A Decade of Austerity or Business as Usual?

We are by now very familiar with the budget deficit.  Congresspersons will fill the Sunday talk shows and deliver political stump speeches arguing for what must be cut and what must be funded as debate on the 2011 budget begins.  Just as an aside, the government’s fiscal year runs October 1^st through September 30^th – our elected leaders should have been required to pass the 2011 budget prior to last October 1^st; however that date preceded the mid-term elections.  By shirking their constitutionally-mandated responsibility prior to an election is yet another illustration of how unpopular decisions with voters will allow for spineless leadership in Washington.

The American government is currently operating on continuing resolutions (CRs) – just enough funding to operate governmental functions on a day to day basis.  Some might argue that CRs may be the appropriate funding mechanism for government as a means of controlling costs; however, any time the government wants to spend, a supplement spending measure is always an option.  Additionally, CRs, by nature, are opaque, and do not receive the level of scrutiny as a published budget which articulate spending priorities and endorsements or opposition by our elected leadership.

We should also be wary whenever we hear politicians talk of “cost saving measures.”  Any time a politician speaks of cutting a government program that will result in X dollars in spending, that number is never pegged to the current budget, or budget deficit – 99% of the time this in reference to multi-year spending.  Government “savings” are normally equated to monies associated with a program that has a 5-10 year horizon that the government has elected to support via line-item in the budget.  Elimination of that program may result in a “savings” of $100 billion over 10 years – barely a dent in the current budget!  By contrast, last year the government spent over $164 billion on the interest alone on the national debt, which was an increase of 18% from 2009 and will simply continue to rise until the government can operate with a budget surplus and begin paying down the principle on the debt.

Unfortunately the days of pointing fingers are over – despite Michele Bachmann’s Tea Party response to the State of the Union last week illustrating how President Obama is responsible for this mess.  I’d like to think we are all savvy enough to know how we got here regardless of revisionist history attempts.  The government’s inability to control spending and balance the budget is analogous to Ricky Gervais’ explanation for how people become obese. We didn’t arrive here overnight, it’s not like last year we woke up and faced a $14 trillion national debt.  It’s fair to say that we all got to this point together and all share an equal responsibility for getting where we are, and we share that same equal responsibility for getting out of this mess.

One area that the Tea Party is correct on is that the government will have to cut spending – simply has to – period – no argument.  Unfortunately, this decade will not be a good one for liberals.  The altruistic designs of liberals using government spending to fund social programs – even if they are for the benefit of the citizenry will need to take a holiday.  Maybe when the government gets its’ act together, these types of spending programs can be revisited.

But where to start, where to start?  I’ve listened to numerous politicians claim that if they get elected they will balance the budget and cut the deficit.  Um, hmmm, I’m still here.  Anyone that seriously believes these people know what they are talking about really should consider a psychological evaluation – you are way too trusting.  Just because people yell and stomp about out of control Washington spending does not give them great insight in terms of fixing the problem.  

What gets cut? Possibly everything.  There was a scene in the movie Dave, where Kevin Kline, acting as President, calls the cabinet in to the White House to go over the budget.  His Chief of Staff derisively told him that if he could find $100 million (or something like that) in the budget, he could fund his pet social program.  Line by line, throughout the day, Dave makes cuts with his cabinet secretaries until they find the $100 million.  In our real world example, we will need to find $1.5 trillion to cut just to balance the books – let alone fund a worthy program.

It is time to put every line item of the budget on the table.  Republicans have long argued that National Public Radio and the National Endowment of the Arts are areas that the government should stop funding.  Their argument has long been that NPR and the NEA use public funds to say and fund items that their constituents find offensive.  Here’s an example.

The reality is, government funding for programs above and beyond those constitutionally mandated as the government’s responsibility have to be considered for cuts altogether.  This includes worthy programs such as government spending on the Head Start program, ethanol subsidies and farming, programs and grants the government provides to private industry, education and energy dollars.  Everything, including defense spending,  has to be considered for significant cuts.  And these are just the discretionary spending issues – we also need to look seriously at mandatory spending adjustments as well – Social Security, Medicare, and Medicaid. 

Mr. Dillon, commenting on the previous article, wrote:

“Think about what Defense cuts mean. The only viable manufacturing left in the US is the manufacturing done on Defense dollars through companies like Boeing, Lockheed, Raytheon, etc... Those are engineering and heavy manufacturing jobs. They in turn, feed custodial and materials management and management jobs.”

This is, without a doubt, the warning that President Eisenhower gave the country as he was leaving office – beware the military industrial complex! Serious cuts in defense spending – especially those targeted to a reduction or elimination of big ticket arms platforms like the Joint Strike Fighter, new aircraft carriers or submarines just to name a few examples will have a serious ripple effect throughout the economy – which in turn will drive unemployment well over 10% and throw the country well into a double-dip recession, if not a full-blown depression.  

While spending cuts will be necessary, it doesn’t have to be as dire as shown.  We have options – this article only addresses one half of the equation.  Next we’ll look at the other side – government revenues (i.e., taxation).  It will only be through a careful balancing of raising revenues and spending cuts combined that will get us out of the mess we’re in.  If we actually take the hard path and make these tough decisions, the 2010s may be referred to by future generations as the Decade of Austerity – the price America paid to remain a superpower.  If we delay and continue to pass the buck, it will be the equivalent of 536 Neros fiddling as Rome burned.