How To Seriously Balance the Budget

balance Our legislators all claim they want to spend less.  But every time they attempt a plan for fiscal responsibility, they get sidetracked on who-wants-to-cut-what.

If they are serious about our finances, they have to stop debating which programs to cut (Planned Parenthood, Medicare, the Military, etc), and instead focus on the budget itself.   This means unilateral cuts, blind to the programs, and  simply trim everything equally.

Here is my simple proposal to balance the budget over 8 years (2013 to 2020):

  1. Federal Spending in 2010 was ~$3.5T with revenues of ~$2.1T.  To make these changes in 2013-2020,  we need to cut $1.4T per year.  We will accomplish this by reducing spending by $175B annually, additively.
  2. An annual spending cap is defined as:
                           ($3.5T – $175B * (Year – 2012))
    1. 2013 = $3.325T
    2. 2014 = $3.150T
    3. 2015 = $2.975T
    4. 2016 = $2.800T
    5. 2017 = $2.625T
    6. 2018 = $2.450T
    7. 2019 = $2.275T
    8. 2020 = $2.100T
    9. > 2020 : The cap is set to the prior year’s revenue.
  3. Each year, the budget dictates the proportion of money spent for each line item.  If the total budget exceeds the values from (2), spending per line item will be reduced proportionally such that total spending equals the value of line (2).
  4. These spending cuts are mandatory, and override any previously guaranteed benefits to any programs.  All federal programs will need to adjust to the new spending caps.
  5. If, in any year, there is a surplus in revenues, the spending caps outlined in (2) will remain, and the surplus will be used to reduce the overall debt.
  6. After the year 2020, annual spending will be capped at the total revenue of the previous year, and the budget balancing process of line (3) will be applied with the new spending cap.

This solution removes the politically charged plans where our legislators always get tripped up.  This is liberating for all legislators, as they can now focus on getting the job done and balancing the budget in 8 years.  No problem, right?

2 thoughts on “How To Seriously Balance the Budget

  • April 13, 2011 at 10:25 pm

    It would be great if something like this could happen. I guess the programs themselves decide how to handle the cuts?

    The big debate would be that this method would be totally blind to value-add of the programs, meaning you cut the same % from program X that is AWESOME and program Y which is GARBAGE. Also, certain programs are probably already operating on a “shoestring” (or so they will say) and are too small to cut any more. So the method is definitely not optimal (in the knap-sack computer science problem sense, where the variables are value-add and cost)

    But then again the country seems to be at the point where getting the optimal solution is likely not possible (as you mentioned with politically charged debates that would rage and debilitate any cuts, unless perhaps something “radical” happens, like Ron Paul getting elected?) and the good-enough result of getting the budget balanced takes precedent over anything else.

  • April 13, 2011 at 11:42 pm

    Bryan – Thanks for your thoughtful reply.

    For every line item that you might think is valuable, there is someone else that thinks it’s a waste.

    My point is – focus on shrinking the budget, not getting into debates about:

    – “that program is a waste, cut it!”
    — “no that program is awesome, cut this other lame program….”
    – “no way, I need that one, that’s not fair!”
    — etc etc etc

    Focus on the budget. Cut everything, unilaterally, first.


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