Grover Norquist and Balancing the Federal Budget

He is an honest man, but a very dishonest one

Grover Norquist is one of those Washington power brokers who is extremely well known to insiders, has tremendous influence but is generally unknown to the public at large.  This has started to change as the budget deficit has started to get attention, and Mr. Norquist was recently profiled in Business Week.

Mr. Norquist’s claim to power dates from about 20+ years ago where he decided that all tax increases were evil.  To prevent this evil from taking root, his organization, Americans for Tax Reform, or ATR, has asked office holders at all levels of government to sign a pledge that they will not raise taxes under any circumstances, for any reason at any time.  To date, almost all House and Senate Republicans (along with a handful of Democrats) have signed the pledge. 

Now there are two honest parts to Mr. Norquist.  One is his public position that the pledge is absolute, and that he will tolerate no deviation from it.  If an office holder violates it, Mr. Norquist and his powerful organization and allies will work to defeat that office holder, even if it means electing someone whose position is diametrically opposed to theirs.  This is true integrity, and deserves some admiration.

The second honest part of Mr. Norquist is that he states openly and plainly that his goal is to shrink government.  He would like to halve the Federal Government as a percent of GDP, and then halve it again.  Essentially his goal is to return the Federal Government to its role at the time it began. He has no concerns, no cares, no problems no issues with what this would entail.  He is rock solid in pursuit of this goal, and again this is true integrity and deserves some admiration.

Where Mr. Norquist is totally dishonest is in his use of the anti-tax method for pursuing his goal. He is not anti-tax for the sake of being anti-tax, he is anti-tax in order to reduce revenues to say 14-15% of GDP, and then use that to force spending to that level.  To see what that entails, we have the following table.

Balancing the Federal Budget in 2011
(Amounts Rounded for Presentation Purposes)
Forecast:( $ millions)
GDP 2011	15,080,000
Receipts	2,175,000
Percent of GDP	14.42%
Total Expenditures	3,820,000
Percent of GDP	25.33%
Cuts to Balance Budget	1,645,000
Candidates for Expenditure Reductions
Government Spending 2011 Forecast
(in Millions of $)
Foreign Aid	20,000
Science and Space Technology	31,000
Energy	11,600
Natural Resources/Environment	44,000
Agriculture	21,400
Transportation	92,000
Mortgage Credit	36,000
Community Development	24,000
Education and Social Services	128,000
Health Care & Services	370,000
Housing Assistance	59,000
Food & Nutrition Assistance	95,000
Veteran Benefits	108,000
Total Social Programs	1,040,000
Amount Needed from Other Programs	605,000
Percent of GDP	4.01%

Source:  OMB, President’s 2012 Budget

For 2011 (FY), the government estimates that tax revenues will be 14.4% of GDP, right where Mr. Norquist wants them.  Expenditures are much higher, and the resulting projected deficit is $1.645 trillion. 

Now if Mr. Norquist can keep revenues at 14.4%, then to balance the budget we would need to completely eliminate all of the departments and related expenditures listed in the table.  But wait, even this would not get to a balanced budget.  There is still another $600 billion to go. Prime targets, Social Security, Medicare and Medicaid.

Eliminating those programs is what Mr. Norquist wants to do, that is his ultimate goal.  If he were truly honest, he would require the office holders to sign pledges that they would eliminate the programs listed above, because that is his actual goal.  If Mr. Norquist were honest, his pledge would require the signers to pledge to totally defund Federal aid to Education, Protection of the Environment, Energy, Veterans, Health Care, Agriculture and so on, because that is what he wants from them.

But Mr. Norquist knows that no office holder will do so, it is electoral suicide.  So in getting his adherents to sign a “no new taxes” pledge he accomplishes his objective, while he and his elected supporters give the impression they are just against tax increases, a much more palatable position than voting against Veterans Benefits, Education, Health Care, etc.  If Norquist and those who signed his pledge were truly honest, and allowed the public to truly understand their policy goals, there would be no support for their position.

Notice that in some of the recent budget/revenue proposals Republicans have talked about a goal of taxes and spending at about 18% of GDP, about 4 percentage points higher than the current level of revenues.  To meet this goal, a balanced budget at 18% of GDP revenues and spending would still require elimination of all of those programs listed.  At least that would not need the other $600 billion that Mr. Norquist’s goal needs.

Finally, this is a static analysis.  In a dynamic Keynesian world, the world in which we live, fiscal contraction at this level would put the economy into a severe depression.  The result, even meeting the Republican goal would not balance the budget; it would only cause deprivation, suffering, and economic destruction.  Their program is the Neutron Bomb of fiscal policy.