Rand Paul proposes a balanced budget in 5 years without raising taxes or touching entitlements.

Rand Paul continues to put money where his mouth is, by planning to release a budget that will slash Federal spending to 18% of the GDP down from an existing 24% that is maintained by the current administration.   To avoid the popular and awfully contentious issues of entitlement effort Paul is achieving his balanced budget by removing entire departments!

"Medicaid, children’s health insurance and food stamps are block-granted to the States and capped in the resolution. 
Paul eliminates the departments of Commerce, Energy, Education, and Housing and Urban Development, all of which he says are unconstitutional."


So while this is exciting and fascinating there is an inherent problem with Paul's proposal.  Even if America is somehow ready to accept that housing, education, commerce and energy are all things that have been made worse by the Federal government and belong to the States how are they going to accept the status quo on a taxation basis?

Now in reality there is hardly any discussion to be had about removing these departments because their track record speak for themselves.  Education and Energy were both created during the Carter administration, yet America's education system has actually declined compared to other Western Governments (a sad 14th despite spending the most)- Carter's attempt at ensuring America becomes independent of foreign oil was a giant flop as we are more dependent on oil now than ever and are paying more for energy than we ever had before.  As far as HUD, well the boondoggle that resulted in house prices declining by double digits and all the social engineering that resulted in houses being sold to people that could not afford them speaks for itself.

By 2012 the removal of these departments will save Americans over half a trillion dollars, but much more importantly it will remove the inflated price structure that has been created by the manipulation, social engineering, reduction of competition and extra regulation.  Prices will come down for college, houses, rent, oil, food, heating and all other basic staples that we require for everyday life.

These are the very magical improvements occur when the heavy and often invisible hand of central planning is removed as we have seen in countries where the free market replaces old former Communist regimes.  This is not the invisible hand that Adam Smith wrote about, this is the invisible hand of Government that silently raises prices for everything through unknown intrusions, restrictions and rules.

However, the big problem is this,  despite all the obvious shortcomings of this Federal intrusion the average American will be correct in asking:  "OK, you have convinced me that we should get rid of all these departments, but why should I be paying just as much in Federal taxes?"  In theory as the Federal Government exists these arenas, States should step in and take care of their own education, energy, commerce and housing needs.  This should correctly result in higher State taxes.  This is something I am willing to accept as long there is a proportional decrease in Federal taxation.  Otherwise most people will correctly feel screwed, as they are actually getting "less" and paying the same - even if they were not getting much in the first place!

Because Rand Paul chose wisely to skirt the entitlement issue in order to make the budget easier to pass, he is now making it that much more obvious where all our money is going!  Yet because we are not even close to solving the looming problem of Medicare/Social Security facing bankruptcy it will leave a  generation of Americans paying as much in taxes to accommodate baby-boomers while getting nothing in return.

Thus it would appear that in reality there is no way to balance the budget unless the entire budget, with defense and entitlements get completely reformed.  This really cannot work piece by piece as it will create too much contention and too many people asking "what is in it for me".  Despite our country facing a financial apocalypse most Americans are unwilling to accept meaningful sacrifices.

All of these hardships are reality without even considering that trying to sell to a large demographic the idea that we should remove anything related to education is virtually impossible.