Congressman John Campbell's Blog - Green Eyeshade Blog

Thursday, May 17, 2007

Posted by: John Campbell at 1:43 PM

Yesterday, Democratic leaders in the House and Senate agreed to a $2.9 trillion budget that will likely be taken up for a full vote soon. Now, if you buy into their talking points, this budget is the greatest thing since sliced bread -- it balances the budget in five years while both increasing discretionary spending and not raising taxes. Well...I can confidently tell you, as one of only a couple CPA's in Congress, that the Democrats must be conjurers of magic because that's what it will take to make a voodoo budget like this work.

Their proposal either doesn't raise taxes, or it doesn't balance the budget. But it absolutely mathematically cannot do both. It will not and cannot mathematically do both.

For argument's sake, let's assume that the Democrats want a budget that doesn't raise taxes. But there is just one small problem with that -- their budget makes no effort - none - to moderate growth in spending. In fact, it calls for $205 billion more in spending over 5 years than proposed by president, and does absolutely nothing to address the $69 trillion long-term entitlement crisis we are facing. You can't balance a budget while increasing spending at the levels they desire without raising taxes. It is just not possible.

I recognize Republicans spent too much when we were in the majority and I acknowledge that we lost sight of our fiscal roots. We suffered last November in no small part because of that. The Democrats, though, actually think we spent too little and they are now happily moving forward with spending increase after spending increase. And despite rhetoric, they want to pay for all this excess spending with the largest tax increase in American history.

So, I would say to my Democratic colleagues, have you really become magicians or are you merely practicing slight of hand? I'd go with the latter.

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Rich L. writes:	Thursday, May, 17, 2007 2:44 PM
Where have you been??
We lowered taxes and the government just took in a record amount. The budget is not a zero-sum game!! I certainly hope you are better at doing someone's taxes than you are at budget! If done properly, you certainly can cut taxes and balance the budget. Now I don't for a minute think that the Dimmocraps can do this, but it can be done.
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fencerdad writes:	Thursday, May, 17, 2007 2:57 PM
Yes ... This is not a zero-sum game
>>"For argument's sake, let's assume that the Democrats want a budget that doesn't raise taxes. But there is just one small problem with that -- their budget makes no effort - none - to moderate growth in spending. In fact, it calls for $205 billion more in spending over 5 years than proposed by president..." At least with respect to the increased $206B spending over 5 years, your proposition is false. One can balance the budget and not raise taxes, if the GDP grows sufficiently. Regarding entitlements, the story is a bit different. But the statement that we have a "$69 trillion long-term debt" is a forward linear projection that is not true - because it is a projection and assumes that Congress makes no adjustment before insolvency strikes. Again, this is a dynamic situation and is amenable to adjustment along the way. Congress can raise the retirement age, reduce benefits, tax benefits, etc. to prevent the insolvency. These actions may not be politically palatable, but they are, nevertheless, true options. In fact, I am opposed to any forecast of debt over a 5 year or 10 year time frame. Why choose this time frame? Congress passes budget bills every year, not every five or ten years. So, this article is simply hype - simply ridiculous.
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P2 writes:	Thursday, May, 17, 2007 4:36 PM
Disingenous, but...
We've been arguing for years that you can balance the budget without raising taxes and that sometimes lowering taxes can increase revenue by stimulating economic growth. So now criticizing the Democrats for trying to balance the budget without raising taxes seems disingenuous. However, as the Democrats have been arguing for years that Bush's tax cuts were wrecking the budget, I would like to see an explanation as to how they now believe they can balance the budget and increase spending without raising taxes. Maybe they've finally come around and embraced the wisdom of our economic policies, but I highly doubt that.
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ZB2 writes:	Friday, May, 18, 2007 4:02 PM
Reversing spending growth is the key
The author correctly points out that stopping Federal spending growth is the key. fencerdad opines that: "One can balance the budget and not raise taxes, if the GDP grows sufficiently." True, as far as it goes. However, the White House submitted budget assumes that GDP will grow by 5.45 percent already! AND uses that assumed growth to expand Federal spending by a total of $829 billion between now and 2012. I think that 5.45 percent is an unrealistically high sustained growth rate. The author's point is defensible, that another $205 billion of Federal spending--25 percent more than the White House budget--is impossible without raising taxes.
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About John Campbell

John Campbell is a member of the House Financial Services Committee, and has taken a leadership role in addressing the country's top economic issues. Campbell serves as a member of the Joint Economic Committee, and House Committee on the Budget. He has a Bachelor's Degree in Economics from UCLA and a Master's Degree in Taxation from USC.