So you want to balance the budget?

In a word association exercise, one of the first things many people will say when prompted with the term “government spending” is “waste.”

For good reason. The government wastes an enormous amount of money, whether it be on a hundred thousand dollar outhouse, a million bucks on a stack of rocks, or eighty grand to monitor depression on Twitter.

But all these examples are miniscule when you consider that the Federal government collected $2.46 trillion in revenue in 2012, while spending $3.79 trillion, for a spending gap of over $1.3 trillion.

While popularized examples of government waste certainly are a problem, when put in context of the size of the deficit, it would be like a person who is $1 million in debt trying to pull himself out by cutting out his morning cup of joe.

It’s a step in the right direction, sure, but one that doesn’t do much to address the real cause of the problem.

Cutting waste isn’t enough to balance the budget. Doing so will require a complete restructuring of the budget and reconsideration of many of the Federal government’s functions.

In this and the next column, I look at how to pull this off.

It would make sense to tackle to deficit by first targeting those government programs or agencies that have the most outlays. Among what I call “The Big Five” are the Department of Defense, which had outlays of $716.3 billion, Medicare, which spent $484.5 billion, miscellaneous health spending (non-Medicare) which amounted to $361.6 billion, Social Security, which spent $778.5 billion, and “income security” which totaled $579.5 billion.

Military spending cuts are the most controversial among my fellow conservatives, but the current size of the military is worth putting into perspective. Current military spending is higher than the next 14 nations (many of which are allies) with the highest military spending. Combined.

In fact, military spending in real dollars is higher today than during the peak of the Cold War. After World War II, the Vietnam War, and the Cold War, military spending decreased.

Now, with the Iraq war over, and the threat of al Qaeda neutralized for the most part, it is time to do the same. Assuming that the war in Afghanistan can be would down, simply reducing military spending to what it was in the year 2000 would translate to roughly a $339.47 billion reduction in spending.

For Social Security, doing something as basic as raising both the early and regular retirement ages would be a large cost saver. The case for raising the age is quite strong. Since people have been living longer without the retirement age increasing, they’ve been receiving benefits for longer than earlier generations.

As a report for the Urban Institute showed, in 2008 the average expected length that workers collected Social Security increased by 5.1 years for men and 6 years for women since benefits began going out in 1940. During this same time period, the average age at which workers began receiving Social Security decreased from age 68.5 to 63.6. With both variables accounted for, the amount of time recipients receive benefits is now approximately 17.9 years for men, and 20.5 for women.

Social Security retirement age can be raised in a way to not affect either new retirees, or those about to retire soon. Had we begun doing so in 2012, raising the early retirement age from 62 to 64 at a pace of 2 months per year (until 2025) would save around $144 billion over the next decade.

Applying the same method to the normal retirement age to raising it to 70 would take until 2035, and would produce $120 billion in savings over the next decade. Do both and you save around $26.4 billion per year.

This age hike could also a boost for the overall quality of retirement for workers in general. As one analyst for Fox Business reported; “By expanding upon the National Retirement Risk Index, analysts at CRR, including Webb, determined that 85% of us would have the financial resources needed to maintain the standard of living were enjoyed prior to retiring  if we worked until age 70.”

The current incentives for healthcare are all wrong. Federal incentives encourage expansion of Medicare that the richest states are able to best utilize.

For every dollar that a state expands their Medicaid program by, the Federal government reimburses between 50-83% of the cost depending on the state – and richer states get larger reimbursements. In 2007, the five richest states average $5,405 in Medicaid spending per person, compared to $3,547 in the poorest states.

Medicaid outlays should be turned into block grants instead. What a block grant does is have the federal government give each state a fixed amount of Medicare dollars which the state then has to divide up as it wishes.

One survey of the effects of block grants, published by the Cato Institute, found in 2010 that block granting from that year to 2019 would have saved $625 billion. That works out to about $62.5 billion in savings annually.

We have saved a lot of money in this column, but we’re out of space. Next time: the war on drugs, corporate welfare and more. Don’t miss it!