The 2011 Federal Budget is about $3.8 Trillion, of which, spending exceeds income by about $1.56 Trillion. So we are in deficit spending mode to the extent of 41% of the budget.
Some questions….
If your small business was running 41% in the red, would you:
a. Cut your spending by 3%;
b. Argue with your wife about whether to cut the budget or just raise prices to your customers;
c. Counterfeit money to pay your debt?
d. All of the above; or
e. Hire an expert to write a dispassionate plan to work your way out of debt; or
f. try something else?
If you answered “d. All of the Above,” you probably work in Washington, D. C. or, more specifically, are in Congress or the White House. Who else could get away with such stupid (and illegal) “solutions”???
If you answered “e. Hire an expert to write a dispassionate plan to work your way out of debt,” you are probably the Republicans in the House of Representatives who have asked Representative Paul Ryan to prepare such a plan. I like Congressman Ryan’s Plan better than anything else I have seen come out of Washington in quite a while. Or maybe you would call on Thomas Sowell and use his plan.
Here is my plan “f.”
Cut the budget of every single operation of the U.S. Government 10% in 2012. Then cut 10% more in 2013. Then do it again in 2014, 2015, and 2016. Cutting 10% from each previous budget for 5 years will take 41% off of the original budget. Problem solved. We are now in the black or so close that the budget deficit is effectively gone.
I can hear the screams now, “Meat Ax,” “Hatchet Man,” etc. In fact, those wielding the real “Meat Ax” are those who spend huge amounts more than they take in each year. Those are the people piling up the debt that will eventually bankrupt the nation. When that happens, little things like 10% cuts will seem like kid’s play.
Before you start to say that 10% a year is unrealistic or that it will cut some programs that shouldn’t be cut while leaving others that should, let me give you a few reasons why I think this will work.
1. Everyone is treated equally. This isn’t playing favorites like only increasing taxes on the “rich” or only cutting programs that support “women’s health.” If you can cut 10% from your budget at home, why can’t Congress and the President do the same?
2. Everyone knows what is coming. If the 5 year plan starts today, everyone knows what their budgets will be in each new year for five years. That gives time to plan.
3. More importantly, it requires you to prioritize what is to be funded and what isn’t. Is Federal support of ethanol really as important as maintenance of the nations bridges? How does a new National Park at Mount St. Helens stack up against funding the Centers for Disease Control? These are questions worthy of debate.
4. The questions are not so important, however, that they should stop all cuts until they are decided. This is the current state of political gridlock. All we get now is more delay, more debt, and more assurance that we will bankrupt the nation. By making the 10% cuts it will force decisions. Politicians need a push.
5. I almost hate to add this, but, we are so conditioned to our government’s economic illiteracy, I need to. We need to motivate our elected officials to balance the budget. I’m not sure I like legislating a “balanced budget.” That is a bit too short term a solution for me. I do think we might try limiting the term of any Congressman, Senator, or President to “x” years after failing to balance a budget.
The idea is to steadily get back on sound financial footing. We can do this if we set a plan in motion that gets us to our goal incrementally. However, it needs to be uncomfortable. No gardener ever created a beautiful landscape without pulling more weeds than she wanted to. No budget will be balanced without discipline and some pain.
10 comments
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April 12, 2011 at 11:18 am
Kurt
If any of my businesses were in the red I would increase revenue.
April 12, 2011 at 11:51 am
ttoes
@ Kurt
I think I agree with your idea, if not your point.
In business, it is much easier to cut costs than to figure out how to increase revenue (or profit). However, you can keep cutting only so long and eventually there is no business left. The better of the two things is to increase revenue (if it is profitable or at least covers more of the overhead).
In government, it is easier to raise revenue than to cut expenses. However, you can only increase revenue so much before you kill the source of revenue. The better of the two choices is to reduce expenses.
Our current Government (both Congress and the Executive) sees only the option of increasing revenue, because that is far easier politically than to cut from entitlements, etc.
My point is that we have far too much government and it is bloated with far too much fat. Adding more revenue will only exacerbate the problem. We need to cut the fat and shrink the government.
Thanks for taking the time to comment,
Tom
April 12, 2011 at 1:06 pm
Kurt
Thanks, Tom. Washington needs to do both, raise revenues and cut expenses. I don’t see it as an either-or proposition.
April 12, 2011 at 7:00 pm
Brandi Jones
Well it is obvious that they can’t control the budget at all, doesn’t matter what congressman/ woman is in control of each state. What President there is…maybe shut down the government and then see who is quickest to get their ideas and morals in check. We are always saving the world and we can’t save our own Military, our own Country and most of all our tax paying citizens.
April 12, 2011 at 11:17 pm
pmv
I worry that the stated goal of deficit reduction is being used as a cover for the more ideological goal of a more limited government. If deficit reduction is really the goal then a combination of spending cuts and tax increases/closed loopholes makes sense. see http://www.economist.com/node/18529711?story_id=18529711 for an interesting example.
Also, #1 on your list is that with an across-the-board cut of 10%, everyone would be treated fairly. But really, a 10% cut in federal government spending affects certain people much more than others (elderly, poor, etc). To be fair, an across-the-board cut (5%?) could be paired with an increse in tax rates at each tax bracket (a small increase, 1-2%) which affects middle and upper class workers much more than the poor and the elderly. To me, that would be a fair way to reduce the deficit.
April 13, 2011 at 9:20 am
ttoes
@PMV
I would agree, not with your worry, but, with your conclusion that much of the goal of budget reduction (not deficit reduction) is all about limiting the size and scope of government. I large number of folks, myself included, feel that our government is too big and involved in many things it should not be. I think the goal of deficit reduction is to again live in the real world and hopefully head off national bankruptcy. One way to achieve this is to balance budgets.
As to your point about my plan treating everyone “fairly,” I actually said “equally” which is a very different thing in my mind. It is like equality under the law. The law is meant, not to be fair, but to be equally administered. Are there some who are treated more harshly than others for the same offense? Of course. If we cut all budgets by 10% will some be effected more than others? Of course. But failure to act, and in this case, I mean to stop wasting tax money, we burden everyone with the consequences of a failed government and monetary decline. There is no chance that 10% cuts implemented by every government agency will have anywhere near the Drconian effects as will a 10% inflation caused by our government printing more money.
Thanks, by the way, for the Economist link. I, too, think that subsidizing ethanol is ridiculous and one of the luxuries of politicians not constrained by the prioritization required to balance budgets. In fact, the Department of Energy could cut the entire $6Billion for ethanol subsidies and reduce their 2012 budget request by over 20% with that single move. Actually, why not just eliminate the Department of Energy and save almost $30 Billion in one fell swoop?
Thanks for the comment,
Tom
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May 13, 2011 at 8:51 am
Richard Billies
I have a newer site with a similar political bent. I wonder if we can exchange links? Where did you get the “hit” counter? Thanks.
Rick Billies
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