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  • Morning Bell: Get on the Path to a Balanced Budget

    Paul Ryan (R-WI), Chairman of the House Budget Committee, will release his budget blueprint today in what will surely be one of the most important policy developments in Washington this year. If as expected Senate Democrats fail yet again to advance a budget for the government, then the Ryan Budget and the President’s Budget released a few weeks ago will present the leading alternatives for how the federal government would dig out of its present fiscal mess. And if the Ryan budget is anything like last year’s effort, the differences couldn’t be clearer. The Heritage Foundation is reviewing Congressman Ryan’s latest budget proposal and will provide analysis in the hours and days ahead.

    President Obama, of course, has talked a good game about fiscal discipline. He’s had his commissions. He’s made his big speeches. But according to his latest offering as scored by the Congressional Budget Office, the outrageous budget deficit of $1.3 trillion this year dips to a still-amazing $488 billion in a few years despite his enormous proposed tax hikes, and then begins to soar anew as the decade proceeds.

    With the federal government racing toward 17 trillion dollars debt, and with 13 million Americans searching for work in a slow economy, conservatives have long ago lost patience with the tax and spend crowd that runs Washington. Heritage has set forth six objectives that should guide development of the annual federal budget:  (1) a tighter budget, (2) a balanced budget, (3) fixes to entitlements, (4) no tax hikes, (5) job-creating, pro-growth tax reform, and (6) a strong national defense. Those conservative objectives lead to a stronger economy, less government, more jobs, and a safer America.

    On the balanced budget objective, Heritage has said:

    “The federal budget should balance in ten years, at a level well below one-fifth of the nation’s economy, and at all events much sooner than the budget would have balanced in the weaker budget formulas proposed  in previous years.”

    Heritage seeks to abolish the income tax and many other taxes and instead adopting the job-creating, pro-growth New Flat Tax in its comprehensive plan for Saving the American Dream. The New Flat Tax, combined with the other elements in the Heritage plan, leads to a balanced annual federal budget in ten years — a permanently balanced budget, without hiking taxes, at a level lower than one-fifth of the nation’s annual economic output. Heritage has emphasized that the current federal budget should make substantial progress toward that objective:

    “Congress should revise the tax code to establish strong economic incentives for job-creating saving and investment by abolishing a wide range of taxes and reducing the income tax structure to a single rate, or at most two.”

    Earlier balanced budgets are better. The quickest way to a balanced budget is to cut spending, avoid tax increases and to overhaul the nation’s tax code so that it helps rather than hurts the economy. Shifting from the current job-killing, anti-growth complex tax system to a simpler, job-creating pro-growth tax system is crucial.  Such a system raises more revenue as the economy grows, but without raising tax rates on Americans.

    The solution to federal government’s overspending and overborrowing does not lie in the arcane world of budget scoring rules and detailed, complex provisions of federal budget laws that only a few specialists understand. Congress must focus outside of Washington.

    Congress must focus on what happens in the real economy, where Americans go to work every day, produce the goods and services others need, pay their taxes, and take what is left in their paychecks home to support themselves and their families.  In that economy, the flatter tax system focused on creating incentives for savings and investment will generate jobs, let people keep more of their paychecks rather than sending more to their government, and will help put America on the path to a balanced budget.

    The dynamic effects of a flatter tax system yield a stronger economy with more jobs and better lives for Americans. The Budget Committee of the U.S. House of Representatives, which will shortly consider the annual federal budget, must begin moving America to a flatter tax system. The move to a flatter tax system, on the way to the New Flat Tax, will help grow our economy instead of our government. The Budget Committee should take that step, right now, toward a balanced budget.

    Quick Hits:

    Posted in Economics [slideshow_deploy]

    31 Responses to Morning Bell: Get on the Path to a Balanced Budget

    1. Mickie says:

      How does the New Flat Tax differ from the Fair Tax, as proposed in Ken Hoagland's book? Can you explain why the Flat Tax would be better than the Fair Tax?

      • dodger says:

        The primary differences are: the flat tax is still an income tax, which can be raised at any time and which Congress can (and will) "tinker" with, while the FairTax is a consumption tax which, if implemented completely, does away with the 16th Amendment (as well as the IRS). Granted, the rate can still be raised with the FairTax, but it would be much harder to do any "tinkering" with it.

    2. Raymond Williams says:

      We will never be able to attack the DEBT until we eliminate the DEFICIT. People don't get it! People equate reducing the deficit with reducing the debt. it is not the same. Any of us that spent like this would either be in jail or had a bookie looking for us.

      Common Sense from a real middle class American.

    3. Mary......WI says:

      Simple solution…..vote Obama out of office in Nov. AND also vote any democrat senator out of office too. This is the only way to get this country back on level ground…period! If the dems haven't passed a budget in 3 years why would anyone think they would pass one now.

    4. Jim Buzzell says:

      Your plan does not mention getting rid of over burdening regulations from EPA, DOE (both), DOC, etc. why is this left out of your blue print?

    5. Rich Teti says:


      America's best hope for survival is derived from the United States Constitution and relies on all of our effort. It is essential that we boil our case down to a choice between Individual Freedom (with this freedom comes personal responsibility) and Collective Servitude. This should be the message hammered day in and day out to America. Specifically, to have maximum freedom and minimal government (less servitude) we need a separation of business and state at all levels of government. This will eliminate corruption, eliminate social engineering and will raise the standard of living for all Americans. At the Federal level, as an American Citizen, I would like to see a long term plan formulated, presented and hammered home on a daily basis that reduces the Federal Government to three Executive Departments, State, Treasury and Defense, Congressional staffs reduced to two assistants, Repeal of the 16th (repeal all direct income tax) and 17th (restore a needed check on Federal Power and Mob rule) Amendments, add a Balanced Budget Amendment, the States will pay for the Federal Government according to population within each State and additional revenue may be obtained from port fees and other appropriate fees for service that are within the confines of the Constitution, add Line Item Veto Amendment for the President, add Amendment to limit Congressional House members to three terms, Senators to one term and limit Supreme Court Justices to one eight (8) year term (service to the Country should not be a Career), eliminate legal tender laws and the Federal Reserve, allow a 100% reserve free banking system to flourish with a sound metal commodity based money unit. All of this can be summarized as true free market Laissez-Faire Capitalism. The only system consistent with Individual Freedom and the United States Republican Form of Government laid out in the Constitution by the Founding Fathers. Charities and other non-profits will be more than adequate to take care of the needy. I am confident that this plan can be achieved within two generations if we start aggressively educating people (Start with Ludwig von Mises Institute; http://mises.org/) of their choice between Individual Freedom and Collective Servitude. Remember one thing: "The Big Tent" is Individual Freedom; Diversity takes care of itself after that.

      We need leaders to help initiate the process of peeling the Collectivist Federal Monkey off the American Citizens back, so we as State Citizens, can concentrate on rolling back our oppressive State and Local Governments.

      Rich Teti, Age 45, Electrical Engineer

      Proud Citizen, Drexel Hill, PA 19026, United States of America

    6. Maine Coon Lover says:

      The point is this,Obama will reject this as well as he's done all the others for two reasons.1. the Republicans proposed it and 2. out of spite whether its good or bad.

    7. charles labounty says:

      The seven endangered islands in the Arctic Ocean and Bering Sea include one the size of Rhode Island and Delaware combined. The Russians are also to get the tens of thousands of square miles of oil-rich seabeds surrounding the islands. The Department of Interior estimates billions of barrels of oil are at stake.

      The State Department has undertaken the giveaway in the guise of a maritime boundary agreement between Alaska and Siberia. Astoundingly, our federal government itself drew the line to put these seven Alaskan islands on the Russian side. But as an executive agreement, it could be reversed with the stroke of a pen by President Obama or Secretary Clinton.

      The agreement was negotiated in total secrecy. The state of Alaska was not allowed to participate in the negotiations, nor was the public given any opportunity for comment. This is despite the fact the Alaska Legislature has passed resolutions of opposition – but the State Department doesn’t seem to care.

      • dodger says:

        Yes, it is true from what I've read. My three questions are: 1. Where does Odumbo think he gets the authority to give away a portion of a sovereign state? Who the h3ll does he think he is? 2. Why isn't Alaska screaming bloody murder about this instead of just passing resolutions against it? 3. What's Odumbo going to try to do next, give Texas and California back to Mexico?

    8. toledofan says:

      It's clear to me that until Obama is out of office nothing with the economy and spending will change. I think that the devastaion Obama and his administration are forcing many Americans to endure is not only pathetic, it's boarders on almost criminal intent by defrauding many retirement accounts, etc. So,HF, keep up the pressure, someday, hopefully soon, things will change.

    9. Robert says:

      Fixes to Entitlements is double speak for ending Social Security, and Medicare. We won't let you do that. If you try, the Republican party will be a foot note in history is its war on Woman has not already finished it off?

    10. Don Coe says:

      Talks of a balanced budget and flat tax are all well and good, and should be heavily promoted by Heritage and conservative groups. Unfortunately, Obama and much of his administration, including members of Congress, have been quoted in the passed several months that their basic ideology is control of the American people. Hence. Obamacare, Harry Reid's refusal to even consider any House-passed bills to be considered for a Senate vote, and all the regulations he has placed on real economic progress.
      Until we can oust this imposter from his assumed dictatorship, I fear we will continue to be stifled in our efforts.

    11. Ron Belliston says:

      this is political fodder and you know it. We have a flat tax system in place with exactly 6 different tax brackets ranging from 10% to 35%. Many of these Internal Revenue Code provisions were enacted to influence national behaviors and many (most would agree) are a good thing. Cases in point would be alternative energy devices and targeted jobs credits. The existing tax code could balance our national budget with one, very easy elimination of a provision – that is the earned income credit. This is a refundable credit which is paid to lower income households depending on the number of children in the household. The maximum credit is $5,751 for a married couple with 3 children and $5,112 for a married couple with 2 children both earning $21,800 per year. This credit is paid to these households in addition to refunding any income taxes withhold by an employer during the year – thus the "refundable" component. Should we be paying lower income households to have more children? That is not for me to decide. My point is this: if we are going to have a national welfare system, it should not be administered via the tax code. And, yes, I am a CPA.

    12. Joe Sneed says:

      Platitudes, despite the fact that I agree. If I spend my limited time reading something I would prefer it contain useful information.

    13. joehollinger says:

      The Heritage discussion on the fiscal direction that our country should take sounds good. It would sound better to me if the flat tax was the "one tax", based on what everyone spends buying goods and services. That is the FAIR TAX; the more a person or entity spends the more tax they pay. One tax rate for everyone and no loopholes for any person or entity including religious organizations. If money is spent, it is taxed….period.

      The one big thing that Heritage has not included is return to a value based economy. Many other countries are returning to the gold standard and the U.S. must seriously attempt to do the same thing. No progress can be made if we continue to base our economy on the amount of indebtedness incurred by our citizens. So much depends on how many houses are bought and the associated mortgages. The mortgage market has driven the cost of housing to extreme heights. Older houses are priced many times over the price at which they were sold when first built and that is ridiculous. A home that originally cost $28,000.00 can now have an asking price of $500,000.00 or more. This is not right because the home is now built out of materials that are nearly 100 years old and built using materials, technology, practices, etc., that are probably significantly inferior to those available in houses built in the last several years.

      Return to the gold standard would be one of the best moves we could make towards improving our economy and rebuilding our country. The most important thing it would give us is out of the clutches and control of the World Bank; the Federal Reserve central bank. A privately owned banking system that is raping America and exploiting its control.

      America should renig on its obligations to the Fed and tell them to take their business and shove it.

      Two great presidents were assassinated for attempting to return to a value based currency; Lincoln and JFK. JFK had gotten so far as to have had money minted and ready for distribution just prior to his demise. That money completely disappeared within a few short days after his death. I wonder where it went.

      The Heritage plan has merit but needs to include the FAIR TAX and return to the gold standard.

      God Bless America!
      Blog: iamacitizen.wordpress.com

    14. Bob Ward says:

      Hang in there everybody! We WILL survive Obama! The newly elected conservative president will be quite busy when he starts his administration, undoing all of the innumerable wrongs that Obama has put in place. The biggest one we need to see fall is OBAMACARE–it has to be repealed! Also, the succeeding president to of current "Imposture-in-Chief" will need to purge all of Obama's cronies and czars out of their positions and into the unemployment ranks by handing out lots of pink slips!

    15. glynnda says:

      Do we have a link available as to what Paul Ryan's budget would look like? Also, sorry Heritage, but you're not going far enough. The Fair tax is a flat tax, but based on sales not income. It takes power out of the hands of politicians, shuts down the IRS (a little police state in itself) and takes into consideration those of lower income. This is the direction we should be taking. One thing I would add to the Fairtax……Congress cannot raise the national sales tax rate without 2/3 Amendment Approval from the States overall, meaning the Constitution would have to undergo an amendment to make it happen.

    16. Lloyd Scallan says:

      You still don't get it. This Obama led administration or the Reid led Senate has not passed any budget in over 3 years. Does anyone really expect any budget plan, from anyone, will be passed as long as this bunch remain in office? They want no budget to interfere with their our of control spending or vote buying schemes. That's just the way it is. The sooner more people realize these facts, the sooner we can fix this nation.

    17. Wayne says:

      The budget must be balanced immediately, The Dollar will collapse and its value will be zero in the next few months if the current spending continues and nothing is done to stop the current Administration destruction of all that we value in our society. America cannot sustain the $15 Trilliion debt. This debt will never be paid. China and the world in the very near future will not accept the Dollar for purchases. U S Banks will fail and close. It will be a disaster.

    18. zee says:

      This is a query.
      What is the position of the Foundation regarding the 1% Reduction Act of 2011 aka 'Penny Plan'?

    19. Jim says:

      This is an opportunity for Republicans, conservatives, etc. to talk about "fairness' in the tax code and how it is not 'fair" for taxpayers to subsidize buying a 40K car (Chevy Volt) for the "rich" people. and not fair for taxpyers to subsidize rich friends and bundlers for Obama in their green intitiatives that fail and go bankrupt.

    20. Nick Meisher says:

      " Heritage has set forth six objectives that should guide development of the annual federal budget: "

      .. I agree with the objectives and agreed with them when first hearing them when Soviet Union was still around.

      How is it even remotely possible to accomplish goals 1-5 of this plan? As soon as anyone hints at medicare, medicaid or social security cuts (without which even a 90% tax will just be a short term solution), the Democrats howl of "they are murdering the elderly in the name of profit,"' will shut every voice out (as it always has in the past.)

      I am more curious about the proposed paths to have these 6 noble goals (of which I've been hearing about now for the 3rd decade) to come to fruition, than only having them re-listed yet once more.

    21. bentonmarder says:

      About a century ago, Brooks Adams said a great truth: "You can't use tact with a Congressman. A Congressman is a pig. You have to take a stick and beat him on the snout."
      No matter what happens with a budget, or a new tax code, Congress is sure to screw it up or meddle with it. They will be paid by the Interests to create new loopholes and exemptions for their patrons.
      Since the amendment process in the Constitution is controlled by Congress (no outside initiative), there's no chance of term limits, balanced budget, whatever. The mass of voters find excuses to keep their own Congressman in office. The only way to deal with Congress is the National Razor, which will solve the pension, perquisites, benefits as well as concentrating the minds of their successors.

    22. Ben C. says:

      Never going to happen. As Tytler predicted a couple of centuries ago a democracy will fail when the number of people receiving out number the number paying. We are at this point. The bottom 50% of taxpayers pay 2.48 percent of federal taxes. I for one am tired of paying for the bottom 50%. If these people are forced to become self-reliant and cut off from federal assistance we will have major civil unrest much like Greece. It's not going to be pretty. So it will be business as usual from the federal government as we slowly experience the death spiral. So much for socialism. We are rapidly running out of other people money. I will continue to fight the good fight but I am very pessimistic for my daughters future.

    23. Pragmatic says:

      Maybe I'm missing this, but I've yet to see an article showing empirical evidence that a flatter tax system is the causal factor of higher economic growth. Could the author of this blog post a few links to some papers or relevant research please? I'd really be interested in reading more on this topic. Thanks.

    24. Robert says:

      I am for this, now how dose one go about implementing this.

    25. 888888888 says:


    26. Blair Franconia, NH says:

      My path to a balanced budget? Cut $10 trillion dollars from the budget. This would make it possible for us to get
      down to $5 trillion dollars.

    27. Ron W. Smith says:

      Has David Addington chosen to leave out of his pitch the clear fact that the United States spends more annually than the rest of the world spends annually COMBINED on National Security–over $1,000,000,000,000 annually? Heritage Foundation's 6 objectives to guide development of the annual federal budget include the necessary while managing to exclude that extravagance completely. "National Defense" is just one in the package of five comprising our "National Security," and the fact that we choose to "project forward" our power through more than 700 military installations large and small, on land and at sea, is an extravagant relic from flusher times. Now, in leaner ones, the foreign policy decisions behind the easy spending are the clear cause of our $16,000,000,000,000 national debt since spending on "entitlements" is far more a down-the-road problem than current.

      Yes, we should put everything possible "on the table" in establishing budget priorities. "Everything possible" includes spending on our international footprint and definitely does NOT exclude "National Defense." Those who think extravagantly when they think what is really necessary for a "strong National Defense" are squanderers of taxpayer money who have mixed up the desired, being the world's hegemon, and their preferred, being SuperPower on Call with the budget to match.

      When will it be time for a national debate on all. of this? Soon, I hope. And I'm ready.

    28. Jeanne Stotler says:

      The 1st step would be to get rid of ALL the dead wood in the Goverment, there is a lot of waste, and job duplication and triplation, close depts. such as EDU and EPA, get rid of and forbid the use of csars, make Michelle trim her staff to what other 1st ladies have had 2 , weed out gov't employees by retiring all eligble and offer early retirement to tose with in 18 mos. of retirement with no penalty, NO Buy out either. Cutting the waste is the frst thing, roll back congressional salaries to 1999 level, pass a bill where they cannot get raises more than COLA, end their lifetime salary retirement, let them do the same as other federal employees, also stop this free medical care, they can have same as other federal employees, Also put a stop to Insider trading amoung Congress, If we cannot do it they shouldn't eiher. Pass the 28th admendment were as Congress has to be effected by all bills they pass, as the saying goes "What's good or the Goose is also good for the Gander"

    29. Fallon T Gordon says:

      Use Ron Paul's method of balancing the budget in three years. And cut all unConstitutional laws, including all Agencies and all Departments that are not Constitutional, and all Regulations except the four in the Constitution. Taxation should be only from Direct Taxes as mandated in the Constitution.There is no authority in the Enumerated Powers of the Constitution for any Agencies, any other Departments except the two in the Constitution and any other regulations but the four in the Constitution.

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