Straight Talk on Balancing the Budget

The federal budget deficit is like the weather. Everybody talks about it; except for Bill Clinton, no one ever does anything about it.

President Obama’s bipartisan Fiscal Debt Commission has released a draft report that starts out with a big problem: even talking about reducing spending is insane when you’re in the midst of a Depression. The real unemployment is over 20 percent. Creating jobs ought to be the feds’ top—perhaps sole—priority.

Let the insanity commence.

Triumphant Republicans say they want to balance the budget. So does Obama. Are they serious? Of course not.

Still, theoretical budget-balancing exercises help enlighten us about where our taxdollars really go. So let’s roll up our sleeves and start some back-of-the-envelope slashing.

The 2010 federal budget shows $3.6 trillion in spending and $2.4 trillion in revenues. Net deficit: $1.2 trillion. It’s a doozy, too. It nearly 13 percent of GDP. It’s the highest since 1943, during World War II.

The goal, then, is to close a $1.2 trillion budget gap. Can we find at least $1.2 trillion in budget cuts? News flash: getting rid of the National Endowment for the Arts ($161 million in 2010, or about 0.01 percent of the deficit), ain’t gonna do the trick.

Any serious budget cutter has to start with defense. The reason is simple: it accounts for 54 percent of discretionary (i.e., optional) federal spending. It’s the biggest piece of the pie by far.

(Mainstream news reports usually state that defense accounts for 20 percent of federal outlays. But they’re fudging the facts in order to pretty up the military-industrial complex. For example, they include budget items like Social Security that no one can do anything about—they’re in a trust fund.)

Of that 54 percent, 18 percent is debt service on old wars. There’s nothing we can do about that—though that number should probably give us pause the next time a president wants to invade Panama or Grenada.

Anyway, that leaves 36 percent, or $1.3 trillion to play with. $200 billion a year goes to Afghanistan and Iraq.

Let’s pull out. We’re losing anyway.

New Deficit: $1.0 trillion.

In 2007 Chalmers Johnson wrote a book about the staggering costs of American imperialism. “The worldwide total of U.S. military personnel in 2005, including those based domestically, was 1,840,062 supported by an additional 473,306 Defense Department civil service employees and 203,328 local hires,” he wrote. “Its overseas bases, according to the Pentagon, contained 32,327 barracks, hangars, hospitals, and other buildings, which it owns, and 16,527 more that it leased. The size of these holdings was recorded in the inventory as covering 687,347 acres overseas and 29,819,492 acres worldwide, making the Pentagon easily one of the world’s largest landlords.”

We’re broke. It’s time to bring those 2.3 million men and women home. At an average cost of $140,000 per employee—crazy but true—we could save $322 billion annually.

New Deficit: $676 billion.

After Defense, the other big costs are Social Security, Medicare and Medicaid.

The obvious place to start slashing is wealthy recipients. Why should Bill Gates, worth $58 billion, get Social Security or Medicare benefits? Dean Baker sums up the traditional liberal argument in favor of giving tax money to people who don’t need it: “Social Security enjoys enormous bipartisan support because all workers pay into it and expect to benefit from it in retirement. Taking away the benefits that better-off workers earned would undoubtedly undermine their support for the program. This could set up a situation in which the program could be more easily attacked in the future.”

Yeah, well, whatever. We. Are. Broke. “Means testing”—for example, eliminating benefits for the approximately one percent of families over age 65 who earn over $100,000 a year—could save $150 billion a year.

New deficit: $526 billion.

Now let’s talk about the other side of the equation: income. How can the U.S. government scare up some extra cash?

Allowing the Bush tax cuts for the richest three percent of Americans to expire on schedule would bring in $70 billion a year. Seems like a no-brainer: anyone earning over $250,000 a year is doing awesome. Moreover, if Democrats don’t insist on the expiration of at least some of those “temporary” tax cuts, what’s the point of the deal they cut with the GOP back in 2001?

New deficit: $456 billion.

When it comes to revenues, you have to go where the money is: the wealthy. The rich have gotten richer, which is a big part of the reason we’re in a Depression again. They’re hogging all the goodies. The rest of us can’t spend.

Despite the miserable economy, there are still 2 million American households earning a whopping $250,000 or more per year. (Their average income is $435,000.) If we were to increase these super-rich Americans’ marginal income tax rate from 35 to 50 percent—the same it was during the early 1980s under Reagan—we’d bring in an extra $131 billion a year. If we raised it back to 91 percent—the top rate during the boom years between 1950 to 1963—the Treasury would collect $487 billion.

Budget SURPLUS: $31 billion.

And we haven’t started on corporate taxes.

(Ted Rall is the author of “The Anti-American Manifesto.” His website is


19 thoughts on “SYNDICATED COLUMN: Yes, I Can

  1. The thing about military spending is that it doesn’t do anything economically. It might create some short term growth in the industries that make the weapons, but it doesn’t do anything in terms of creating wealth. Military weapons either A. sit around and do nothing or B. blow the levitating crap out of people (destroying wealth). A bridge or a road or a school will lead to growth if spent correctly, but weapons don’t do that. That’s why war should be a last resort. Endless wars destroy empires and that seems to be happening to the US now.

  2. Instead of unemploying 2.3 million service members, let’s ask them to build infrastructure: bridges, trains, highways, rural internet, etc. It won’t save on the deficit this year or next, but soon the increased productivity from the bettered infrastructure will bring in plenty in taxes without having to torque with the tax rates.

    It is much more an issue of where we spend it than how much we spend.

  3. Yes Chalmers Johnson’s “Dismantling the Empire” does talk about the long term problems with “Military Keynesianism” (employing people and stimulating the economy by grossly overspending on defense) and it is corrosive effect that is slowly killing the country. But Lee is right here, we can’t cut 2.3 million jobs in the middle of a massive recession even if these jobs are a long term detriment to the country. We either have to wait for better times to cut those jobs or do as Lee suggested and switch those jobs over to infrastructure construction (Traditional Keynesianism) which may still save money (it probably cost a lot less then 140,000 or so per person) but it won’t cut such expenditures outright.

    What you missed was the capital gains tax. One ugly little secret of the American tax code is that it is actually regressive when you get all the way to the super rich. The 35% on “income” is for a W2. Most of the super rich don’t have a W2 because they are their own boss, no one pays them they make all their money on finance trades and other stock and such sales. This is subjected to capital gains tax which caps out at 15%. So America’s progressive taxation is still just “for the little people” and falls hardest on the upper middle class while ignoring the truly wealthy who only pay a paltry 15%. Hence there is plenty of money there for the harvesting from people who really don’t need it and you wouldn’t even have to raise the income tax to get at it.

  4. Any serious budget cutter has to start with defense. The reason is simple: it accounts for 54 percent of discretionary (i.e., optional) federal spending. It’s the biggest piece of the pie by far.

    Truer words have never been uttered in this blog. See, lefty trolls? I can agree with your idol every now and then. Of course, calling the Pentagon budget “defense” is a misnomer: there’s nothing defensive in attacking three countries half a globe away that never did anything to your country, and stationing troops in dozens of other countries.

  5. While I agree that defense spending is out of control I am not entirely sure what you are proposing Ted. How steep of cuts would you make to personnel? So we have 2.3 million active and reserve troops combined. How many would you cut, you never provide any details. I bring this point up because I myself believe that a large portion of active troops should be transitioned into reserve status following the end of the wars in the middle east. It is time to move from the cold war stance to a smaller active force capable of training and mobilizing forces in time of need, with a large pool of trained and ready citizen-soldiers to answer the call when the time comes.

  6. Ted,

    You may have gotten the liberal argument wrong, but you should at least be able to get the arithmetic straight. Unlike income distribution, which is hugely skewed, the rich don’t get much more for Social Security and Medicare than the rest of us. So, if you want to zero these programs out for the richest 1 percent of seniors how much do you think you get?

    That’s right Ted!!! You get about 1 percent of spending. In 2011 we are projected to spend about $1.3 trillion on these programs, so tough guy Ted, your plan will save about $13 billion a year, not $150 billion as you have you in your calculations.

    But wait, there’s more. It’s really neat to say that you’ll zero the programs out at $100k, but let’s pretend we’re Joe rich senior with an income of $110k. Joe Rich Guy senior knows that he will lose around $30k in Social Security and Medicare benefits because his income is above $100k. Because Joe Rich Guy senior is better at math than tough guy Ted, Joe is going to decide to take some of his wealth and buy a condo in Florida. This means that he can stay there free every winter. Even more importantly, because he won’t collect dividends and interest on the $400k used to buy the condo, Joe Rich Guy senior’s income will now be $90k instead of $110 k. Now Joe Rich Guy senior still collects his full Medicare and Social Security benefits even under tough guy Ted’s proposal.

    So, tough guy Ted’s great plan didn’t save us taxpayers any money and it just created a new industry of accountants who will help people like Joe Rich Guy senior escape tough guy Ted’s means testing.

    The moral of the story is that you should know the arguments that are your trying to dismiss. Also, learning arithmetic would be helpful as well. One more thing, the country is not broke — if it were investors would not be lending us tens of billions of dollars at 2.6 percent interest.

  7. Nice accounting Ted.

    Although like some of your other posters, I would slightly dispute your HR management of the entire US Department of Defence.

    Two marketing quibbles; (1) the US Department of Defence should have it’s name reverted to its pre-WWII title, the “War Department”; would bring the point across much more clearly. (2) Instead of calling it “Means Testing” call it “The 100 Grand Opt Out”. Or anything; just make sure the phrase “100 Grand”, or some impression of the numbers involved are in their. Marketing and more marketing, my friends. That is the path to success if you have a good product.

    I leave it to the Americans to decide how to deal with taxing their own super wealthy.

  8. I would have loved to see what the increase on taxes on corporations would bring in.

    1. Increasing tariffs on trade that also bring back jobs and factories.
    2. Taking away the bailouts from the wallstreet and banking bastards.
    3. Legalizing pot.

  9. While we’re at it, let’s also eliminate the Air Force. It’s redundant and an artifact of the Cold War. Even with just Naval and Army aviation, we still have air superiority. Eliminating the Air Force is bound to save some money.

    And I’d like to see what we can do with goosing corporations…if they complain, we should revoke their charters. No corporate charter has been revoked since 1888 as far as I know (someone correct me if I’m wrong). But being incorporated is a privilege and the government absolutely has the right to revoke charters. We set the rules to say what businesses have to abide by, and we revoke charters and nationalize assets when they don’t play by the rules.

    I know….How S of me (Capital S!!!)….

  10. Aggie_Dude ; I completely agree, the Air Force should be rolled into the Army and Navy, like it originally was. The main impetus for a separate air force to begin with was the management of the US nuclear arsenal…clearly they have done a piss poor job of that recently, also one could argue that if nothing else the air force should be administrated under the army similar to the marine corps…never made sense for the air force to have separate doctors, lawyers, administrators etc……..

  11. Oh My God Aggie Dude, you’re right about the corporate charter thing! It’s been four years since I saw “The Corporation” and I had the movie lying around on my hard drive for the longest time. We can all name a few companies that deserve to have their charters revoked, and God it would be awesome to have them done in. Would really, really like to hear what Ted has to say about corporate tax loopholes.

  12. ” anyone earning over $250,000 a year is doing awesome.”

    That is why we worship them. They are God. Now, why do you want to go and kill God?

  13. I suppose it seemed redundant to mention that the rich would need to be put on the no-fly list. Just ask François Mitterand or Sal Allende.

  14. Progressive legislators have long resisted “means testing” Social Security because anything that poor people get and rich people don’t will gradually get whittled away until it ONLY goes to poor people, then the “middle class” (including the working class) will scorn it as “welfare” and its beneficiaries as undeserving scum, and happily acquiesce in its complete elimination.

  15. We probably don’t really need much of an overseas military except for a Navy to kick pirate ass when necessary. Supercarriers would be grotesque overkill for that mission. De-commission them and sell them to the highest bidder as offshore/riverboat gambling resorts.

    We could save a ton of money on Medicare by adopting a quality of life adjusted year (QULAY) system like the British use. We need to make hard choices about how much therapy is appropriate for people with co-morbid or terminal conditions, otherwise taxpayer funded entitlements are being spend to prolong death rather than prolong life. It may sound cold, but a month on a ventilator costs as much as a college education. Which is more humane, spending money to let people get the most out of the best years of their lives or extending the worst years of their lives?

    We also need strict price controls on hospitals. Health care is expensive because hospitals have a great business model; your money or your life. That would also save Medicare a fortune.

  16. Aggie

    We set the rules to say what businesses have to abide by, and we revoke charters and nationalize assets when they don’t play by the rules.

    I know….How S of me (Capital S!!!)….

    That’s a wonderful idea, but I fail to see what it has to do with Capital S.

    Corporatism is just the form of collectivism that’s appealing to our rich and powerful. It isn’t much different from socialism in practice; socialists simply know their powerful by different titles. Just look at how well American robber barons get along with Chinese Communist Party members.

  17. Billy Mac,

    I agree completely. I was being facetious because in current political discourse anything that isn’t Tea Party purity seems to be called socialism. When in reality Corporatism, as you said, isn’t really different.

    That’s precisely why I don’t think the Soviet Union was socialist. I think it was State Capitalism, with party as corporation, party membership as shareholder, and everything else as corporate asset.

    Nothing socialist about it. “Public ownership” requires the existence of a public sphere. Which means, it requires democratic institutions. Our views of what these social forms are tend to be convoluted into catch phrases, “gotcha” lines and moronic “us-them” terminology.

    That leads me to be facetious and sarcastic. But maybe with the ejection of one of the most notorious trolls from this dialogue, I should have more willingness to actually express meaningful ideas.

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