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Oct. 14 (Bloomberg) -- Herman Cain’s self-described “bold” 9-9-9 tax proposal has received most of the attention in his campaign for the Republican presidential nomination. His plans for the federal budget are more radical.
Cain this week pledged at a debate to balance the government’s books in a single year if elected. This would require the elimination of what the Congressional Budget Office projects may be a more than $800 billion deficit in 2013.
Erasing the deficit that quickly would mean a more than 20 percent cut in spending, which could force reductions in politically sensitive programs such as Social Security, Medicare or defense, since they make up more than half the budget.
Even those pressing hardest for the government to reduce its deficit, which the CBO said was $1.3 trillion last year in a budget totaling $3.6 trillion, call Cain’s plan unrealistic.
“The massive spending cuts or tax hikes it would take to balance the budget in one year are politically unrealistic and would be economically disruptive,” said Maya MacGuineas, head of the nonpartisan Committee for a Responsible Federal Budget.
Cain made his pledge in an Oct. 11 presidential debate sponsored by Bloomberg News and the Washington Post, promising that in the “first year that I’m president and I oversee a fiscal year budget, make sure that revenues equal spending.”
That goes far beyond any of the major deficit-cutting plans being considered in Washington, where even deficit hawks say it will take decades to produce a balanced budget.
Not Until 2040
House Budget Committee Chairman Paul Ryan, who came under pressure earlier this year from Tea Party colleagues demanding the Republican budget be balanced within 10 years, couldn’t even do that. His plan, which has since been adopted by his House Republican colleagues and was backed by Senate Republicans, wouldn’t show a single balanced budget until 2040. It would leave a deficit of $391 billion in 10 years. Ryan yesterday declined to comment on Cain’s plan.
A proposal drawn up by the heads of President Barack Obama’s debt commission wouldn’t balance the budget for 25 years. And unelected budget experts at the Washington-based Bipartisan Policy Center, in no danger of losing their jobs to voters unhappy with cuts, couldn’t come up with what they considered a plausible plan to ever show balance.
The single most aggressive proposal that’s been put to a vote this year in Congress was by Senator Rand Paul, a freshman Republican from Kentucky. It would erase the annual deficit within five years in part by eliminating four Cabinet departments. It was overwhelmingly rejected by his colleagues, Republicans and Democrats alike, winning just seven votes.
‘Not Yet Ready’
“People here are not yet ready to do what it would take to balance the budget, even in the Republican caucus,” said Paul, whose father, Ron, is seeking the party’s presidential nomination. “It’s an enormous amount of money to cut in one year,” he said of the Cain proposal, adding it might get even less than seven votes in the Senate were it put to a vote.
Republicans in Congress have had to settle for promising to put the government “on the path” toward balance and calling for a constitutional amendment that would require the government to balance its books. While the amendment has little chance of being approved, it does allow lawmakers to underscore their desire to cut spending.
Cain, the front-runner for the nomination according to a Wall Street Journal-NBC News poll released this week, has offered few details on how he would get rid of the deficit. Rich Lowrie, an economic adviser, declined to identify what the candidate would cut.
‘In Due Course’
“We will roll out spending reform in due course, so it is too early for me to comment now,” Lowrie wrote in an e-mail. It’s a “priority for sure,” though if Cain’s tax plan is “not addressed first, the spending will only get harder to solve,” he said. “First step is to grow the economy.”
Cain said during the debate that it’s time to “get serious about not creating annual deficits so we can bring down the national debt.” He has called for replacing the current tax code with his 9-9-9 plan, which would set income, sales and business taxes all at 9 percent.
Cain has already backed away from a clean 9-9-9 plan. In Concord, New Hampshire, on Oct. 12, he told reporters that his plan wouldn’t apply to used goods. His campaign then said that excise taxes now in place, such as those on beer and cigarettes, would remain.
Democrats dismiss budget-balancing promises by the former chief executive of Godfather’s Pizza, calling them naïve.
Stick to Pizzas
“He ought to stick to his pizzas,” said Senator Dick Durbin of Illinois, the chamber’s second-ranking Democrat who laughed when asked about the proposal. “It’s great for a campaign, but it doesn’t work in real life.”
Perhaps the biggest obstacle to balancing the budget is demographics. The long-anticipated retirement of the baby boom generation has begun, with the eldest becoming eligible this year for Medicare, three years after they began receiving Social Security. Those two programs, which already represent about one- third of all spending, are projected to grow rapidly in coming years with the ranks of Social Security beneficiaries projected to almost double over the next 25 years.
Lawmakers on both sides of the aisle generally agree that benefits shouldn’t be cut for current retirees or those approaching retirement because they should be given time to adjust to any changes. Ryan’s plan would only begin cutting Medicare for those turning 65 in 2021, which means those reductions wouldn’t even begin to pare the deficit until then.
If Social Security and Medicare are spared cuts, along with the Pentagon, and the government continues to make its interest payments on the national debt this year, that would leave about $1.3 trillion in spending available for cuts -- about equaling last year’s deficit.
--Editors: Mark McQuillan, Jim Rubin.
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