Federal Spending Must Be Cut 26% To Balance Budget, Even More To Keep Core Social, Defense Programs Intact: Analysis

Severe reductions to federal expenditures would be required in order to attain a balanced budget while keeping intact critical programs such as Social Security, according to a new analysis.

Policymakers must enact 26% across-the-board spending cuts in order to balance the budget within the next decade, according to an analysis from the Committee for a Responsible Federal Budget. In order to balance the budget but also exempt programs such as defense, veteran benefits, Social Security, and Medicare from cuts, all other federal spending would have to be reduced 85%.

“Due to continued borrowing over the past several years, the desirable fiscal goal of budgetary balance has become much more difficult to reach, and it is highly unlikely it could be achieved in a decade or less, particularly if revenue, defense, and other parts of the budget are excluded from the solution,” the analysis said. “We recommend Congress adopt an aggressive but achievable fiscal goal in its budgets and any fiscal deals.”

Keeping veteran and defense spending intact would require 33% spending reductions for all federal programs, including Social Security and Medicare. The average annual benefit for a new retiree would decrease by as much as $13,000, while as many as 25 million recipients of Medicare would lose eligibility. Between 1.1 million and 1.4 million federal employees would be dismissed.

Another alternative is keeping defense, veterans, and Social Security expenditures intact while enacting cuts to Medicare and all other federal programs. Such a course would require 51% spending reductions for affected agencies.

“Wanting to balance the budget is an admirable and desirable goal. However, the path to get to balance within ten years is likely infeasible, and it is virtually impossible if major parts of the budget and tax code are exempt from change,” the analysis remarked. “Policymakers should set aggressive but realistic fiscal goals, should keep all areas of the budget on the table, and should put forward policies to begin reducing deficits. The first step, of course, is to avoid actions that would worsen our already unsustainable fiscal situation. Policymakers should agree not to pass legislation that calls for any new borrowing. We commend the adoption of a specific and realistic fiscal target.”

The analysis from the conservative think tank comes after Republican lawmakers struck a deal with House Speaker Kevin McCarthy (R-CA) under which the party’s new majority will introduce a budget that refrains from increasing the debt ceiling, an artificial limit on federal obligations imposed by Congress. Several Republican lawmakers initially hesitant to hand the gavel to the leader of their caucus had expressed concern about excessive federal spending.

The national debt is currently nearing $31.5 trillion even as maintenance costs soar due to a higher interest rate environment. An analysis from economists at the University of Pennsylvania’s Wharton School recently found that a 30% decrease in spending or a 40% increase in taxation would be necessary to handle current spending and future obligations.

“Just like all individuals and businesses, the federal government is subject to a budget constraint: it must fund all expenditures, current and future, from its tax and non-tax receipts over time,” the economists said. “By construction, the fiscal imbalance must be zero for a fiscal policy to be sustainable without future changes.”

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