Wednesday, January 30, 2013

Cutting Government Spending ... A Sensible Approach That Won't Be Adopted

When government spends money, it first gets that money either from taxpayers or lenders. In either case, private sector growth is hurt.

And we very much need more private sector led economic growth to get our unemployment down and our nation's finances under control. Thus, it would seem that eliminating unnecessary government spending, and especially wasteful and unproductive spending, would be job #1 in government these days.

Of course, it's not only not job #1 --- it isn't even on the serious work-to-do list of our duly elected "public servants."

Politicians talk openly about the problems surrounding our nation's financial debts and annual deficits. But that's about all they do -- talk about it.

They also talk about addressing wasteful and unnecessary government spending. But again, that's about all they do -- talk about it.

If our government knows best gang really became serious about restricting its spending to expected receipts, there's a really simple and quite effective way to accomplish just that. They could simply agree at the outset of the budgeting process that total spending will be not more than $X, with $X representing the anticipated receipts, and then discuss and fight among themselves how that total $X will be spent among the various programs and alternatives, including the specific constituencies.

I know what you're thinking. Dream on.

Of course, even I understand that our politicians don't want to be limited to keeping spending within the amount government collects from its citizen taxpayers. They all want to get as much money as possible and spend it on their constituents so they can remain in elected office. Bringing home the bacon is one tried and tested way of staying in office, so everybody in government rubs everybody else's back, and the deficits and debts pile up. Meanwhile, the politicians get re-elected, and most of the taxpayers get screwed.

Still, let's consider a common sense way to reduce our deficits which is described in The Case for Across-the-Board Spending Cuts:

"You know the cliché: America's fiscal condition might be grim, but lawmakers should avoid the "meat ax" of across-the-board spending cuts and instead use the "scalpel" of targeted reductions. The problem with this argument is that, given today's politics, it is nonsensical.

Targeted reductions would be welcome, but the current federal budget didn't drop from the sky. Every program in the budget—from defense to food stamps, agriculture, Medicare and beyond—is in place for a reason: It has advocates in Congress and a constituency in the country. These advocates won't sit idly by while their programs are targeted, whether by a scalpel or any other instrument. That is why targeted spending cuts have historically been both rare and small. And in a government as closely divided as today's, there is virtually no prospect for meaningful targeted spending cuts.

The most likely way to achieve significant reductions in spending is by across-the-board cuts. Each reduction of 1% in the $3.6 trillion federal budget would yield roughly $36 billion the first year and would reduce the budget baseline in future years. Even with modest reductions, this is real money.

Some would inevitably argue that these cuts are unfair. Is the current budget fair? Everyone knows that a $3.6 trillion budget isn't the happy result of Congress providing exactly what is "fair" to every program. The federal budget is the result of temporary and arbitrary political compromises, with each program funded as much as its advocates can get it and as little as its detractors can support.
There is no transcendent wisdom here, nor any argument that a federal budget that preserves the current allocation of spending, but at a slightly lower level, is somehow less fair.

So let's give up the politically pointless effort to pick and choose among programs, accept the political reality of current allocations, and reduce everything proportionately. No one program would be very much disadvantaged. In many cases, a 1% or 3% reduction would scarcely be noticed. Are we really to believe that a government that spent $2.7 trillion five years ago couldn't survive a 3% cut that would bring spending to "only" $3.5 trillion today? Every household, company and nonprofit organization across America can do this, as can state and local governments. So could Washington.

Across-the-board federal cuts would have to include all programs—no last-minute reprieves for alternative-energy programs, filmmakers or any other cause. All parties would know that they are being treated equally. Defense programs, food-stamp recipients, retired federal employees, the judiciary, Social-Security recipients, veterans and members of Congress—each would join to make a minor sacrifice. It would be a narrative of civic virtue.

Applying across-the-board cuts to both discretionary and nondiscretionary programs would present some technical legislative difficulties, and some members of Congress will certainly try to argue that, while they support spending reduction, they just couldn't abide a certain cut or two. Yet this very argument would illustrate that opposition comes not because cuts are unfair, but because they are equally leveled.

Talk of axes versus scalpels is designed to deflect reform. Whatever carefully targeted budget cuts might animate our dreams, the actual world of divided government suggests only one realistic way to achieve real spending reductions. It is not a meat ax. A scalpel that shaves a bit off all programs equally would work just fine."

Summing Up

There are too simply many self interested "public servants" trying to satisfy their own self interested voter constituencies to expect any objective decisions to take the appropriate and necessary action on behalf of We the People as a whole.

The bottoms-up way it's done now, the sum of the specific spending parts will always exceed the whole of government receipts. There will never be enough money if Congress keeps playing the game the way it's been played for far too long --- congressional district by congressional district, special interest group by special interest group, politician by politician and campaign funding lobbyist by campaign funding lobbyist.

That's our form of representative democracy at work when there's an unrestrained budgeting process for total government spending. Unless the spending of the whole is constrained at the outset, overspending will always be, as it is now, the inevitable result and our nation's debts will grow and its annual trillion dollar deficits will recur. That will the inevitable and unfortunate result of not choosing to do what's necessary to live within our means as a society.

To repeat the blindingly obvious, Congress has at least one strong defender for every otherwise defenseless wasteful government spending program that exists. These programs didn't become law all by themselves. Somebody voted for them, and that's who will try to defend and keep them in effect.

But if we give the bureaucrats cover to do the right thing by cutting spending across the board (unless the government officials somehow agree which specific programs will be cut in order to save other programs from being cut at all), that across-the-board spending reduction approach would work.

Everybody would be forced to give up a little and nobody would be required to give up a lot. The pain wouldn't be severe and what pain there would be would be shared equally. And the politiicans could look forward to re-election, too. In the end, everybody would win.

Accordingly, the solution to our nation's spending problems is really a simple one.

That said, simple isn't to be confused with easy.

Thus, the solution isn't likely to be implemented anytime soon. We may need a real crisis first.

That's my take.

Thanks. Bob.

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