No, You Can’t Balance The Budget In 10 Years. At Least If You Want To Stay In Office.

In 2001, Alan Greenspan, then-chairman of the Federal Reserve, sat before the Senate Budget Committee and , senior fellow at the Urban-Brookings Tax Policy Center, a left-leaning economic policy think tank.

What Washington calls mandatory spending — autopilot spending for programs like Social Security, Medicare and Medicaid, as well as smaller programs such as food assistance and farm subsidies — make up close to two-thirds of the government’s spending.

The rest is called discretionary and is doled out by Congress in annual appropriation bills, like the $1.7 trillion omnibus bill that passed in December. Of that $1.7 trillion, about half was set aside for the Pentagon’s defense programs.

And that’s the rub. To try to balance the budget with spending cuts only means either hacking that $800 billion in non-defense spending massively or cutting Social Security and Medicare.

As the bipartisan Committee for a Responsible Federal Budget budget put it: “Unfortunately, due to continued borrowing over the past several years, the desirable fiscal goal of budgetary balance has become much more difficult to reach, and it is highly unlikely it could be achieved in a decade or less, particularly if revenue, defense, and other parts of the budget are excluded from the solution.”

In its most recent projections, the Congressional Budget Office estimated the 2032 budget gap will be $1.8 trillion. The 2033 deficit, which the CBO will forecast in February, will likely be even bigger. For the 10 years ending in 2032, the CBO said it expects the annual deficits to total more than $15 trillion.

(That’s also too optimistic because the rules about CBO forecasts make it assume things that won’t happen, like the temporary individual tax cuts in the 2017 tax bill actually expiring.)

So what would need to be done to gradually get the 2032 deficit down to zero from $1.8 trillion? The menu of options isn’t pretty, at least if you want to remain in office.

The CBO, every two years, lists some of the biggest options and its 10-year deficit impact:

• Impose a consumption tax, between $1.930 trillion and $3.050 trillion;
• Eliminate itemized tax deductions, between $541 billion and $2.507 trillion; and
• Impose a new payroll deduction tax, like those for Social Security and Medicare, between $1.136 trillion to $2.253 trillion.

The CBO looked at spending cuts, too, but the biggest savings there were not as big as possible tax hikes. They included:

• Cut the armed forces by about 20% for five years and then let spending grow with inflation afterward, $995 billion;
• Cap the federal contribution to the joint state-federal Medicaid program, between $501 billion and $871 billion; and
• Make Social Security benefits a flat amount, cutting how much goes to high-income earners, between $270 billion and $593 billion.

None of those are likely to make many lawmakers’ hearts flutter. But even the most recent budget by the Republican Study Committee, a group of conservative House Republicans, had to take big steps to get to its claimed goal of a budget in balance in seven years.

It would raise the eligibility ages to qualify for Social Security and Medicare, and in Medicare’s case, it would allow participants to use federal dollars to buy Medicare plans outside the traditional program, essentially making it a voucher program. It would also cut the non-defense discretionary spending by about one-fifth over 10 years, or $3.6 trillion.

Tax hikes or spending cuts of that magnitude are just not politically tenable, according to Holtz-Eakin.

“The public is not prepared for that kind of a change, and they’re not prepared to see their Social Security and Medicare simply cut. So the very people who want to have a more responsible fiscal policy are going to endanger the reelection of their colleagues,” Holtz-Eakin said.

“They might be in safe seats, but their colleagues are not. And we’re going to get back a crowd that is even less responsible than the one we have now.”

That’s led many Republicans to be somewhat at a loss to say what they would do or to posit contradictory solutions. Donald Trump took to his Truth Social app to post a video saying: “Under no circumstances should Republicans vote to cut a single penny from Social Security or Medicare.”

House Speaker Kevin McCarthy (R-Calif.) appeared to endorse that stance last week when he told Donald Trump Jr., “We won’t touch Medicare or Social Security.”

Instead, Trump suggested cutting waste, fraud and abuse, perennial targets that no serious budget expert believes can balance the budget.

Rep. Nancy Mace (R-S.C.), appearing Jan. 22 on “Meet the Press,” said “obviously” there should be no cuts to Social Security, Medicare or even Medicaid. “That’s a non-starter for either side.”

But then she praised the so-called Penny Plan, an idea championed by Sen. Rand Paul (R-Ky.) that would cut all federal spending across the board by 6% (or six pennies on the dollar) for five years, including spending on Social Security, Medicare and Medicaid.

With House Republicans hoping to have something to show for taking the debt ceiling hostage, what could they claim as a credible piece of deficit reduction?

One idea is commissions to look at Social Security and Medicare, something championed by Sen. Mitt Romney (R-Utah). Others, like the Committee for a Responsible Federal Budget, suggest less ambitious goals than pure balance, like balancing the budget except for interest payments (a Barack Obama-era idea); stabilizing the debt in proportion to the size of the economy or setting a longer time horizon than 10 years.

Holtz-Eakin said he agreed with trying to stabilize the debt, which would mean running annual deficits smaller than the growth in the economy each year.

“That will require real work. That will require real reforms. And that would also do the trick in the sense of taking off the table any fear of a sovereign debt crisis,” he said.

Politically, convincing voters that stabilizing the ratio of debt to gross domestic product is better than “balance in 10 years” will be difficult. But the alternative may be worse, a political talking point Republicans will be unable to deliver on.

Or, as Holtz-Eakin put it in a recent post, “Innumeracy and unrealism do not add up to equal fiscal discipline.”