A value-added tax, a soda tax, a gas tax, banning earmarks, freezing a portion of federal spending at “pre-stimulus” levels – there’s no shortage of ideas being thrown out to fix the country’s disastrous balance sheet, which threatens not just near-term economic recovery but the possibility of long-term growth. Like last week’s report from the president’s Commission on Fiscal Responsibility and Reform, most of the current plans to fix the country’s finances rely more on increases in revenues than on cuts in spending. In part due to its heavy reliance on revenue hikes, the commission, charged with balancing the budget by 2020, failed to win enough votes of its own members to present its recommendations to Congress.

Which raises the question: Can America really reduce its debt and deficit without raising taxes to job-killing rates or cutting essential services to developing-world levels? The answer is not simply yes, it’s that we have to.

Raising government revenue – taxes – substantially is not only bad policy, it has proven difficult and ultimately unsustainable for any length of time in the past 60 years. Since 1950, annual government revenue, as a percentage of Gross Domestic Product (GDP), has averaged just below 18 percent despite every attempt to jack it up or tamp it down. Our post-World War II experience shows that if the government is going to live within its means, it can’t spend much more than 18 percent of GDP. Period.

Which is one reason to be happy that the debt commission’s recommendations won’t be presented to Congress anytime soon. The report assumes revenue equal to 21 percent of GDP and struggles to get spending to “below 22% and eventually to 21%” of GDP. That’s a recipe for disaster that would guarantee deficits and red ink.

Similarly, former Sens. Bill Bradley, John Danforth, and Gary Hart, working with the Committee for a Responsible Budget, have offered up a plan to balance the budget by 2020 that relies on revenue hitting 20.8 percent of GDP, a level that hasn’t been achieved once in the past 60 years. Republicans have not advanced any realistic near-term plans. Rep. Paul Ryan’s (R-Wisc.) Roadmap to the American Future does not balance the budget until 2063. The pre-election GOP’s Pledge to America is worthless since it fails to provide specifics (and to the extent it does, it is no good).

The current situation is a bipartisan disaster that requires immediate action. Since Bill Clinton left the White House in 2001, total federal spending has increased by a massive 60 percent in inflation-adjusted 2010 dollars. In fiscal year 2010, which ended September 30, the federal government spent $3.6 trillion, or 25 percent of Gross Domestic Product. That’s the most spending, in terms of percentage of GDP, since 1946. Likewise, last year’s $1.5 trillion deficit, as a percentage of GDP, was the largest deficit since 1945.

Most economists talk about a debt-to-GDP ratio of 60 percent as a trigger point that makes investors very nervous about a country’s ability to pay its obligations. The debt to GDP ratio was 63 percent this year and the Congressional Budget Office (CBO) projects it will be 87 percent in 2020. Just three years ago, it was 36.5 percent. Not good signs.

So, what would it take to bring federal spending into line with plausible levels of revenue?

The CBO, the non-partisan agency charged with estimating the effects of legislation on government costs, has produced a long-term budget outlook in which Bush-era tax rates remain unchanged. Their conclusion is that over the next decade, “government revenues would remain at about 19 percent of GDP, near their historical averages.” That’s actually a bit higher than the historical average, but is within the bounds of reason.

A balanced budget based on 19 percent of GDP would mean $1.3 trillion in cuts over the next decade, or about $129 billion annually out of ever-increasing budgets averaging around $4.1 trillion. Note that these are not even absolute cuts, but trims from expected increases in spending.

To get a more concrete sense of what getting to 19 percent means, here is a table of projected major budget expenditures in total dollars, followed by the amount that needs to be cut each year from the expected budget to get an annual 3.6 percent decrease across the board.

Looking at the chart below, the question becomes: Could you, say, find $129 billion dollars of cuts in a 2016 budget that squeezes through the door at $4.3 trillion?

Congress hasn’t even begun real work on the 2011 budget, even though the fiscal year started in October (the government is currently being funded by short-term continuing resolutions; the next one expires on December 18). If they want to get serious about staving off the uncertainty, tax increases, and unrestrained spending that are sure recovery killers, they could put us on a path to a balanced budget right now.

Are our leaders willing and able to identify and cut just $25 billion in waste and excess out of more than $700 billion in non-defense discretionary spending? Is reducing the $714 billion the Department of Defense received in 2010 by a paltry $25 billion impossible? Can Medicare and Medicaid, two programs that are infamous for waste and fraud and cost well over $720 billion in 2010, find $35 billion in efficiences? The specific cuts should be open to negotiation, but the historical record shows that the available level of government revenue is fixed.

If these sorts of small but systematic trims are impossible over the next decade, then really nothing is possible and debt, deficits, and despair are here to stay.

It just might be time to start thinking about moving to Greece.

Nick Gillespie is editor in chief of Reason.tv and Reason.com. Veronique de Rugy is an economist at The Mercatus Center at George Mason University. For more on the topic, go here.

They’ve targeted bottled water and the selling of all kinds of pets, er, “animal companions.” And now, with the soda scold who’s yanking sugary beverages from vending machines, the City by the Bay pulls off the first-ever Nanny of the Month trifecta!

Presenting Reason.tv’s Nanny of the Month for July 2010: San Francisco Mayor Gavin Newsom!

“Nanny of the Month” is written and produced by Ted Balaker. Associate Producers: Paul Detrick and Alex Manning; Animation: Meredith Bragg

Approximately one minute.

To watch previous Nanny of the Month videos, go here.

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Cameras are everywhere today: In convenience stores, at intersections, the workplace, your computer, your cellphone, ATM machines. There’s even been a camera in news anchor Katie Couric.

Yet there’s one place cameras have never been allowed: The U.S. Supreme Court. Just what are Supreme Court justices hiding beneath their robes that they continue to say no to cameras in their courtroom?

For decades the White House and Congress have opened their public business to television cameras, but the judicial branch has remained staunchly against the practice. As C-SPAN’s Brian Lamb tells Reason.tv, the justices have rebuffed every attempt to videotape the oral arguments phase of Supreme Court proceedings. On this, an often-divided court remains unanimous, even if the arguments offered up Justices Scalia, Breyer, Thomas, Kennedy, and others remain even weaker than the majority’s logic in their awful Kelo decision, which legitimated eminent domain abuse.

Both Sonia Sotomayor and Elena Kagan have spoken in favor of cameras in the Supreme Court. Can a new batch of justices, more attune to the benefits of transparency, finally change things for the better?

“The Case for Cameras in The Supreme Court” is written and produced by Meredith Bragg and Nick Gillespie, who also hosts.

Approximately 3.40 minutes.

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Kristin Davis, who ran the escort service that provided former Gov. Eliot Spitzer with call girls and served time (while Spitzer remained free to purchase all the black socks he wanted), is running for governor on what some have called a “pot and pussy platform.” She wants to legalize marijuana and prostitution and collect tax revenue from them; she wants to open casinos in the state’s great vacation areas; she wants to legalize gay marriage and address a legal system that nets the poor and unconnected and leaves the big fish to swim free.

Besides running prostitutes, what qualifications does she possess for the top job in Albany (as if that isn’t enough)? She was valedictorian of her high school and worked at a hedge fund, which pretty much makes her more qualified than Andrew Cuomo and whoever the Republican candidate is. But judge for yourself in this, the best campaign video so far this year (in a non-Basil Marceaux category).

Note: No Reason.tv T-shirts were harmed in the filming of this video! And that product placement was news to me when I saw it.

LeBron James has decided to move to Florida and play for the Miami Heat rather than bear another season with the Cavaliers.

Everybody is piling on: How could a dude with a tattoo of the word loyalty on his chest abandon “the mistake on the lake?”

But LeBron is only doing what more than half of Cleveland’s population has done over the in the last 60 years: Getting the hell out of the place.

He didn’t leave because of money, though some analyses show that he can take home more in pay in Florida despite a lower salary. Ohio used to be one of the lowest-tax states in the country. Now it’s one of the highest.

That’s what Clevelanders should be outraged about. Their economy has enough to deal with already without being put in a full court press by high taxes.

Cleveland needs to get rid of its savior complex. LeBron James could never have saved Cleveland–no single sports star or entrepreneur or bailout can–but there are definite, proven steps that any city can take to improve
life for its citizens.

Reason.tv highlighted a whole host of possible steps in our series “Reason Saves Cleveland” available at www.reason.tv.

“Don’t Blame LeBron” was produced by Dan Hayes and Nick Gillespie. Production Assistant Joshua Swain.

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Before hurricane Katrina ravaged the city in 2005, New Orleans had one of the worst performing public school districts in the nation. Katrina forced nearly a million people to leave their homes and caused almost $100 billion in damages. To an already failing public school system, the storm seemed to provide the final deathblow. But then something amazing happened. In the wake of Katrina, education reformers decided to seize the opportunity and start fresh with a system based on choice.

Today, New Orleans has the most market-based school system in the US. 60% of New Orleans students currently attend charter schools, test scores are up, and talented and passionate educators from around the country are flocking to New Orleans to be a part of the education revolution. It’s too early to tell if the New Orleans experiment in school choice will succeed over the long term, but for the first time in decades people are optimistic about the future of New Orleans schools.

Approximately 10 minutes. Produced by Paul Feine; hosted by Nick Gillespie; shot by Alex Manning and Dan Hayes; edited by Alex Manning.

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The financial reform bill currently working its way toward President Barack Obama’s desk for signing is being touted as the biggest overhaul of the banking and investment sectors since the Great Depression.

But the new regs won’t be any more effective than the ones they replace in fixing anything or preventing the next major panic for at least three reasons.

1. New Watchdog, Old Tricks

They create a new watchdog consumer agency designed to protect consumers from their own supposed stupidity. You’ll now be facing fewer choices when it comes to getting credit cards, loans, and doing other basic financial transactions.

2. Never Too Big To Fail

They replace “Too Big to Fail” with… “Too Big to Fail.” One of the reasons why major financial institutions played Russian Roulette with the economy was because they were betting they would get bailed out. Which is precisely what happened. The new rules codify the idea that the government will make sure certain institutions can never fail. And if you think the big boys won’t game that system, then you don’t understand how well Citigroup, Goldman Sachs, et al have come through the current meltdown.

3. Housing Bubble Trouble

The financial crisis was set into motion by government policies that encouraged people to buy homes they couldn’t afford at prices that were unsustainable. Between desperate attempts to keep people in houses and to keep interest rates below an effective rate of zero, the government continues to pour more money down the same rathole.

Markets work best when the risk and reward incentives are clear cut. When investors know they really can lose it all, they act responsibly with their money. If regulators think they can create a system that cushions us from bad decisions and doesn’t encourage bad behavior, it’s a delusion we’ll all be paying for for a very long time.

Approximately 2 minutes. Produced by Meredith Bragg and Nick Gillespie, who also hosts.

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