The federal debt recently hit yet another all-time high, a staggering $34 trillion as of December 2023, propelled by a $1.7 trillion deficit between revenue and expenditures.

Deficits propel debt, it’s true, but spending is the fuel. Despite what Democrats would have you believe, the solution is not to raise taxes — it’s not even to balance the budget, per se. The only long-term solution is to cut spending.

It will take nothing short of an American Revolution 2.0 to accomplish serious cuts. That revolution starts with CPI-X.

Pronounced CPI minus X, this budget blaster is a rigorous, objective and practical way to not just slow down or put on hold spending, but to significantly cut it down over a reasonable timeframe, which is both politically and administratively doable.

In a nutshell, CPI-X is a formula based on official historical and forecast data that allows spending to increase according to inflation (CPI) minus inefficiency (-X). Cuts result when economy-wide inflation is outweighed by government inefficiencies — that is, when CPI is smaller than X.

The inefficiency X-factors are based on spending benchmarks of the federal government, all fifty states and five similar countries plus the EU. They span across ten policy areas, including welfare and defense.

The fiscal context is that spending grew by 133% from $3.4 trillion in 2008 to a projected $8 trillion in 2024. That spending is forecast to grow by 57% from a forecast $8.3 trillion in 2025 to $13 trillion in 2038.

The political context is that spending is a bipartisan problem in Washington, D.C. The two worst one-term spending presidents since 1970 consist of Donald Trump and Joe Biden at $24 trillion and $31 trillion, respectively. The two worst two-term ones consist of George W. Bush and Barack Obama at $23 trillion and $33 trillion.

CPI-X was invented in the early 1980s to better control the spending of government businesses privatized by Margaret Thatcher. These were considered “natural monopolies.” It has since been used for decades in the U.K., Australia and elsewhere to regulate public utility rates.

I was the first to think of, model and apply CPI-X to the ultimate source of not-so-natural monopoly — Big Government.

After a one-off bill were to hopefully be passed and signed in 2025, then the annual process thereafter would mainly consist of appropriating a decreasing amount for agencies across the ten policy areas. Each agency could have discretion, under their CPI-X budget cap, to prioritize and allocate internally.

This would slash expected spending of $8.3 trillion in 2025 down to $3.7 trillion by 2038. That’s a 55% cut, nearly back to 2008 levels. The resulting budget savings of $75 trillion could potentially translate into both 100% debt retirement over that period as well as $19,347 worth of income tax relief per year per taxpayer.

America’s bloated budget isn’t helpless. As they say: “Where there is a will, there is a way.” That way is CPI-X.

Darren Nelson on January 19, 2024

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