For Pete's sake...

Let's play another pretend-game...

Let say that tomorrow, April 28th 2010, Ryan becomes President of the United States (reasons unknown, but pretend, okay?). With no aspect of "Obama-care" actually in place yet, he still sits down behind the "big desk" in the Oval Office to find that the US is spending $1.42 trillion MORE than it is making in revenue. Ryan, being Ryan, insists on "fixing this problem" in the manner and means that he sees fit: cut spending.

Now, I have made the point in the past (one I won't revisit here in detail) that if President Ryan simply placed a complete moratorium in new spending, we'd see the revenue column of our balance sheets catch up to the spending column in about 10 years (the average rate of growth in revenue figures is between 7% and 11%). This is not a difficult thing to imagine happening, is it? Stop the spending of anything more than we are spending right now for a period of a complete Presidential term (unprecedented, but it is possible). This would make Ryan the FIRST PRESIDENT in history to actually STOP the growth of Government during his watch. Quite the accomplishment, huh?

Problems arise, however, when we see that programs like Social Security, Medicare and Medicaid are already running a very nearly $500 billion dollar deficit all by themselves, AND they average a growth in spending of more than 7% annually. In other words, these programs (left alone with no reform or changes to operation) will out-spend the growth in revenues all by themselves, and never allow for any actual reduction in the deficit. Perhaps, with reduced spending in one area providing savings that can be applied somewhere else, vital areas of budgetary cost can be maintained (Defense, Federal infrastructure, etc). But not nearly enough to lower the budgeted deficit by any significant amount.

I guess my point is that my proposal for an imported oil tariff (inspired by Friedman, but not actually put forward by him with any seriousness, I think) is not, nor could it ever be, the "fix-it-all" solution to our spending problem. The intended $40.1 billion wouldn't even catch up our short-comings in Social Security spending, no matter how long we waited. My point is that it would generate a source of Federal revenue that could (in a perfect scenario) be used to further reduce the debt when coupled with a rational redefinition of what the role of the Federal government is in the modern world.

Perhaps the question was too ambiguous, though. Let's run with the scenario above: What would Ryan do? How would Ryan balance the budget while still keeping the government working in a manner that didn't cause a general shut-down through Congress' inability to pass a budget into law. Honestly, I'm not 100% sure the moratorium itself wouldn't cause a Federal closure before something was signed into law... but perhaps it would pass with the right leadership behind the effort.

Seriously, this was something Jambo and I talked about in the past, but I think this a do-able exercise. What would YOU do to fix what is wrong with the Federal government? What spending is "ok" and what isn't? Which taxes are necessary, and which aren't?