• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Closing the Deficit Requires an Open Mind, Not an Open Wallet

    The typically staid pages of the Washington Post Business Section were graced this morning with subtle humor from the virtual pen of the ever-sober, oft sagacious Steven Pearlstein. In a piece titled “Keeping an open mind on solutions to the budget deficit”, Pearlstein neatly lays out the argument one typically hears from open-minded liberals today. What makes the argument humorous is that they really believe they can pull this off.

    The essential of the argument is simple enough. Using Pearlstein’s numbers, federal spending is running at about 26 percent of Gross Domestic Product (GDP). Revenues tend to run at about 19 percent, and we can sustain a deficit of about 2 percent of GDP. That leaves a gap of 5 percent of our economy, a big number. Pearlstein then suggests what he regards as an eminently fair and reasonable proposition – a 50-50 split between tax hikes and spending reductions; 2 and a half percent of GDP each in tax hikes and spending cuts.

    What’s not to like? Consider that until very recently, federal spending had hovered around 20 percent of GDP. After complaining about deficits during the campaign once in office Obama and friends then launched federal spending toward 26 percent. So Pearlstein is suggesting a compromise whereby spending that has soared by 6 percentage points of GDP should now be cut back by 2 and a half points. So, from a pre-Obama perspective, the Pearlstein deal is to raise spending by more than three percent of our economy and pay for this by raising taxes by 2 percentage points. Steve, you’re such a kidder.

    Pearlstein argues that “political reality dictates that it is impossible to close that [5 percent] gap entirely with spending cuts.” Oh, really? Voters determine what political reality is, not Washington, as Senator Bob Bennett (R-UT) and Congressman Allan Mollahan (D-WV) recently discovered to their dismay. So here’s an open-minded solution from the taxpayers’ perspective. Get spending back down to 20 percent, and then we’ll talk.

    Posted in Economics [slideshow_deploy]

    3 Responses to Closing the Deficit Requires an Open Mind, Not an Open Wallet

    1. Pingback: » Financial News Update – 05/12/10 NoisyRoom.net: The Progressive Hunter

    2. Gregory Johnson Rifl says:

      Personally feel that we need to scale back and get the defecit down to around 20% of GDP. I don't know everything about the defecit but I am sure that there is 6% or more of waste, fraud and abuse in our system that could probably be cut out. Whether or not this is the time to scale back the National Debt considering we are not totally out of the woods as far as the recession goes is another matter. Even if you run a 2% annual defecit at some point down the road it needs to be scaled back. You cannot run defecits forever and expect to survive.

    3. louis vuitton says:

      Hi, I like Louis Vuitton or anything fashion for that matter! I was cruising the web for some new louis vuitton luxury items and I came across this article. This is a cool site and I wanted to post a comment to let you know, good job! Thanks Meme

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.