Freedomnomics

Article published Tuesday, April 5, 2011, at Fox News.

Paul Ryan Is Right About the Budget -- Americans Cannot Afford Another Decade of Massive Government Spending

By John R. Lott, Jr.

The deficit is a spending problem. That's the simple truth. If federal government spending after President Clinton's last budget had simply grown fast enough to keep up with inflation and the growth in population, the 2012 budget would be running over a $70 billion surplus. Instead, federal expenditures more than doubled from $1.86 to $3.82 trillion in the ten years from 2001 to 2011, causing this year’s enormous $1.65 trillion deficit.

During President Obama's first three years in office the government's deficits are adding up to over $4.3 trillion. And there is no let up in sight. The Congressional Budget Office (CBO) estimates that the President Obama's budget plans will add another $10.4 trillion in deficits over the next decade from 2012 to 2021.

Americans can't afford to ignore this problem. The pricetag for that expected addition to the federal debt over the next decade comes to over $134,000 for a family of four. That doubles the debt the CBO expects that families will already face by the end of this year.

Tuesday Congressman Paul Ryan (R-Wis.), Chairman of the House Budget Committee, will announce his proposal to make cuts in spending in order to trim the increase in debt by $4.4 trillion -- down from the projected $10.4 trillion to $6 trillion. That is a serious start. Unfortunately, the proposal can be expected to be met by incredulity from Democrats, who don’t want to cut any spending and who labeled the current House Republican proposal for this year's budget of a measly $61 billion as "extreme" and "reckless."

Rep. Chris Van Hollen, the top Democrat on the House Budget Committee, already fired the first salvo on Sunday, accusing Ryan of “protect[ing] tax breaks for millionaires, oil companies and other big-money special interests while slashing our investment in education, ending the current health care guarantees for seniors on Medicare, and denying health care coverage to tens of millions of Americans.” Of course, this was before Van Hollen even had read Ryan’s proposal.

Yet, Tuesday Ryan proposed an end to the special tax breaks that let companies such as Obama favorite, General Electric, make $14.2 billion in profits this year but avoid paying any federal corporate taxes. GE’s president, Jeffrey Immelt, heads Obama’s outside panel of economic advisers. As The New York Times reported, “Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting.”

It was Democrats that GE successfully lobbying for tax breaks over the last couple of years. Ryan’s approach is quite different. He proposes a revenue-neutral approach that would replace deductions and loopholes with a lower rate that puts all companies on the same playing field. Despite Obama's repeated promises to cut the deficit, the CBO estimates that the claimed $1.1 trillion cut in the deficit actually amounts to a $1.2 trillion increase. Obama simply ignores the cost of existing programs and underestimates how expensive his new proposed programs will be.

But his current promises have been no more dependable than his past ones. In the first presidential debate, Mr. Obama attacked Republicans for an "orgy of spending and enormous deficits," promising that he was actually going to eliminate the deficit by reducing spending. He repeated that promise to cut overall spending in both the second and third debates.

Ironically, if Obama really believed that 2008 marked an “orgy of spending,” solving the deficit would be easy. Cutting government spending back to just 2007 levels would reduce next year’s deficit to just $100 billion. Cutting spending back to 2006 levels would eliminate it. Indeed, these cuts are much bigger than the cuts that Representative Ryan proposes today, yet Obama’s statements were never labeled as “extreme.”

Democrats respond that government spending can’t be cut because it would eliminate jobs. Just the proposed $61 billion cuts by House Republicans in the current budget is said to “amount to a loss of 700,000 jobs.” The claim only counts the jobs funded by the government and assumes that this spending isn’t offset by the loss of private sector jobs. The notion is that if the government doesn’t spend the money, it never really exists.

Obama’s massive budget increases over the last couple of years were promised to just be temporary. Now Democrats argue that they can’t be touched. Americans simply can’t afford another decade of deficits that add up to $134,000 for a family of four. Paul Ryan's proposal is actually fairly modest, adding just another $77,000 to the total debt for a family of four.

Government spending is simply out of control. Despite facing what will surely be vicious attacks, Ryan's proposal makes a real start at digging us out of this mess.

John R. Lott Jr. is a FOXNews.com contributor. He is an economist and the author of "More Guns, Less Crime (University of Chicago Press, 2010), the third edition of which was published in May.".

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