November 19, 2010
Colin Powell's Algebra LessonBy Randall Hoven
Colin Powell said this to Larry King.
With all due respect to the general, that algebraic equation will work. The political equation probably won't work, but the algebraic one is completely doable. The algebra is pretty simple.
Deficit = Spending - Revenue
As you can see, if we reduce spending without touching revenue, we reduce the deficit. In fact, if you trust my algebra, we could make the deficit zero by the following formula.
Spending = Revenue
The algebra says that not only is there a solution to this equation, but that there is an infinite number of solutions. There is only one equation, but two unknowns: spending and revenue. It's something taught in algebra class. Both spending and revenue could be a dollar. Both a trillion dollars. Or both a quadrillion dollars.
Here is one possible solution to that equation: set both spending and revenue to somewhere near the average amount of revenue that the federal government collected for the last fifty years. That would be about 18% of GDP. To put it in the general's terms, the algebraic equation is as follows.
18% of GDP - 18% of GDP = 0
For revenue, that should be "doable," to use the general's term, since that is what we did for the fifty years before President Obama was inaugurated. And Obama's own Office of Management and Budget agrees with me. In fact, it expects revenues to go back above that historical level by 2012, where they were in 2006 and 2007 when Republicans wrote budgets. By 2015, OMB expects revenues to be 18.9% of GDP.
Now for the bad news: spending. This year, federal spending is about 25.4% of GDP. OMB expects it to come down a little, but only to 22.9% of GDP by 2015. In the general's terms, the algebra for 2015 works out as follows.
22.9% - 18.9% = 4.0%
Four percent is a little high -- about $750B in 2015, as a matter of fact. Four percent of GDP is higher than any of President Bush's deficits -- 2001 through 2008, for example. In fact, in no fiscal year from 1996 through 2007, when a Republican-controlled House of Representatives wrote budgets, did the deficit exceed 3.5% of GDP. During four of those years, there was a surplus. OMB predicts a 4% deficit in 2015, six years after the Great Recession was declared over and after six years of an assumed healthy economy.
But once again, by the magic of algebra, one solution for getting the 2015 deficit to zero is to cut spending to 18.9% of GDP.
To examine that, we need to go beyond algebra and into arithmetic. Here is how it breaks down without cutting spending, per the OMB, in 2015.
We could eliminate national defense spending entirely, but we'd still have a deficit. Or we could eliminate all non-defense discretionary spending, but we'd still have a deficit. By the way, that non-defense discretionary spending includes
If we cut all discretionary spending, including defense, by 10% across the board, we would have a 2015 deficit of 3.3% of GDP ($620B) instead of 4% of GDP.
Here is what it would take to eliminate the deficit in 2015 without raising revenues and without touching mandatory spending: a 60% across-the-board cut in all discretionary spending (the above list, plus national defense). As an insanity check, even the Communist Party is calling for only 50% cuts in defense spending.
I think what the general meant to say was that the algebraic equation will not work if we don't touch mandatory spending and also don't cut discretionary spending by at least 60%.
But if mandatory spending is not out of bounds, and the president's own Deficit Commission says it is not, then we need to cut all spending by about 20% to eliminate the deficit without raising revenue. Painful to some? Yes. Algebraically impossible? No.
But cuts do not have to come via meat-axe, the way ObamaCare did with Medicare cuts. We could, for example, reform Medicare. Republicans not only suggested that, but they passed it in 1995. President Clinton vetoed it. (Why, when they had the same chance with a Republican president, they created Medicare Part D instead of simply resubmitting real reform is a question for the ages.)
Also, there is nothing magic about 2015. What matters is the long-term solvency outlook. The deficit doesn't have to be zero in 2015. It could be, say, 2% of GDP if that is on a path to solvency.
Is there such a path to solvency that does not require more revenue? Yes. Not just a path, but a road map: Paul Ryan's Roadmap.
Here is what you Republicans need to do. Click here and get a copy of the Roadmap. Print it out and at least scan it if you don't read it. There's no algebra in it, but there are some graphs. Then, the next time you go on a talk show and the unbiased and fair moderator inquires, "If you won't raise taxes, then what are you going to cut, huh? What? What? What?"
You can show the moderator the Roadmap and say, "It's all right here. No net tax increase. Social Security reform and Medicare reform without changing anything for anyone already 55. And near-universal health coverage. All sustainable and solvent. By the way, no cuts -- just reductions in increases."
The polite moderator might then explain, "But that's just Republican propaganda, anybody can use a computer to produce a glossy report! It's all lies!"
Then you can show him your second piece of evidence. Click here for that. Calmly explain to your moderator, "I'm glad you asked. As a matter of fact, the CBO has analyzed the Roadmap. The CBO finds not only that is the Roadmap sustainable, but that economic growth would be 75% greater with it than under the status quo alternative."
I'd like to offer more advice on what to say, but better than my words would be those that Paul Ryan has already used. Listen to him. Listen to him on YouTube. Read his Roadmap.
Is the Roadmap Nirvana? No. But it solves the budget problem while also providing near-universal health insurance, all without raising net taxes or having the U.S. become France. It is comprehensive, and it has been scored by the CBO. Improve on it if you like, but not by throwing mud balls.
Earmark reform is fine, but it is a mite on a flea on the tail of the elephant. Ten-percent across-the-board haircuts won't do it, either. Neither will defense cuts. Sitting down "at the table" and making lovey-dovey sounds won't do it, either.
You have to tackle entitlements. Real reform. Structural reform. Not just an age-of-eligibility increase here and there. And you can do it without raising taxes. Believe me, both Paul Ryan and the CBO can do algebra and arithmetic.
If you are afraid to speak of such things, whether you are a RINO or Tea Partier, then you deserve the scorn you get from guys who can't even get their algebra straight.
(Data source: OMB historical tables. See especially tables 1.1, 1.2, 8.1, 8.3 and 8.7.)