Tag Archives: spending

Cutting

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The Tea Party Debt Commission, a project of the FreedomWorks organization, is working on the same goal as the Congressional debt commission [sic], that of devising a means of reducing the nation’s debt.  Rather than playing small ball, the way the Congress’ commission is, though, the TPDC is looking for a $9 trillion reduction over the next 10 years.  Further, the TPDC, unlike the Democrats on Congress’ commission, is looking to do this without raising taxes.

In support of this goal, the TPDC polled “activists across the country,” says The Daily Caller, for the top 10 sources of budget cuts, and they got these:

1.    Repeal Obamacare
2.    Reduce duplicative purchases of Pentagon supplies
3.    Eliminate the Department of Education
4.    Privatize Fannie Mae and Freddie Mac
5.    Reduce discretionary spending to 2008 level
6.    Block grant Medicaid
7.    End ethanol tax credits
8.    Sell needless federal buildings
9.    Eliminate the Department of Housing and Urban Development
10.  Reduce Medicare teaching subsidies

Naturally, I have my own view, and I have a bit more than 10.

1.  Repeal Obamacare
2.  Repeal Dodd-Frank
3.  Privatize Social Security and Medicare
4.  Push the States to privatize Medicaid, and block grant Medicaid’s Federal transfer payments, reducing each State’s payment by 10% of the 2010 total transfer to that State each succeeding year until the block grants are gone
5.  Open insurance to interstate sales on free market principles
6.  Eliminate the Department of Education
7.  Eliminate EPA
8.  Eliminate Fannie Mae and Freddie Mac
9.  Eliminate HUD
10. Eliminate all “green” and all oil and gas subsidies
11. Cap Federal tax collections at 20% of GDP
12. Cap Federal spending at 95% of the average Federal tax collections over the preceding five years, with the excess collections going directly to paying down our national debt.
13. Cap Federal borrowing at 20% of GDP unless the President declares a national emergency and both the Speaker of the House and the Senate Majority Leader concur.
14. When the current national debt falls to that level, re-cap Federal tax collections at 95% of that prior limit.

While it’s useful to reduce Defense spending—and the spending by all the other Departments as well—through efficient-izing the Department’s spending through eliminating duplication, i.e., rooting out fraud, waste, and abuse, in general, this is easier said than done, and we need something done now.  The same difficulty applies to “needless” federal buildings.  It’s always a good idea to get rid of excess, to a point.  Maybe it’s better, though, to keep real estate in the government’s back pocket against future need, and lease the excess, instead.

Privatizing our health and retirement accounts, in addition to saving all those expenditures, leaves the tax money that isn’t funding those programs, anymore anyway, in our hands.  This both gives us the wherewithal to fund our own needs, and it leaves that money in the hands of those who are, empirically, better equipped and more skilled to do intelligent investing than our government has shown itself to be.

On eliminating all energy subsidies, neither “green” nor hydrocarbon energy sources need them.  The oil and gas industry will still make money without the subsidies, especially if impeding regulations also are eliminated.  If the “green” industry can’t compete in a free market without subsidies (and without impeding, or facilitating, regulations), that merely demonstrates that “green” technology isn’t ready for prime time.  In addition to which, the American people are fully capable of making our own decisions, via our free market, concerning our energy needs; we don’t need to be told what to do by government subsidy or EPA diktat.

We don’t need to privatize the FMs.  We need to eliminate them.  If our free market wants a means of “securitizing” mortgage loans—if there really is a market niche for this—the appropriate businesses will start with the appropriate entrepreneurs.  Besides, given the shenanigans of the FMs, there would need to be a 100% replacement of management all the way down to the secretarial pool (to date myself) supervisor before those two institutions could be trusted again.

Reducing discretionary spending to 2008 levels is a nice start, but it doesn’t address the long-term problem of too much spending—unless the pollees want discretionary spending permanently capped at 2008 levels.  There are two reasons such a cap, temporary or permanent, is insufficient, though.  The first is that a fixed, hard number doesn’t take into account future unforeseen, or future economic growth.  It would be better to cap at a percentage of GDP.  Also, capping discretionary spending only addresses a relatively small part of Federal spending; it ignores entitlement spending (which is a terribly indicative name for that category of spending, but it’s what we have).  “Entitlement” spending needs to be severely curtailed, also.

Spending Cuts: Austerity, or Thrift?

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Europe’s search for a solution to its exploding debt crisis is couched in terms of austerity and citizen “sacrifice.”  Indeed, the Greeks riot over “austerity measures” which their government take that they consider to be going too far, and the Italian coalition government is threatened with collapse over the need to engage in further “austerity measures” to control its own long-standing national debt.  The arguments here at home over how deep to cut, if at all, are couched more and more in terms of “austerity measures.”  This raises other questions, though.

Is there no thrift involved in any of this?  Is thrift not a player at all, do the debaters tacitly assume that thrift is wholly subsumed into what is austerity?

When there are true austerity measures being contemplated or enacted, a nation is having to reduce expenditures on more than the highly useful or the nice to have features of its economy—a tax subsidy for this industry, for instance, pay raises for government employees, or expenditures on those national parks, and so on.  It’s also having to reduce or eliminate spending on the things actually necessary to the nation’s independence of action—national defense, roads and communications networks, other infrastructure items, and so on.  Austerity also cries out for tax increases to support its minimally required spending.

When the nation is being thrifty, instead, it’s managing its accounts and making the spending tradeoffs necessary to avoid overstretching is finances to the point where austerity is thrust upon it.  When the nation begins to overstretch—perhaps from a period of drift, perhaps deliberately to acquire a particularly expensive item or capability—it makes further tradeoffs, deferring spending here, eschewing purchasing altogether there—in order to bring its spending back into line.

Thrift, apart from being simply a wise management of the nation’s money, also is a powerful ward against the conditions that force austerity.  But to achieve control over our future, to avoid a need for austerity measures, in short to be thrifty, a government must achieve two things.  It must obtain a net positive income—that is, it must maintain its spending at a level at or below its revenue intake (and it must emphasize the “below” part where the national debt has gotten excessive).  The second thing it must do is commit that budget surplus to the following purposes.  First, government must pay down the national debt until that value is at a properly low level.  Then it must use the surplus to build the same sort of “rainy day” fund that many states accumulate and all responsible families accumulate, so that these accumulated savings can be tapped for unexpected needs, rather than routinely running up the national debt.  Finally, with the debt at a reasonable level and savings accumulated to a useful level, the surplus must be reduced by reducing the taxes collected from the citizens for whom the government works.

There are a couple of things that our government, in particular, can do to achieve that first requirement of achieving a net positive income and so to avoid the need for austerity measures.  One is to carefully and cold-bloodedly identify the things on which it spends that are truly necessary; the things that are useful, but not critical, to have; and the things that are, for lack of a better word, luxuries.  We have, as a nation over the last three generations (primarily spanned by the baby boomer generation after WWII), gotten so wealthy that we’ve simply lost track of the distinctions among these three categories.  Everything is necessary, because we’ve been able to afford it, or so it has seemed.

The other thing our government should do is determine where the responsibility for the spending should lie: with government, or with the individual.  Not everything on which our government spends should be a government expenditure.  One item, for instance, on which the government spent 20% of its 2010 budget, is Social Security.  A well-intended program, it was badly designed and has been badly managed by government to the point that this combination of failure will leave the program bankrupt in just a few short years.  Privatized retirement programs, where each citizen owns and manages his own retirement funding, will be a vast improvement in the government’s thrift.

This recognition of where spending responsibility lies, and an associated shift in who does the actual spending, is critical because this is the force behind thrift: the decisions made when it’s our money on the line vs. the decisions made when it’s votes and other people’s money on the line.  We’re much more likely to take care of our financial house when it’s our money, than is government, whose bureaucrats and politicians have no skin in that game.

Returning to government thrift has another beneficial pathway.  Reduced government spending, more disciplined government spending, reduces the flow of government money and of government debt into our economy.  This reduces crowding out of and competition against private enterprise, fostering their growth (and hiring).  In the end, almost any spending cut, to borrow a phrase from the present administration, is stimulative.  And so not austere.