Among the major proposals Dan Debicella is tossing out there in this campaign is this: "Cap" federal spending at 20% of GDP to "force politicians to work together to eliminate the deficit by 2026 without raising taxes." He is proposing, in short, magic. A silver bullet. A single proposal that will have the effect of bending 434 other representatives to his will, for they will be powerless to spend money (a power granted to them by Article I of the Constitution) once subject to the Debicella "cap."
I'm sorry for the sarcasm, but arithmetic tells you why this proposal is impossible to implement. Well, maybe it's possible, but not without absolutely gutting Medicare, Social Security or defense.
I assume he is talking about annual spending and annual GDP. Quarterly seems like it would get too messy and require endless revisions. Setting aside the problem that spending is approved in advance of a fiscal year and GDP for that fiscal year could only be determined afterward (which is kind of a big problem), here are the most recent numbers I could find:
GDP for 2009: $14.12 trillion at the Commerce Department site, $14.24 in President's FY 2010 budget. I think the difference is Commerce reports on calendar year 2009, and budgeting is done for fiscal year 2009, so I'm using the FY number.
Federal Spending FY 2009 (including debt interest): $3.938 trillion
The magic of division: 27.7% of GDP was federal spending in FY 2009.
Projected GDP 2010: $14.729 trillion
Federal Spending FY 2010: $3.552 trillion
The magic of division: 24.1% of GDP is projected to federal spending in FY 2010.
Heck! We're nearly halfway there! Almost to 20% right?!? Well, not really. FY 2009 was a huge outlier. Remember how the country crumbled into economic dust and lost $12 trillion in private wealth in about a week? Yeah, that. The actions of FY 2009 stopped the crash, and that is a rather rare occurrence. For example, FY2008 spending was 21.1% of GDP. The White House is projecting it to be pretty stable at 22.2% from FY 2012 on (grain of salt needed). So, in a "normal" year what would it take to squeeze out that last 2.2% or so?
Let's try, shall we? Projected 2012 GDP is $16,470,000,000,000 (give or take a buck). Projected spending is $3,662,000,000,000.
The magic of multiplication: 22.2% of GDP = $3,662 billion, while 20% of GDP is $3,294 billion
Size of the cuts needed: $368 billion
(cut-a-palooza, and why it won't happen, after the jump)
I found a non-security discretionary (NSD) spending projection of $520 billion for FY 2011. But since Obama is already proposing a freeze on NSD for three years, it ought to be $520 billion for FY 2012, too. If you want to make the Debicella cuts in only non-security discretionary spending, you would have to eliminate 71% of all spending for air traffic control, farm subsidies, education, the federal courts, nutrition, the EPA and national parks, etc., etc. Debicella is suggesting he can take a jumbo scalpel to farm subsidies and air traffic control, and will attract the votes of representatives from deeply-red areas like Kansas, Nebraska, agricultural regions of California, and pretty much the entire rural South. And those with constituents who use airplanes. Uh-huh.
But, let's give him the benefit of the doubt. Let's say this "plan" achieves massive cuts in non-security discretionary spending (because, after all, to listen to Debicella's rhetoric on this it will "force the politicians of both parties to live within a budget, just like our families do"). OK, we'll only cut funding our aging, already-perilous air traffic control system by, say, a mere 20%, slash education funding in half (states can just come up with that $18 billion), and we'll just have the people living in poverty start kicking in a co-pay to get food at the food bank -- stuff like that. Let's say you cut NSD in half (I'm being very generous to Debicella here -- you'd never get close to half). You've now cut $260 billion. You have $108 billion to go. And here are your choices:
Medicare
Medicaid
Social Security
Other mandatory programs like Veterans' benefits, unemployment up to 39 weeks, and food stamps.
Security-related spending, which is the entire defense budget, plus things like Homeland Security and maintenance of embassies worldwide.
OK, Dan... go for it! Show me the $108 billion! The Medicare budget is around $490 billion. A 22% cut to Medicare? Something tells me that's off the table. Social Security then? Hmmm. Close half our embassies? Probably a trivial amount of money to be saved there with awful consequences. You see the problem. Nothing there is realistically cut-able. And I already imposed $260 billion in NDS cuts, which are also not realistic.
I saw another analysis with different spending and GDP projections, and it requires cuts of about $800 billion. In the president's budget, which I'm using, GDP grows at an annual rate of 5%. That sounds high. So really, the GDP number will likely be lower in 2012, requiring even deeper cuts. See, Debicella's proposal requires cutting spending when GDP goes down, and permits spending increases when it goes up. He thinks government spending should mimic broad economic activity, not try to stabilize or effect it.
The purpose of this post is to look at what it really means to cut federal spending to 20% of GDP. I am ignoring the feasibility of enforcing such a cap, or even its constitutionality. I am also ignoring a pretty important fact: Government spending is one of the four components of GDP. When you reduce it, you reduce GDP. So I didn't bother adjusting the denominator in the "magic of" calculations above. In part, because "federal spending" isn't identical to "government spending" and a lot of the cuts that would result from the Debicella proposal will just shift spending to the states. Unless you think federal transportation appropriations don't help states pave roads or, say, put new Metro-North cars into service.
This proposal is feel-good nonsense. I hope someone out there grills Debicella for specifics. Because until he says what he'll cut and by how much, he's offering empty rhetoric designed to sound like a good idea. And I think he knows it's an impossible idea. If he thinks this proposal is possible to implement, constitutional, and prudent... I suggest that "radical, reckless and wrong" applies perfectly to Dan Debicella.
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