the video makes these points it wimps out. Its solutions are no solutions at all. So I offer a few real solutions of my own that will work.
1. Eliminate duplication
2. Eliminate automatic escalators
3. Raise the full benefit age in social security to 70
4. Privatize medicare and medicaid
5. Privatize social security with a benefit floor guaranteed by the federal government
6. Institute a flat income tax with no exemptions
7. Limit the growth in the number of pages in the federal register
8. Institute an aggressive review of all regulations by all federal agencies
9. Mandate that regulatory burdens must be reduced by at least 5 percent per year. (We did this when I was at NCUA).
10. Limit federal pay (including perks) to no more than 10 percent over the average pay for the same position in the private sector.
11. And of course, cap the federal budget to 20 percent of the previous year's GDP.
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