What Can We Cut to Balance the Budget?

In 2011, federal government spending significantly outweighed revenue. While the federal government spent $3.8 trillion, it collected only $2.2 trillion from various taxes, licenses, and fees. Professor Antony Davies breaks federal spending into five basic components. He further divides it into mandatory spending, which is an amount of spending automatically built into every budget by law, and discretionary spending, which must be approved by Congress every year.

Mandatory spending includes spending on entitlements—that is, on Social Security, Medicare, and Medicaid—net interest, and other things, such as food stamps, student loans, unemployment benefits and more. While many advocates of social welfare programs complain that economists look primarily to Social Security and Medicare for budget cuts, it’s clear why they do. Professor Davies shows that even if the government eliminated everything government does with the exception of social programs and the interest on the debt, we still wouldn’t be able to balance the budget.

Over the next decade, the U.S. government will face difficult choices. Weighing specific cuts is not enough, because there are no specific cuts that will enable government to balance the budget. Professor Davies says, “Nothing less than a redesign will solve this problem.” That redesign, he says, should begin by determining what the proper role of government is.