The Mack/penny Plan for Balancing the Budget in a Decade--THE BEST
By M.L. Cook
The first thing you have to understand about the current deficit crisis is the concept of baseline budgeting (BB), which our nation has practiced since 1974. Under BB the budget of every department in the federal government not only continues automatically into the next fiscal year, but gets increased!
The rate of automatic increase is substantial--7.5%, which is far beyond inflation or population growth. It is far beyond our current growth in GDP. The 7.5% is our official government growth rate (which Obama has actually managed to substantially exceed the last 2.5 years, a pretty incredible feat!) BB drives an enormous segment of our over-spending problems, but is almost never mentioned by the chattering class.
Have you heard about those terrible, horrific, excessive, irresponsible Republican/TeaParty attempts to slash government spending? To hear it said, you would think that
at least the cruel, cold-hearted Boehner plan would eliminate this 7.5% growth factor.
Not so. The Boehner plan achieves less than $50 Billion (with a
B please note) total spending reduction which will barely knock the rate of growth of spending down to 7.4%.
Understandably, conservatives with a Tea Party tilt to their feather-plumed wide brim hats want a much better plan. Even the vaunted Cut, Cap, and Balance plan would not return the USA to the balanced budget we last enjoyed in 1997, not for a long, long time. Democrats could not even tolerate CCB's moderate measures.
A better conservative plan, probably the best conservative plan, has been proposed by Sen. Connie Mack of Florida after collaboration with Sen. Rand Paul of Kentucky. It is called the Mack/penny plan, after the notion that the federal government beginning next year would have to first reduce the BB rate of growth from 7.5 to zero, and then further reduce every department budget by one cent (a penny) for every dollar spent for six years in a row, hence Mack/penny.
The Mack/penny approach is an absolute spending reduction. With BB gone, this is a cut that draws real blood, not projected blood. The pain will be real. The good news for the Obama White House is that the executive branch can elect to decrease one department by 9% so that it can raise another department by 8% if it wants. The one per cent cut is not a flat rate for every department, but the total federal budget must go down one per cent.
Mack/penny would run these 1% cuts for six years, then cap the rate and at 8 years institute an iron clad balanced budget law. Even doing all this, Sen. Mack thinks it would be ten years to achieve the balanced budget (like we had in 1997) once again.
A one per cent cut in spending every year can be presented to families as not something so extreme as to be unprecedented in their own household budgeting. Sometimes most of usl have to do that much, or much worse. It is a cut easy to explain, easy to visualize.
One major problem looming for Mack/penny will be Social Security and Medicaire. Because of the aging population social security costs can't be easily contained and because of Obamacare we are essentially putting 30 million new people into a quasi private-public insurance wonderland. Probably the only way for Mack/penny to accommodate those challenges will be means testing. The one penny per dollar rubric could be maintained by only applying that reduction rate to the richest 10% of pensioners.
Do we really want to do anything about the National Debt reaching 16 Trillion dollars in this budget, and likely 30 Trillion by 2025? A mediocre plan that we begin this year will do immensely more good than a more meticulously-crafted plan (by politicians, so add grain of salt) than we don't get around to for 5-8 years. That truth springs from the relentless crunching of irresistible numbers. What we were taught in business school about the miracle of compound interest is working very decidedly against us today.
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