Its Simple to Balance The Budget Without Higher Taxes

Politicians and interest groups claim higher taxes are necessary because it would be impossible to cut spending by enough to balance the budget. This Center for Freedom and Prosperity short video shows that these assertions are nonsense. The budget can be balanced very quickly by simply limiting the annual growth of federal spending

Here are the main points of the video:

What would it take to balance the budget without higher taxes? Deficits are caused by too much spending. According to the Congressional Budget Office, the Federal Government is spending $3.49 trillion and is collecting $2.14 trillion of tax revenues, resulting in a deficit of $1.34 trillion, as shown below. How should we balance the budget?

CBO Baseline Budget

First, we could limit the federal government to the activities authorized by the Constitution. Article 1, Section 8 provides a list, such as national defense, post offices, etc. Nowhere on the list is the Department of Education, Small Business Administration, National Endowment for the Arts, etc. Getting rid of these departments would immediately balance the budget.

For much of America’s history, the federal government only spent 3% of GDP, as the graph below depicts. If we did the same today, federal spending would be less than $450 billion.

Government Spending What the Founding Fathers Wanted and What We Have Today

However, this would not be palatable to most politicians. Therefore, let’s try another approach: just keep spending levels at the rate when Clinton left office, as depicted below.

Huge Surpluses If Bush Obama Continued Clinton Spending Levels

Allowing spending to grow at the rate of inflation and population growth would create a budget surplus in just two years. However, this also would not be palatable to politicians. So, let’s try another approach.

Let’s accept the current level of government spending and ask politicians to be responsible in the future. If spending is kept at the current level with a hard freeze, it would generate a surplus in 2016, as shown below. If we allowed the budget to grow at 2% per year, the budget will be balanced in 2020.

Balancing the Budget With Spending Restraint

Balancing the budget is not difficult. All we have to do is have restraint. We can balance the budget without raising taxes. How? We can balance the budget by limiting spending growth.

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