In his new TV ads, here are some of the things Mitt Romney is promising to do on his first day in office, if elected president: Reduce the deficit. Cut government spending. And cut taxes.
Nice plan. But it would never happen the way Romney describes, because of the details he isn't bothering to mention.
Romney's economic plan calls for cutting federal spending to 20 percent of GDP (it's 24.3 percent today), raising defense spending, cutting income-tax rates by about one fifth, and lowering other types of taxes. In general, he'd have to cut overall spending by more than he'd cut taxes, in order to make the deficit smaller.
It might sound simple, but in reality it's practically impossible. Romney says he'll start whacking the federal budget on Day One by cutting non-defense, discretionary spending (which I'll call NDD, for simplicity) by 5 percent. That's like trying to get your family out of debt by eliminating your chewing-gum habit.
NDD spending includes stuff that Congress must authorize every year, like veterans' benefits, highway funds, money for federal courts, and the budgets for most cabinet agencies. It doesn't include entitlement spending on Medicare, Social Security or Medicaid—and it only accounts for about 15 percent of all federal funding, or about $570 billion this year.
So cutting NDD spending by 5 percent would cut total federal spending by a grand total of $28 billion, which is only 0.8 percent of the total federal budget. That's enough to lower federal spending from 24.3 percent of GDP to 24.1 percent. Oops. Missed the target by a little.
So obviously it would take much bigger spending cuts to get to Romney budget's target. If he were to cut all NDD spending, while leaving taxes where they are, he'd only get Washington's budget down to 20.7 percent of GDP. Plus a spending cut of that size would come straight out of GDP growth and trigger a recession, making the whole problem worse. If Romney were to cut taxes at the same time, spending (and GDP growth) would have to come down by even more.
Romney has said he'd be willing to cut certain types of tax breaks and subsidies to help finance his plan, but he hasn't identified any in particular. That's because curtailing tax breaks would take money straight out of taxpayers' pockets, which is not a very shrewd campaign platform. For what it's worth, however, the big money would come from cutting the tax deductibility of mortgage interest, company-paid health insurance, retirement savings, and state and local taxes. Right. This means you.
The only real way to reach Romney's goals is to cut the entitlement spending that makes up 60 percent of the budget. And it would be painful. The Center for Budget and Policy Priorities, for example, estimates that spending on Medicare and Medicaid would have to be cut by 29 percent in 2016, and 59 percent in 2022, in order to meet Romney's targets while cutting taxes and fencing off defense spending.
That might alarm retirees, but it's not politically feasible. The senior lobby in Washington is powerful—plus seniors vote—which makes a budget plan that eviscerates Medicare a political nonstarter. Yet there's really no way to solve the government's budget problems without cutting the kind of spending that provides tangible and valuable benefits for millions of Americans.
Romney's shallow rhetoric about the budget is making voters stupid because it perpetuates the fiction that a few basic cuts will get Washington's spending under control and "end the era of big government." That's malarkey. Nearly every credible budget expert agrees that solving the problem will require widespread tax increases along with cuts in many programs. Politically, an agreement will only be possible if there's shared sacrifice and a widespread view that pain now will generate greater benefits for everybody in the future.
President Obama, for his part, isn't leveling with voters either about the sacrifices they'll have to make to keep America solvent. I'll address that in future installments of this series. Unfortunately, there's plenty of stupidity to go around.
Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.