McCain to Balance Budget – Here’s How
John McCain is promising to balance the budget in his first term:
Sen. John McCain (R-Ariz.) plans to promise on Monday that he will balance the federal budget by the end of his first term by curbing wasteful spending and overhauling entitlement programs, including Social Security, his advisers told Politico.
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“In the long-term, the only way to keep the budget balanced is successful reform of the large spending pressures in Social Security, Medicare, and Medicaid,” the McCain campaign says in a policy paper to be released Monday. “The McCain administration would reserve all savings from victory in the Iraq and Afghanistan operations in the fight against Islamic extremists for reducing the deficit. Since all their costs were financed with deficit spending, all their savings must go to deficit reduction.”
Considering that the current deficit is in the neighborhood of $410 billion, it’s going to be a neat trick, indeed, to eliminate it through the elimination of “wasteful” spending. Then again, the Bush White House lists among the highlights of the 2009 budget the fact that it “Balances the budget by 2012.” Indeed, OMB projects a $48 billion surplus.
It’s noteworthy that the 2009 request is $987.6 billion, an increase of $46.2 billion (4.9 percent) from the previous year. And that’s not counting $75.8 billion in “Supplemental and Emergency Funding” (down from $104.4 billion). Balancing the budget, then, would require finding waste and reforms that would shave the budget by a quarter.
Social Security, incidentally, is only $8.4 billion.[*] The entire Health and Human Services budget? $70.4 billion. Housing and Urban Development? Another $38.5 billion. Environmental Protection is $7.1 billion. Interior, $10.6 billion. (Those are FY 2009 requests; the appropriations will differ somewhat.) So, let’s say we reform those to run with such efficiency that they are totally self-sustaining. That’s $135 billion in savings. Only another $275 billion and we’re home free! Education is another $59.2 billion. Labor, $10.5. National Science Foundation, $6.9 billion. And “Other Agencies” — how important could they be, really, if they don’t get mentioned by name? — are $7.2 billion. That’s another $83.8 billion, getting our deficit down to $191.2 billion. If we can achieve victory in Iraq and Afghanistan by, say, the one year anniversary of McCain’s inauguration, we can save that, easy.
Now, the economy is kind of soft right now. If McCain can come in and give it the kick in the pants it needs, we’ll start bringing in more revenue. So, maybe, we can save a few of those programs above.
UPDATE: Matt Yglesias suggests that “magic ponies” might somehow be involved. I hadn’t factored that into the above calculations.
*UPDATE: As Dave Schuler notes in the comments, this represents only the general fund fraction of the Social Security Administration’s budget. The total expenditures of SSA are a staggering $695.9 billion. But, since that’s “off budget,” it doesn’t count toward the deficit.
UPDATE: Hilzoy says the budget calculations are even more complicated than my figures above suggest.
Your wit gets dryer by the day, James. I’m almost afraid.
I’m just waiting for my calculations to be cited as evidence that balancing the budget in four years is so possible. I give it until noon.
Sounds easier than drilling in ANWR.
There truly can’t be a group of voters who are going to buy this, right? ‘Victory’, or whatever that means in 4 years. ‘Overhauling’ Social Security will produce savings, which sounds as likely as ‘Overhauling’ Medicare to produce savings did’.
Who is writing policy in the McCain shop? I know that the media and Republicans want to make this election all about Obama, but it seems like McCain is barely even trying to put together a coherent Domestic policy approach to his Administration. More and more, I’m beginning to think that if McCain where to win, his VP would basically have the run of this country while McCain spent his time creating ‘Victory’ around the world and micromanaging the contracts for office products in the Navy and other Armed Forces.
the numbers are daunting, James, but then again, so were the numbers faced previously… and growth cycles suprised the experts on the subject each time. I have my doubts, but will be watching, and won’t be too overly shocked if it happens.
Presumably that’s the Social Security Administration itself. Spendings on Social Security Retirement Income are significantly larger. Like 50 times larger.
Congress discovered the way to balance the budget long ago: take things off budget. If you take all expenses that exceed revenues off the budget, you’ll nominally balance the budget every time.
all the growth cycles that have come since the 70’s have involved a precipitous drop in oil prices. The Reagan economic recovery involved one of the biggest post war collapses of oil prices since WWII. I don’t think we will see that unless we can get the dollar back to the value it was at at the end of the Clinton administration.
Good point.
And I’m already on record as saying that will be happening.
So McCain is saying that we’ll be out of Iraq and Afghanistan by the 4 year mark? Is that a time table for withdrawl?
When Bush took office the federal surplus in 2001 was 1.3% of gdp. Now the federal deficit is about 3% of gdp.
McCain is promising to follow essentially the same policies Bush promised to follow and expects to get the opposite results.
But don’t worry, the republicans keep warning us that if we elect a democrat president this trend will reverse.
I refuse to believe that McCain and Obama are serious about balancing the budget when both of them are proposing non-revenue-neutral tax cuts. As long as spending is in deficit, a tax cut is merely a delayed tax hike.
Seriously, somebody needs to get Dave Ramsey to the CBO, stat.
So bringing an end (let’s be honest, a reduction, not an end) to a massive government program we never needed in the first place counts as a “savings” that McCain gets to take credit for??? Yeah, whatever. The idea that “victory” there will “save” us money, I’ll listen to that when those oil royalty checks we were supposed to get pass the $1 trillion mark.
Sounds like when Democrats whine about the Bush tax cut “giveaways” to the rich — you know, the ones where we “give” them “back” some of their own money that we hadn’t even taken yet.
I appreciate McCain’s interest in reducing domestic government waste, it is almost enough to make me want to vote for him, and I still may. But then he gets started talking on his own big government pet projects beyond our borders. If we’re going to waste money let’s at least do it at home and where the only people we piss off is ourselves.
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Second thought;
Wasnt that massive cut about the time that Prudhoe really came online? I think we have the best argument yet for drilling in ANWR, people.
Third thought: Why not actually check whether the drop in oil prices corresponds to the opening of Prudhoe Bay, _before_ attributing a past outcome to a policy you support?
I think the Executive Order that Pres.GHW Bush signed banning drilling on the continental shelf has something to do with this. Bush the lesser has had 7+ years to make this go away with the stroke of a pen. I don’t remember McCain calling for him to do so. Are GHW & GW these envior-freaks who have halted exploitation of ANWAR? So it would seem…
The deficits of the past 8 years are based on two things: tax cuts that were not offset by spending cuts, and spending increases related to Iraq and Afghanistan. So, in theory, if you return tax rates to 1998 levels and end the war, everything should go back to balanced, or close to it. So, which of the two candidates is more likely to do those two things? (Hint: It’s NOT McCain.)
There is no way to cut enough ‘waste’ out of the system to made a dent in the deficit. If you think Congress is going to cut Social Security and Medicare benefits, then you forget that the largest and most consistent block of voters in America is those over 60.
To balance the budget, you HAVE to raise taxes. And why NOT raise them to 1998 levels? The economy was strong, we have unprecedented GDP growth, and I don’t recall tons of rich people complaining that they weren’t getting richer fast enough.
Yeah, I remember the ‘Peace Dividend’ that Bush 41 got after the Berlin Wall came down. Every politician in Washington was drooling to find something to spend that on – when it fact, that ‘savings’ was just an end to massive deficit spending under Reagan/Bush (or could have been if Congress had left it alone).
The budget deficit in 2004 was $413B. Four years later, FY 2007, the deficit was $162B. During that time no effort was made to reduce government spending.
You have waved away the effects of better economic performance on government revenues and, to a lesser extent, expenditures. A return to the growth rates of most of the last 8 years by itself will cut the deficit by more than half.
THEN you can start counting up savings from reducing discretionary spending or reforming entitlements.
I think fluctuations in the national income that gets taxed has a lot to do with it as well. Clinton benefited from a good economy to allow him to balance budgets more easily. One can argue that Clinton helped produce that economy, and that Bush helped produce this one, but there are too many factors involved for me to take a position on that. With a surge in economic growth, perhaps we could balance the budget at existing tax rates. And perhaps a tax increase would make that surge even more unlikely. In fact, there is no doubt we could balance the budget with lower tax rates, if we just spent less. Unfortunately, it is hard to convince Americans that they would benefit from spending cuts, because their experience has been that the benefits flow whether they pay for them or not. If the government stopped by our door every month to collect the Iraq payment, we would have been out of there before the invasion even started. Same for countless other programs.