Does gridlock mean bigger government?

It would, by default. What could make a difference? Perhaps the Toomey bill:

Debt-Limit Remedy Gives Fiscal Hawks Leverage

What happens when an unstoppable force meets an immovable object? House Republicans can pass all sorts of legislation to reduce the burden of government spending, but they don't control the Senate and they can't override a presidential veto. President Barack Obama, meanwhile, lacks the power to compel Congress to approve Democratic goals, including higher taxes.

This is a recipe for gridlock. And gridlock means bigger government: Democratic proponents of the status quo are in much stronger position to prevail because there are few ways for budget cutters to exert their will.

But there is some hope because of a "must-pass" piece of legislation. The president wants Congress to increase the statutory debt ceiling of $14.3 trillion so that government operations remain unaffected. Republicans oppose this business- as-usual approach and are insisting on real fiscal reforms in exchange for a higher ceiling.

[...]

Quite simply, Toomey's bill would require the federal government to fulfill obligations to bondholders before making any other disbursements.

To the extent that investors actually are worried, Toomey's legislation would remove ambiguity and, to borrow from the title of the bill, make clear that the "full faith and credit" of the U.S. government would be preserved.

Toomey's proposal has generated a lot of angst among Beltway insiders because it would change the political dynamics of the budget fight. Politicians love to pontificate about the dangers of debt, but many of them are MIA when it comes to putting real limits on the growth of government spending.

It's much easier to put the budget on auto-pilot and delay tough choices, which is usually what happens with closed-door budget compromises in Washington.

Powerful Weapon
If the Toomey legislation is adopted, fiscal reformers will have a powerful weapon at their disposal. Secure in the knowledge that default no longer is a possibility, they can be much tougher in their negotiations with the politicians who favor the status quo. [...]

THAT would be change I could believe in.
     

Budget cutting, the REASONable way

Reason.tv: Budget Chef Presents: How to Balance the Budget W/O Raising Taxes!

Using just a big piece of pork, a large knife, and a small knife, the budget chef shows how to balance the federal budget by 2020.

As a special treat, he does it without raising taxes from the current Bush-era rates!

It seems like a complicated preparation at first, but it's so simple that almost any elected official should be able to pull it off like a pro!

Domestic and foreign investors will love this, and it will also help create a stable environment conducive to long-term, sustainable economic growth.

Between 2011 and 2020, the Congressional Budget Office estimates that total federal outlays - for defense, agriculture subsidies, Medicare, Social Security, you name it - will total a whopping $42.1 trillion (in 2010 dollars). To bring outlays down to revenue, we need to cut a total of $1.3 trillion in total expenditures over the next 10 years.

That sounds like a really tall order until you realize that it cutting just 3.6 percent a year for each of the next 10 years. To put it in dollar terms, it means cutting about $130 billion a year from budgets that will average over $4 trillion.

That's not so hard now, is it? By making small, systematic cuts to a federal budget that is larded up with more fat than an Ponderosa buffet, we can balance the budget without even nicking essential services. [...]

The video is just a summary. It's based on a much more detailed article:

How to Balance the Budget Without Raising Taxes
The 19 Percent Solution

A value-added tax, a soda tax, a gas tax, banning earmarks, freezing a portion of federal spending at "pre-stimulus" levels - there’s no shortage of ideas being thrown out to fix the country’s disastrous balance sheet, which threatens not just near-term economic recovery but the possibility of long-term growth. Like last week's report from the president's Commission on Fiscal Responsibility and Reform, most of the current plans to fix the country's finances rely more on increases in revenues than on cuts in spending. In part due to its heavy reliance on revenue hikes, the commission, charged with balancing the budget by 2020, failed to win enough votes of its own members to present its recommendations to Congress.

Which raises the question: Can America really reduce its debt and deficit without raising taxes to job-killing rates or cutting essential services to developing-world levels? The answer is not simply yes, it's that we have to.

Raising government revenue - taxes - substantially is not only bad policy, it has proven difficult and ultimately unsustainable for any length of time in the past 60 years. Since 1950, annual government revenue, as a percentage of Gross Domestic Product (GDP), has averaged just below 18 percent despite every attempt to jack it up or tamp it down. Our post-World War II experience shows that if the government is going to live within its means, it can't spend much more than 18 percent of GDP. Period.


Which is one reason to be happy that the debt commission's recommendations won't be presented to Congress anytime soon. The report assumes revenue equal to 21 percent of GDP and struggles to get spending to "below 22% and eventually to 21%" of GDP. That’s a recipe for disaster that would guarantee deficits and red ink.

Similarly, former Sens. Bill Bradley, John Danforth, and Gary Hart, working with the Committee for a Responsible Budget, have offered up a plan to balance the budget by 2020 that relies on revenue hitting 20.8 percent of GDP, a level that hasn't been achieved once in the past 60 years. Republicans have not advanced any realistic near-term plans. Rep. Paul Ryan's (R-Wisc.) Roadmap to the American Future does not balance the budget until 2063. The pre-election GOP’s Pledge to America is worthless since it fails to provide specifics (and to the extent it does, it is no good).

The current situation is a bipartisan disaster that requires immediate action. Since Bill Clinton left the White House in 2001, total federal spending has increased by a massive 60 percent in inflation-adjusted 2010 dollars. In fiscal year 2010, which ended September 30, the federal government spent $3.6 trillion, or 25 percent of Gross Domestic Product. That’s the most spending, in terms of percentage of GDP, since 1946. Likewise, last year’s $1.5 trillion deficit, as a percentage of GDP, was the largest deficit since 1945.

Most economists talk about a debt-to-GDP ratio of 60 percent as a trigger point that makes investors very nervous about a country's ability to pay its obligations. The debt to GDP ratio was 63 percent this year and the Congressional Budget Office (CBO) projects it will be 87 percent in 2020. Just three years ago, it was 36.5 percent. Not good signs.

So, what would it take to bring federal spending into line with plausible levels of revenue?

The CBO, the non-partisan agency charged with estimating the effects of legislation on government costs, has produced a long-term budget outlook in which Bush-era tax rates remain unchanged. Their conclusion is that over the next decade, "government revenues would remain at about 19 percent of GDP, near their historical averages." That's actually a bit higher than the historical average, but is within the bounds of reason. [...]

There's a lot more. Read the whole thing, the original article also has many embedded links too. It's so refreshing to read about real, actual, REASONABLE solutions!

     

Federal deficit-cutting commission gets real

I hadn't much hope for this commission, but I may have to change my mind:

Deficit-Cutting Chairmen Call Washington's Bluff

Perhaps you don't want to play poker with Alan Simpson and Erskine Bowles.

Mr. Simpson, the Republican and former Senator from Wyoming, and Mr. Bowles, the Democrat and former White House chief of staff, are chairmen of the federal deficit-cutting commission charged with devising a way to reduce the red ink Washington is producing. They oversee an 18-member, bipartisan panel that is supposed to come up with a plan by Dec. 1, provided they can get 14 of the 18 commission members to agree on something.

That's a big if. But the two have at least increased the odds of success with the clever way they rolled out their own personal recommendations Wednesday on how to suck up that red ink.

Specifically, they jolted the capital by laying out ideas to achieve some $4 trillion in deficit reduction by 2020. Look carefully at what they did and how they did it, and you'll see that their effort was designed to box in those on all sides who would rather talk in high-sounding generalities about the deficit than deal with the unpleasant specifics.

That doesn't mean they will succeed, but their tactics have at least given them a better shot.

Consider: [...]

Read the whole thing. It seems well thought-out, and they announced it publicaly rather than privately, so it can't just be ignored. It surpasses the requested reduction amount, and has wiggle room for adjustments. Sounds like a great starting point.

     

Where to make the spending cuts?

There has already been lots of research on the topic:

What Spending Should the GOP Cut?

[...] Out of the starting gate next year, fiscal reformers in Congress should push for an across-the-board cut to discretionary spending for the rest of the current fiscal year. One approach would be for House leaders to propose a continuing resolution that extends spending at last year’s levels, less some substantial percentage cut applied to every program.

For the upcoming fiscal year of 2012, reformers need to carefully target some major program cuts and eliminations. The president and the Democrats in the Senate will likely resist proposed cuts, but the point is to further the national debate that has begun about the proper size and scope of the federal government.

Some initial targets for GOP reformers, with rough annual savings, could include: community development subsidies ($15 billion), public housing subsidies ($9 billion), urban transit subsidies ($9 billion), and foreign development aid ($18 billion). On the entitlement side, initial cuts could include raising the retirement age for Social Security and introducing progressive price indexing to reduce the growth rate of future benefits. [...]

The article has many links to think-tanks and groups who have been studying the topic, and have many suggestions.

Europe has recognized the global economic threat and is reacting accordingly. They've been urging us to do the same. How long will it take us to change course before the collapse of our currency is imminent?

Spending cuts may be tough, but it will be nothing, compared to world-wide ecomomic collapse. See the links below for details.


Additional information:


What would a U.S. currency collapse look like?

What happens when Tax Cuts Expire in 2011?

Our true national debt: $130,000,000,000,000.

Argentina's Example: Are we heading there?

Glenn Beck – 15 Days of Economic Collapse

Has US Currency already "collapsed"?