A Take on Obama's Budget Propsal from a Man Who Knows the Wonks

Paul Krugman writes:

Obama’s budget proposal really is wonk-tested, in a way Ryan’s never was; trust me, I know the wonks! (And Ryan’s wonks are the people who projected 2.8 percent unemployment, plus higher revenue from tax cuts.)

The problem Krugman doesn't seem to get is that the world doesn't fit nicely into the equations the wonks create. The world is much more complex than the wonks could ever model.  All we can understand in the world of economics is grand trends, not the micro details. The micro details are far too many and change too frequently. It's impossible to know even five years out what the shape of the United States economy will be, especially given the mad manipulations by the Federal Reserve.

Thus, a detailed 10 year plan, like Obama's, which is based on all kinds of micro projections is absurd, as is Paul Ryan's 40 year plan.

The only real way to deal with the budget is to cut it far, far below expected revenues. These walking on the edge of the knife budgets are irresponsible thinking, even for those who think government needs to play a significant role in the affairs of a country.

The current balanced budget proposals are not much different from an individual planning a five year budget based on the "plan" that he is going to win the lottery in year 4. How nuts is that?

It's time to demystify these wonks Krugman speaks so highly of.  There is simply no sound way for them to know the exact revenues of the country, a few years out. And given the open ended structure on the spending side of the budget proposal, where the amount that will be required for healthcare and defense is unknown, there is no way the true size of government spending can be known either.

And so Krugman's wonks are modeling based on unknown revenues and unknown expenditures. Is it any wonder these budget proposals never come close to their projections?

Krugman's selling of the wonks is a scam. It is an attempt by him to give the impression that there are wonks somewhere that are busily adding up every penny of tax money that is going to come in over the next ten years and exactly how much spending is going to take place across the entire United States  government over the next 10 years. It can't be done to any degree of detailed certainty, which means it can't be done in the manner Ryan and Obama give the impression their budgets do.

This is how you do a budget for the United |States government.

You start of with the revenues in 2010, they were roughly $4.2 trillion.  Since you want to be conservative, you assume revenues will come in for 2012 at 10% less, or $3.8 trillion.

Of this $3.8 trillion, you use 25% for deficit reduction, which leaves you with $2.9 trillion. Finally, you get to the spending side, which is where the $2.9 trillion comes in. Since the $2.9 trillion is a hard cap, you can divvy that up amongst government agencies anyway you please, but that's all that is available for spending. If additional revenues come in, you use it for further deficit reduction.

Now, I hasten to add that this budget is designed for those who actually think government's roll in the economy should be in the trillions of dollars. It is designed simply to show how a real budget is designed, versus the 10 year plans designed by Obama's wonks, or the 40 year plans designed by Ryan's wonks. It is designed to show that current budget discussions are a fraud.

As for how much money government would need to operate in a truly Private Property Society the number would be 0.