Rand Paul has been promoting the tea party's "penny plan" to reduce government spending, but he hasn't been talking much about what implementing that plan would look like. His supporters should ask themselves why.
The penny plan calls for
- a 1% reduction in total federal spending per year for six years
- a cap on federal spending of 18% of gross domestic product [GDP] starting in 2018
- $7.5 trillion less total federal spending than currently forecasted.
For reference, total federal spending in 2011 will be approximately $3.8 trillion. 2011 GDP will be about $13.3 trillion.
A one percent cut to federal spending of $3.8 trillion sounds like a very doable $38 billion.
But $38 billion in cuts each year for the next seven years is only $266 billion in cuts -- a far cry from $7.5 trillion. The reason is that our population is growing, our economy is growing (we hope), and we expect government to grow more or less commensurately. The Office of Management and Budget forecasts 2016 federal spending of $4.5 trillion. Extended to 2018, we see total federal spending more or less at these levels.
| Year | OMB Spending Forecast |
|---|---|
| 2011 | $3,800,000,000,000 |
| 2012 | $3,940,000,000,000 |
| 2013 | $4,080,000,000,000 |
| 2014 | $4,220,000,000,000 |
| 2015 | $4,360,000,000,000 |
| 2016 | $4,500,000,000,000 |
| 2017 | $4,640,000,000,000 |
| 2018 | $4,780,000,000,000 |
A 1% cut from current levels each year is way more severe when on top of that you also have to cut all the growth in government spending that is anticipated. But that is what you have to do to achieve the $7.5 trillion in savings.
To see the actual magnitude of Rand Paul's penny plan cuts, we can compare the above OMB projections with a 1% annual cut from current levels.
| Year | OMB Spending | Rand Paul's Spending |
|---|---|---|
| 2011 | $3,800,000,000,000 | $3,800,000,000,000 |
| 2012 | $3,940,000,000,000 | $3,762,000,000,000 |
| 2013 | $4,080,000,000,000 | $3,724,380,000,000 |
| 2014 | $4,220,000,000,000 | $3,687,136,200,000 |
| 2015 | $4,360,000,000,000 | $3,650,264,838,000 |
| 2016 | $4,500,000,000,000 | $3,613,762,189,620 |
| 2017 | $4,640,000,000,000 | $3,577,624,567,724 |
| 2018 | $4,780,000,000,000 | $3,541,848,322,047 |
What begins as a 4.5% cut from forecasted spending in 2012 grows to become a 26% cut from the spending forecast for 2018. That will be a whopping $1.2 trillion cut in a single year. And, mind you, that massive 26% cut will be in the face of a population 25 million people larger than today.
We can do a thought exercise on what is involved in cutting 26% from the 2018 budget by thinking about what we would have to do to cut 26% from the 2011 budget of $3.8 trillion. That comes to $988 billion. And, yes, all in one year.
For sake of an example, lets say conservatives got to whack their most hated federal programs and really remake the government the way they'd like it. I tried completely eliminating all Medicare spending, all unemployment compensation, all food and nutrition assistance (including both for women and families as well as the school lunch program), and all money spent on elementary, secondary, vocational, and higher education. I completely ended public housing and housing assistance. I zeroed out the foreign aid budget, eliminated all farm subsidies and all federally funded social services, and I got rid of all funding for pollution control and abatement. I, of course, ended all spending on consumer protections and worker health and safety. Then I closed down all of the national parks, eliminated all federal funding for regional development, and I stopped all energy regulation. For good measure, I ended the postal service too.
At that point I only had to cut $11 billion more, which I was able to do by killing off disaster relief.
Senator Paul's supporters might ask themselves why he hides the devastating 26% cuts that will be needed to make his innocent sounding 1% cuts happen.
Louisville.com's The Arena section features opinions from active participants in the city's politics. Their viewpoints are not those of Louisville.com (a website is an inanimate object and, as such, has no opinions).
