Sample Budget

I pledge to personally donate 50% of my Congressional pay to charity until Congressional pay is reduced.

I have described the problem and laid out my approach to solving the problem, but how would I envision this approach affecting specific programs? While I recognize that I would be just one vote out of 435 in the House, I believe true leaders should be bold enough to propose real solutions rather than merely giving lip-service to problems, or calling for independent study groups. The time for real action is now. Every day that we delay results in additional $27 of debt for every taxpayer.

While there are many possible solutions that I could support to reach the goal of a responsible budget, I provide the following high-level overview of one possible solution along with an explanation of the cuts in the major programs. The intent is primarily to provide an example of the types and magnitude of cuts that will be necessary for us to fulfill our moral obligation to pay off the debt. The details are flexible, but my principles are firm. We must reduce spending to 17% of GDP, which is roughly $2.6 trillion. Any proposal for a smaller spending cut in one area must be offset by a deeper cut in another area.

In order to reach this goal, we will need true leadership from Congress and an acceptance of shared sacrifice. True leadership means that Congress must set the example with its own budget. I therefore pledge that my first act in Congress will be to propose a 50% cut in Congressional pay. This matches the 50% cut that I propose for general government expenses and is deeper than the 36% cut in the non-interest budget. However, I am also a realist; I recognize that it is easy for a candidate to make such a proposal since there is little chance that it would pass Congress. But true leaders demonstrate their integrity by finding ways to lead. It is for this reason that I pledge to personally donate 50% of my Congressional pay to charity until Congressional pay is reduced. I further challenge every member of Congress to take this same pledge starting today. The time has come to separate the true leaders from those simply posing as leaders.

Unfortunately, Congressional pay is just a small part of the budget. Table 1 provides the complete summary of my budget blueprint.

Table 1: Summary of Spending Cuts (figures in billions)

  2011 20122
Category Obama Obama Cut Ryan Cut Vaughn Cut
Social Security $740 $747 -1% $766 -4% $740 0%
National Defense $740 $719 3% $594 20% $481 35%3
Income Security $570 $540 5% $501 12% $314 45%
Medicare $500 $480 4% $482 4% $250 50%
Health Programs $380 $364 4% $347 9% $114 70%
Interest $250 $235 6% $256 -2% $250 0%
Veterans Benefits $120 $122 -1% $127 -6% $108 10%
Education & Training $120 $103 14% $100 17% $78 35%
Transportation $90 $102 -14% $80 11% $68 25%
International Affairs $65 $62 5% $36 45% $33 50%
Justice $60 $30 50% $54 10% $45 25%
Natural Resources $39 $42 -7% $37 5% $20 50%
Science and Space $31 $31 -1% $30 3% $8 75%
General Government $29 $161 43% $27 7% $15 50%
Commerce $27 $17 37% $14 50%
Agriculture $25 $20 20% $6 75%
Community $21 $24 -14% $5 75%
Energy $12 $16 -33% $6 50%
Emergencies/Other $5 $15 -200% $5 0%
Total $3,824 $3,729 2% $3,529 8% $2,557 33%
Non-interest Total $3,574 $3,494 2% $3,273 8% $2,307.25 35%

1 There are no line items for these categories in Obama's 2012 Budget;it
is likely that many of these costs are embedded in the other categories
My sample budget numbers reflect my best guess as to where Congress
would agree to make cuts, if Congress agrees to cut the budget by
33%. I believe we need to cut this much, but more importantly, we
need to reform the budget process to define and reach our national
budget goals.
3 Since this sample budget was originally posted, defense spending was
already cut by roughly 10% by pulling out of Iraq; an additional 13% 
reduction will take place when we withdraw from Afghanistan. A
further 1% can be saved by eliminating Cold War systems that the
Pentagon doesn't want. The remaining 11% is largely covered by the
current sequestration cuts, which can be achieved responsibly by
performing a full audit of the defense budget in order to eliminate
waste. 

Social Security
Social Security is currently over budget and is using excess funds that have built up over the last few decades. Under current policies, the program is projected to use all of these funds within 26 years, at which point we will only have resources to fund 70% of promised Social Security benefits. The fundamental problem is that people are living longer, and we have underfunded the program to prepare for the retiring baby-boomers. I support the recent calls to raise the Social Security retirement age to roughly age 70, which should solve the long-term solvency of the program.

I am also concerned that the Social Security program is extra-Constitutional; in other words, there is no enumerated power giving Congress the authority to establish such a program. However, the program has arguably already taxed the people for a promised benefit. I also believe that there is value in such a program - it just should not be the role of the federal government to provide the program. Rather, the program should either be transfered to the states or justified through a constitutional amendment (I prefer the former). However, any such transfer to the states must be done with care to avoid unnecessary complications. This will likely take years to achieve, and, in the meantime, the above proposals will put the program on a stable budgetary footing.

National Defense
The Constitution is clear; national defense is one of the most important responsibilities of our government. Unfortunately, we still face many threats to our national security. We need to be prepared to meet threats from Afghanistan and Pakistan, Iran, North Korea, China, and the developing situation throughout northern Africa, just to name a few. We also need to protect our borders; the violence along the Mexican border has now reached levels seen in Iraq during the height of the war, yet it has received scant attention from the media. In addition, there appear to be an increasing number of reports suggesting that terrorists are crossing this border illegally. For example, in Arizona, an Iranian-published book titled In Memory of Our Martyrs was discovered by Border Patrol along a well-known smugglers' trail.

However, I believe our national debt has now become our biggest national security problem. Wars are expensive. Many have pointed out the expense of the Iraq war, but World War II caused our national debt to rise from 30% of GDP to 120% of GDP in just a few years; in today's terms, that would equate to roughly $13 trillion. If we are to be able to defend our country in a future war, we will need a strong credit rating to fund our activities. We imperil our society by failing to plan for this eventuality. Worse, by failing to prepare, we invite attack.

The truth is that the military can be cut. Every year, we hear about programs that the military wants to cut, but Congress continues to fund. We must eliminate these programs.

We also must scale back our operations overseas. This includes reducing the number and size of foreign bases. While having a few bases overseas may be justifiable from a logistics perspective, we do not need to be omnipresent, and the level of our involvement can be reduced.

Further, we must disengage from the wars in Afghanistan, Iraq, and Libya. While I believe there are very real threats to our society from a number of sources in the Middle East, our continued presence will begin to strain our relationships. We have won the war in Iraq, we should declare the victory and bring the troops home. Afghanistan is a much more complicated situation, but we have been there for almost 10 full years, and there is little evidence (at least available to the public) that we are making any significant long-term strategic gains. We should not remain in the country long enough for children to be born and grow to adulthood; that will spell disaster for us as we will then be seen as occupiers. I understand that this may mean that we will pull out with unfinished business. I also understand that this will likely give rise to more extreme forces in that country. However, that is why we must be clear that we are not afraid to return if we are attacked in any way - and any return will have to be much more aggressive. However, we simply do not have the money or the right to police foreign countries.

We must eliminate our support for dictators. Supporting the lesser of two evils has proven to be a flawed policy multiple times; Iran and Egypt are two clear examples of the danger of this policy. We must restore our integrity by demanding greater freedom around the world. But, this must not mean that it is our job to get involved in every conflict. We should only act when there is a clear, vital interest to the U.S.

We must also shrink the size of the "military-industrial complex." While a portion of this machine does excellent work and is run by good people, it is simply too large, and there are too many programs that have swelled beyond their need. We simply cannot balance the budget without severe cuts to programs that many have come to take for granted.

We must continue to provide for our national defense, and cuts made to the defense budget must be made with care, but each and every defense program needs to justify its existence and magnitude. The defense budget accounts for roughly 20% of the budget, and it is difficult to envision how we might reduce spending to 17% of GDP without making significant cuts to this program. A 35% cut would decrease defense spending to the lowest level that our country has seen since World War II. I am not convinced it is wise to make deeper cuts, given the current conflicts in the world.

Income Security
The income security category includes a variety of programs. A major portion of this category represents various retirement programs (both military and civilian) and insurance for disabled workers. These represent the funding of previous work agreements and should be low on the priority list of cuts on the basis that they represent employment contracts. On the other hand, many of these agreements were simply unrealistic when they were made, and we must all share in the sacrifice. Thus, these programs should not be entirely exempt from cuts.

Income security also includes unemployment insurance. This program is designed to be self-funded through employment taxes. We should restore this program to balance by returning to a responsible level of 13 to 26 weeks of unemployment rather than the current extension that allows 99 weeks of unemployment.

Finally, the income security category also includes numerous programs that are personal subsidy programs. These programs, like all subsidy programs, create a severe drag on the economy while also enticing the recipients to become dependent upon the government. After decades of fighting the "war on poverty," these government programs have not brought us any closer to solving the problem. In fact, these subsidy programs are ever expanding and now form a significant portion of the federal budget. If we are going to balance the budget, we must drastically reduce this type of counter-productive spending. These programs inclulde:

  • Food stamps
  • Child tax credit
  • Making work pay tax credit
  • Earned income tax credit
  • Section 8 housing credit
  • State child nutrition programs
  • Temporary assistance for needy families
  • WIC
  • Foster care and adoption assistance
  • Energy assistance
  • Etc.

Of course, we each still have a personal responsibility to care for the less fortunate in our society. We must humble ourselves and recognize that we are fortunate - any number of factors could easily place the wealthiest in our society into a position of need. It is only through the grace of God that we have our health and abilities; but from those who have been given much, much is demanded. I challenge my supporters and especially my donors to give at least 10% to charity. Charity works because it benefits both the giver and the recipient. The recipient is grateful and humble rather than expecting and demanding; as a result, the recipient is less likely to become dependent and more likely to use the resources to invest in the future.

Medicare
Medicare is perhaps the most problematic program in the entire federal government. Nominally, it is a self-funded program, but in reality, this is true only of Medicare Part A (i.e., hospital insurance), and even that program receives some outside dedicated funding (e.g., taxes on Social Security benefits). Medicare Part B (e.g., physician visits) is funded primarily through the general revenue (about 75%) and supplemented with participant premiums (roughly 20%), with some other minor sources. Rather than solving this funding problem, George Bush and the Republican Congress made the problem worse with the introduction of Medicare Part D, which is also funded from the same Part B pot of money.

Through these programs, Medicare now consumes $500 billion per year, while the Medicare payroll taxes only bring in about $200 billion - and just like Social Security, these numbers are projected to get much worse with the retirement of the baby-boomers, with real costs potentially doubling in the next 25 years. We simply cannot afford to provide the level of coverage that we have been providing - let alone promising.

There is only one real solution - we must drastically reduce spending on this program. Despite all of the spin, there is no magical solution. Cutting payments to doctors will only result in more doctors refusing to accept Medicare patients. Requiring doctors to accept patients will only result in doctors abandoning the fields in which they are needed. Forcing everyone to buy insurance, as with Obamacare, is simply an unconstitutional back-door way to introduce a new tax, while still not solving the fundamental imbalance (i.e., it does not raise nearly enough money). Standardizing care and programs will only meet with the same financial limitations and force the providers to ration their services.

Congressmen do not want to anger the older generation because they know that they vote; but the reality is that this program is the biggest component in our budgetary problems. We must recognize that the government has promised medical benefits that it has no hope of paying for. Future retirees will not receive the benefits that current retirees are enjoying; the only question is whether we as a country address this problem proactively or if we allow the entire economic system to collapse and then realize that there is no government able to provide these benefits.

While there may be some advantages to saving components of Medicare Part B and D, the current structure of the program suggests that we should retain Medicare Part A and eliminate Parts B and D. This will put the program into budgetary balance for the immediate future. However, a change this large should be done with a level of caution. There are likely components of Medicare Parts B and D that are worth salvaging and components of Part A that are not critical. Thus, I would propose the elimination of Medicare Parts B and D over a period of 5 years, with 20% of its current budget being eliminated each year. In the meantime, Congress should revise Medicare Part A to ensure that it covers the programs that we believe are most important.

Finally, we should also recognize that Medicare is another example of an extra-constitutional program; Congress has no authority to run such a program. Therefore, as with Social Security, I believe this program should be gracefully transfered to the states, or optionally justified through a constitutional amendment. Once again, this is a delicate matter that will take years to put in place; my proposal provides a solution in the meantime to put the program into budgetary balance.

Health Programs
Health care costs are spiraling out of control. In order to address this problem, we must first understand where the extra money is going. Congress has already investigated this issue and determined that the bulk of the increased health care costs are due to technology-related changes. These include new drugs, new procedures, and new medical devices. This actually should not be surprising, as it is exactly what economists predicted would happen when the cost of insurance coverage shifted away from the individual and to a third party.

The problem is that the individual user of health care bears very little of the cost of health care. As in most markets, when the consumer can get something for free, they will consume more of it. However, in the health care industry, there is a unique dynamic. People do not go out and purposely get sick in order to use more health care services. Instead, what has happened is that the medical research community has gone out and invented new products for people to buy to solve existing problems. They know that if they invent a new solution, the health insurance industry will be forced to buy it as a result of the agreements that they have established with their customers. By the time the cost gets back to the individual, it is largely disassociated from the benefit, and the individual complains about the high price of the insurance. This is true whether the insurer is a private firm or the federal government.

To make this problem worse, we then subsidize medical research, thereby accelerating the pace at which we improve medical technology and increase costs. If we are to balance the budget, we must break this cycle. We must return the cost of health care, especially the costs of advanced forms of health care, to the individual, or at least closer to the individual. This can be done by shifting the full cost of medicaid, CHIP, and other programs to the states while also reducing the budget for the NIH.

Interest
It is critical that we continue to pay interest on the national debt to retain our credit rating.

Veterans Benefits
Our military deserves the benefits that they receive, especially the medical benefits and pensions provided to the lower-ranking members. Nonetheless, every program must share in the cuts to some extent, but this should be one of the most protected programs.

Education and Training
Many of the education and training programs can be reduced or eliminated. K-12 education should be entirely funded by state and local sources so that the power is kept as close as possible to the people. Higher education should also be shifted towards state governments so that the programs become more efficient.

Transportation
While much of the transportation budget is self-funded, each of the specific programs receives significant subsidies that should be eliminated. The highway trust fund receives approximately $10 billion per year to subsidize highways and transit. An additional $10 billion goes into airports and marine operations. And another $2 billion goes to Amtrak.

We complain about the environmental impacts of transportation, but then subsidize all forms of transportation - except the most efficient, such as working from home. This is a classic example of how Washington works. Our supposed leaders will give lip service to an issue without taking any real action to solve the problems for fear of upsetting voters. It is time to find real leaders.

We should also ensure that we target those programs that are least effective. For example, we should streamline the federal role in highways and shrink or eliminate large segments of the FHWA. Gas tax funds should be provided more directly to the states so that they can put the money to use in building and maintaining highways rather than in funding bureaucrats in Washington, DC.

International Affairs
We should not be so generous with tax dollars. Many of the international programs are charity programs that should be left to individuals to fund on a voluntary basis. And the operation of the state department should be scaled back with the rest of the government.

Justice
Many of the administration of justice items would be difficult to cut and maintain proper operations. For example, we need to operate our prisons, secure our borders, and provide for the operation of our court system. However, there are components that can be cut, including the victims of crime fund and support for local and state agencies.

Other
Many of the remaining programs reflect federal government assistance to states, local governments, or individuals. Many of these can be reduced or eliminated.