It will be difficult for the free spenders in Washington to characterize the budget plan being forwarded by U.S. Rep. Connie Mack and others as extreme.
They’ll do it, but it will be difficult.
Difficult because the centerpiece of the plan is a 1 percent annual reduction in the federal budget for the next six years.
One percent and extreme just don’t go together. In this recession, anyone’s who’s experienced only a 1 percent reduction in income is doing pretty well. State and local governments have cut spending by similar amounts. Florida’s Legislature just passed a $69.7 billion budget, a cut of 1 percent compared to the year before. Tuesday, Collier County Sheriff Kevin Rambosk announced his budget for the coming fiscal year will be 3 percent below the current year.
The government-must-do-more crowd will decry any real cut as draconian and argue that the only cuts that should be considered are cuts in the rate of growth. If a projected 4 percent increase becomes a 2 percent increase, then a cut of 2 percent has taken place, that thinking holds.
But voters, faced with real cuts in their own finances, aren’t as likely to accept that reasoning as readily as they did in previous years.
The weak spot of the “One Cent Solution,” as Mack and his allies refer to the plan, comes after the six years of tiny budget cuts occur.
At that point, the law would mandate that government spending be limited to 18 percent of Gross Domestic Product, the total of all goods and services produced in the country.
Historically, tax revenues have amounted to about 18 percent of GDP and spending has been about 20 percent, leading to modest deficits each year, said Brian Riedl, a research fellow with the conservative Heritage Foundation in Washington, D.C. Over the past few years, the formula has gotten out of whack. “We’ve seen a dramatic increase in federal spending in the past three years,” he said.
At present, federal government spending stands at 23.8 percent of GDP, according to the White House Office of Management and Budget.
Had the 18 percent cap been in place for this year, federal spending would be about $2.6 trillion, instead of the $3.5 trillion now budgeted, a 25 percent reduction. Federal spending as a percentage of GDP hasn’t been close to 18 percent since 1974, when it was 18.7 percent. It hasn’t been consistently below the 18 percent cap since the mid 1960s.
Opponents to Mack’s plan to rein in government will cite those numbers of proof that the government can’t possibly get by consuming the paltry sum of slightly less than one fifth of everything everyone produces,
But the weakness of the plan is also its strength.
The GDP is not set in stone. It changes depending on how well the economy is doing. In good times, it jumps by hundreds of billions of dollars a year. Even in bad times, it tends to creep up by small percentage points. As a result, 18 percent of GDP also grows.
The White House optimistically projects robust growth in GDP in the coming years. If those projections hold true, the federal government could spend even more than it spends today without breaking the 18 percent cap.
The OMB projects a GDP of $19.8 trillion in 2016, the last year in its forecast. A federal budget capped at 18 percent of that level would allow $3.56 trillion in spending, more than the $3.4 trillion now being spent.
To argue that the One Cent Solution would mean drastic cuts, opponents would have to propose that the White House figures are wrong and that GDP will be lower than projected. That is essentially arguing that the recession is going to go on throughout the presidency of Barack Obama, hardly a position Democrats will be eager to take.
The Congressional debate on how to cope with the just-breached federal limit will require legislators to seriously consider spending plans like the one Mack has outlined, Riedl said.
“Congress has got to do something. Some reforms are going to have to be implemented.”
Connect with Brent Batten at naplesnews.com/staff/brent_batten