How Much Would It Hurt To Balance The USA's Budget?

by Gene Michael Stover

created Monday, 2012-02-13 T 23:54:00Z
updated Monday, 2012-02-13 T 23:54:00Z

Though it's not the hot new issue of the week right now, a balanced federal budget is often in the news. In 2011 November, the House of Representatives voted against a balanced budget amendment to the Constitution, and politicians, analysts, & everyone else often discuss what cuts we'd need to make or taxes we'd need to increase to balance the budget.

It's presented as an enormous problem. To get an idea of how big a problem, let's see what portion of the Gross Domestic Product (GDP) we spend each year. What will it be? 80 percent of GDP? 100 percent? 120 percent?

Here's a table:

year  per-person  percent  population        GDP   expenses
----  ----------  -------  ----------  ---------  ---------
2011    12240.13     25.5   313232044  1.506E+13  3.834E+12
2010    11504.62     24.4   308745538  1.458E+13  3.552E+12
2009    10169.24     22.1   305529237  1.404E+13  3.107E+12
2008     9508.20     20.3   305000000  1.430E+13  2.900E+12
2007     9039.74     19.5   302000000  1.399E+13  2.730E+12

I dug the population, GDP, & expenses (a.k.a. expenditures) from online sources. I forget exactly where, & it doesn't matter because this is just an estimate to get a feel for the numbers. Population is in humans. GDP & expenses are in dollars, & they are expressed in scientific notation, so the "E" indicates that the following number is an exponent. For example, 1.506E+13 indicates 15.06 trillion dollars.

The per-person column shows how many dollars each person would have to pay if you divided the annual expenditures by the population, every person whether or not an adult, whether or not employed. I included it just out of curiosity.

The percent column is the real motivation for the table. It is the size of the budget expressed as a percent of GDP. In other words, it's (100 * expenses / GDP).

So what does the table indicate? It shows that if everyone paid roughly a 26 percent income tax rate, we could balance the budget with a little left over for a rainy day fund or to reduce the debt. (Remember the debt? People used to be worried about the debt. It's a bigger problem than the deficit because it's the accumulation of deficits.)

26 percent. It's a little more than I usually pay, but less than the most I've paid. Yeah yeah, there are plenty of arguments against a single rate (& plenty of arguments for one). Maybe the lowest rate should be 20 or 15 or 10 or 5 or zero, & maybe the highest rate should be 30 or 35 or 40 or sky's-the-limit. That's fine-tuning, & it doesn't matter right now. The point is that all we'd need to do to balance the budget was have a tax rate of about 26 percent.

Until we connect the budget (expenditures) with the taxes for the same year or an adjoining year, our balanced budget discussions will continue to be abstract, dividing the voters & obscuring the reality that the solution is simple & not unbearable.