We Are Out of Money

What Both Parties Must Understand About the Budget
by Nick Gillespie and Matt Welch

What part of “we are out of money” don’t they understand?

Since 1950, total federal revenue from all sources has averaged right around 18 percent of GDP. In some years, government receipts have been bigger — even reaching a bit over 20 percent of GDP once under President Clinton — and many years they’ve been a bit lower. But the variance hasn’t been all that great; it’s pretty much 18 to 19 percent.

If history is any guide and if the federal government wants to balance its books, it’s got to spend no more than around 19 percent of GDP. So what would it take for the federal government to restrain spending to just 19 percent of GDP in 2020?

According to the Congressional Budget Offices’ alternative-scenario projections, it would mean coming up with a budget equal to $3.7 trillion in today’s dollars, rather than an anticipated $5 trillion if spending stays on autopilot. How do you trim $1.3 trillion over a decade or so?

Cut $130 billion out of projected spending (including projected increases) every year for the next decade. It’s the only way to actually keep the federal government solvent until we get around to fully revising outdated entitlement programs that are set to beggar us more than any stock market collapse ever did.

19% of GDP. That’s the magic number. If you want to spend more, your best option is to grow the GDP. And that means getting out of the way and allowing the American economy to work as it should. Stop playing favorites and stop the unnecessary regulations.

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