Deficit Fix: You Get a Second Job

There are jokes, bad jokes, and deficit commissions.

President Obama tackled the job of the federal budget by creating a commission to study it. And now that commission has some answers for us. You will read much about its recommendations to raise the Social Security retirement age, get rid of mortgage interest as a tax deduction, cut the defense budget, etc.

But here is all you need to know about the commission and its answers, from The Wall Street Journal.

The plan's goal is to reduce federal spending and federal revenues to 21% of gross domestic product. Federal revenues currently are projected to be about 19% of GDP in 2015, and outlays about 23%.

Do you know the last time federal revenues were 21% of GDP? Approximately the 13th of Never! Federal revenues have never been that high. Not at the peak of World War II. Not at the peak of the tech bubble. Not ever. (You can look it up. See Table 1.2 of the Office of Management and Budget's historical tables.) 

From 1960 through 2009, federal revenues averaged 18.0% of GDP. The highest average over any ten-year period was 18.9%. The highest in any single year was 20.9%. By having 21% as a goal, the deficit commission is recommending that taxpayers fork over more money to the federal government than they ever have in history, even at the peak of World War II.

They are recommending a permanent increase of about 17%, compared to our postwar history, in the amount of money we send to Washington.

Let's say your brother-in-law is living in your basement, and you are paying for the cost of his living: his rent, food, cable TV, cell phone, beer, etc. You finally have a sit-down talk with him and say, "We can no longer afford this. What do you suggest?" His answer is, "Gee, it's pretty obvious you need to find a second job." That is what Obama's deficit commission just recommended.

What about on the spending side -- how much is 21% of GDP? For one, it is more than was spent in any year that George W. Bush was president. You read that right: Bush never spent that much. The most spent in any single year from 2001 through 2008 was 20.7%, and that was in 2008. The average over those years was 19.5%. The average over the last fifty years, 1960-2009, was 20.3%. Yes, Bush spent less than average. Again, you can look it up.

Prior to 2009, the federal government had not spent 21% of GDP since 1994. In 2007, the last fiscal year under a budget written by a Republican-controlled Congress, it was 19.6%. Heck, the last year under a budget signed by President Clinton it was 18.2% (also under a budget written by a Republican-controlled Congress).

So the deficit commission's idea of austerity is to tax and spend more than we have in the pre-Obama history of the country.

It is one thing for Obama to say he just cannot find a way to tax and spend less than either George W. Bush or Bill Clinton, or any of his predecessors. It is another for a "bipartisan" commission of supposed experts to say that. What is so impossible about simply going back to 2007 in terms of taxing and spending as fractions of GDP? Or even 2008?

Heck, how about 1968? Vietnam War spending was at a peak. We were in the middle of the Great Society. We were putting men on the moon. Yet federal government was still "only" 20.5% of GDP. Now, we think that is so ridiculously low that we don't even try to spend that little. (In 1968, national defense was 46% of federal spending. In 2007, it was 20%.)

Some of you might be looking at these numbers and asking, "What's the big deal about whether it's 21% or 19%? Seems like a small difference to be worried about."

For one thing, 2% of GDP is about $300 billion. Every year. For another thing, it pushes us deeper into European territory.

In 2007, when the federal government spent 19.6% of GDP, total government spending (including state and local governments) was 37.4% of GDP. (See the U.S. Statistical Abstract, Table 1324.) That level of spending put us ahead of Australia, Ireland, Japan, South Korea, Slovakia, and Switzerland. Had we met the deficit commission's goals back then, we would have gone ahead of Luxembourg and Spain as well.

The deficit commission is recommending that we become France, and like it.

The irony is that the commission is getting grief for being too austere! My Senator, Dick Durbin, said, "There are things in there that I hate like the devil hates holy water." And the Communist Party's favorite union head, the AFL-CIO's Richard Trumka, said, "Especially in these tough economic times, it is unconscionable to be proposing cuts to the critical economic lifelines for working people, Social Security and Medicare."

(Does Trumka know that the commission is talking about the year 2015 -- five years from now? The times are not supposed to tough then; Barack Obama will have calmed the seas, if not walked on them. The CBO says we'll see 4.1% real GDP growth over 2012-14, and unemployment will shrink to 5% by 2015.)

It's funny that Dick Durbin uses the phrase "like the devil hates holy water." That is exactly how I view fiscal sanity. Fiscal sanity is to today's Democrats what holy water is to the devil. We are talking levels of spending well above those of both Clinton and Bush, and Durbin screams like a vampire exposed to sunlight.

How is my brother-in-law supposed to survive on only 40% of everything I make? The horror.

Cutting spending to 2007 levels does not require defying the laws of physics, nor does it require grandma to eat dog food. Republican Paul Ryan, about to be chairman of the House budget committee, has a plan that will fix our budget and debt messes. Grandma could survive it; the CBO says so. The Cato Institute also has a few ideas. Even the deficit commission had some good ideas, as the Heritage Foundation says.

We are not short of ideas. We are short of politicians who have the courage to do the right thing. Becoming France is not the right thing. And spending no more than we did under George W. Bush is not the wrong thing.

In fact, let's make that our new goal: to spend less than George W. Bush did. And if we can't do that, we really need to shut up about George Bush and "the last decade," don't we?

Randall Hoven can be contacted at or via his website,
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