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http://www.cnn.com/2011/OPINION/03/16/bennett.spending.debate/index.html
America needs a budget breakthrough
Editor's note: CNN contributor William J. Bennett is the Washington fellow of the Claremont Institute. He was U.S. secretary of education from 1985 to 1988 and was director of the Office of National Drug Control Policy under President George H.W. Bush.
(CNN) -- Almost everyone in Washington knows that our national budget deficits and national debt are out of control. President Obama has said, "[W]e have to confront the fact that our government spends more than it takes in. That is not sustainable."
The president's bipartisan fiscal responsibility commission has said, "The era of debt denial is over." And House Speaker John Boehner has said our unrestrained spending poses "a mortal threat" to our country.
But once the White House, Congress or outside analysts start talking about where to cut spending in the current continuing resolutions for this fiscal year or the president's budget for next year, the agreement quickly ends. In their first effort to trim the budget for this year, for example, the House of Representatives, where Republicans are in the majority, proposed nearly $60 billion in budget cuts -- and the Senate, where the Democrats hold the majority, defeated the proposal.
New York Sen. Chuck Schumer, chairman of the Senate Democratic Policy Committee, called the plan a "scorched earth spending proposal."
The problem is, even while $60 billion in cuts is controversial, that amount does not even come close to seriously addressing the budget crises everyone seems to agree we face.
To put the numbers in perspective, financial author and radio host Dave Ramsey illustrated it this way: Take a couple that earns $58,000 a year. To put their income and spending on par with our nation's deficit spending ratios (we are about $16 trillion in debt, we spend about $3.7 trillion a year and take in about $2.9 trillion a year), it is akin to them spending nearly $75,000 a year. Now, realizing they have a spending problem, they decide to cut back their spending by $3,000 and then call that a success by saying these are "big cuts." They would still be spending more than 20% more than they earned.
So in the larger picture, these proposed reductions of $60 billion are not big cuts, and our budget proposals to cut our deficits and debt are simply not anywhere near fiscal sanity -- but, still, these small cuts remain controversial and cause political gridlock and recrimination.
So, where to start? The new Republican majority in the House has proposed cutting spending to 2008 levels. In 2008, spending was far lower than it is today -- approximately $2.9 trillion. Now, seeing these numbers, a common-sense question immediately arises: Does anyone recall complaints in 2008 that our nation was spending too little?
In fact, even four years ago, there were complaints we were spending too much, and the Fed chairman was saying, "[T]he fundamental decision that Congress, the administration and the American people must confront is how large a share of the nation's economic resources to devote to federal government programs, including transfer programs such as Social Security, Medicare and Medicaid."
To get a better grasp on Washington's seemingly inevitable spending increases -- even dismissing such nondiscretionary programs as Social Security and the like -- take a department I've run as illustrative: Education. In 1985, when I became education secretary, the department's budget was about $15.5 billion (or about $32.5 billion, adjusting for inflation).
It has increased every year since and, today, the president is proposing a 2012 budget for the department that approaches $90 billion; this, on top of the $100 billion in stimulus money it has already received. Another obvious and common-sense question arises: For all these billions spent at the national level, has education improved? The question answers itself.
Here is the general problem, as pinpointed by former British Prime Minister Margaret Thatcher just over 20 years ago: We have reached a point of too-expansive governments where the state "takes too much from you to do too much for you, constantly substituting the politicians' view of what the people should have for the people's own view of what they want."
But the specific problem is worse: While politicians have their pet projects and specific views on what they would like to fund and what they would like to cut, the people (the governors' governors) have their own sacred cows.
The gridlock is not so much in Washington as it is in the electorate and the commentariat that generally agrees we need to cut spending but then engages in cognitive dissonance the moment specific programs are identified for retrenchment. Almost everyone agrees (nearly 70%) we need to cut spending, but majorities can't agree on cutting anything -- from education to Social Security to the arts.
The ultimate truth is this: Dave Ramsey is right -- every family knows it cannot go on forever with its own deficit spending, attempting minimal cuts that hardly begin to address the larger issue. The same is true for our country and its priorities. The spending cuts are simply not serious enough to deal with the problem both parties have created.
Commissions will not solve this, and bickering over the differences between $6 billion and $60 billion will not solve this. Rather, what is needed is a series of national symposia, a series of national teachable moments, outside of Washington. I suggest that the Republican chairman of the House Budget Committee, Paul Ryan, and whomever the Democrats would like to put up, commence a series of national debates throughout the country (make it seven, in the Lincoln-Douglas format), have them aired on the three cable networks, C-SPAN and on the internet, and see who has the best plan to restore fiscal sanity -- who can win over the most minds.
The time for a truly national conversation is upon us, the time for de minimis solutions is over, and the time for the American people to make up their minds is now.
The opinions expressed in this commentary are solely those of William J. Bennett.
Rice and beans?
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Commissions will not solve this, and bickering over the differences between $6 billion and $60 billion will not solve this. Rather, what is needed is a series of national symposia, a series of national teachable moments, outside of Washington. I suggest that the Republican chairman of the House Budget Committee, Paul Ryan, and whomever the Democrats would like to put up, commence a series of national debates throughout the country (make it seven, in the Lincoln-Douglas format), have them aired on the three cable networks, C-SPAN and on the internet, and see who has the best plan to restore fiscal sanity -- who can win over the most minds.
Naturally. The problem is that we can't agree, and we're sitting on our hands. The solution? Expand the argument; make it even
harder to get to a consensus.
Maybe the best compromise is to simply cut all programs equally.
Quote from: MadImmortalMan on March 17, 2011, 03:46:16 PM
Maybe the best compromise is to simply cut all programs equally.
Actually, I'd go for that. You get a small percentage applied to everything across the board; services continue with less interruption or could be phased out more smoothly, and the gross effect to the deficit would definitely be substantial. It makes sense.
Naturally, this means it won't even show up on Congress' radar.
Quote from: MadImmortalMan on March 17, 2011, 03:46:16 PM
Maybe the best compromise is to simply cut all programs equally.
No, that's pretty much the worst option. Government is still trying to do all the same stuff it did before, but now with less money it just does it all worse. And, once finances improve, it is easy to restore the funding that was cut.
Any meaningful cuts need to be to entire programs.
I was hoping he'd suggest gambling.
I think it is easier to put things off until a new generation is saddled with the mess.
Quote from: Barrister on March 17, 2011, 03:57:06 PM
No, that's pretty much the worst option. Government is still trying to do all the same stuff it did before, but now with less money it just does it all worse. And, once finances improve, it is easy to restore the funding that was cut.
Any meaningful cuts need to be to entire programs.
We've been trying that route for decades, and look where it's gotten us. As long as you've got two people in the room, there'll never be a consensus on what needs to go.
Also, when your government is as glutted up as ours is, it actually could benefit from reductions across the board. I can be big-government and still feel comfortable saying the departments of the government are way, way, way too big.
Maybe a step-down approach; cut a small percent of funding across the board, measure performance, repeat. Set up baseline criteria for programs and continue cutting until you reach those- then it's easier to look across the board and see what is actually just sucking up money.
Quote from: DontSayBanana on March 17, 2011, 04:02:54 PM
Quote from: Barrister on March 17, 2011, 03:57:06 PM
No, that's pretty much the worst option. Government is still trying to do all the same stuff it did before, but now with less money it just does it all worse. And, once finances improve, it is easy to restore the funding that was cut.
Any meaningful cuts need to be to entire programs.
We've been trying that route for decades, and look where it's gotten us. As long as you've got two people in the room, there'll never be a consensus on what needs to go.
Also, when your government is as glutted up as ours is, it actually could benefit from reductions across the board. I can be big-government and still feel comfortable saying the departments of the government are way, way, way too big.
Maybe a step-down approach; cut a small percent of funding across the board, measure performance, repeat. Set up baseline criteria for programs and continue cutting until you reach those- then it's easier to look across the board and see what is actually just sucking up money.
No, you haven't been trying that.
I'm telling you as someone who works in government - just saying to everyone "okay your budget is 10% less" isn't going to be effective in the long run, and the money will be made back sooner or later.
Quote from: MadImmortalMan on March 17, 2011, 03:46:16 PM
Maybe the best compromise is to simply cut all programs equally.
That doesn't address the question of how much to cut and whether to raise taxes.
Quote from: Admiral Yi on March 17, 2011, 05:18:36 PM
Quote from: MadImmortalMan on March 17, 2011, 03:46:16 PM
Maybe the best compromise is to simply cut all programs equally.
That doesn't address the question of how much to cut and whether to raise taxes.
That's true. I was mainly speaking from the palatability angle. If it's equal across the board, nobody can really be upset about their favorites getting the chop. Not legitimately anyway.
Quote from: MadImmortalMan on March 17, 2011, 03:32:53 PM
Rice and beans?
:mmm:
Give me some hoecakes and Tabasco and I'm good.
One thing I hear at least some Pols talking about is rolling back budgets to 2008. Now I don't expect they will go all the way but the budgets of many departments has been greatly increased over the last few years, and the Stimulus added even more. I'd like to see some of that brought back down, and some of the budget cuts are looking to do that. Of course, it gets people crying about the draconian cuts! But this is the kind of madness our Legislators need to avoid; both parties and the President need to get serious about this issue. It's maddening and actually very worrying.
Quote from: KRonn on March 17, 2011, 08:36:35 PM
One thing I hear at least some Pols talking about is rolling back budgets to 2008. Now I don't expect they will go all the way but the budgets of many departments has been greatly increased over the last few years, and the Stimulus added even more. I'd like to see some of that brought back down, and some of the budget cuts are looking to do that. Of course, it gets people crying about the draconian cuts! But this is the kind of madness our Legislators need to avoid; both parties and the President need to get serious about this issue. It's maddening and actually very worrying.
I don't think they can time travel.
The US should increase the efficiency of the things they spend on. But since this is something that no one in government is interested in maybe it won't happen.
Quote from: Admiral Yi on March 17, 2011, 05:18:36 PM
Quote from: MadImmortalMan on March 17, 2011, 03:46:16 PM
Maybe the best compromise is to simply cut all programs equally.
That doesn't address the question of how much to cut and whether to raise taxes.
Of course you need to raise taxes, on everyone and you should probably introduce a VAT too. I don't agree with just a flat-rate cut it would be ridiculous. I think immediate savings can be most quickly made in defence, because it's the largest discretionary bit of the budget. There's lots of other small cuts that can be made across other departments - in the long-term you need to do something that stops the healthcare inflation you've seen in the US since the early 90s.
Quote from: The Brain on March 18, 2011, 02:28:47 AM
The US should increase the efficiency of the things they spend on. But since this is something that no one in government is interested in maybe it won't happen.
The problem is that government spending is inefficient by definition. If you try to make government spending efficient, then it would merely justify more government spending, which by definition is inefficient.
Quote from: Sheilbh on March 18, 2011, 02:28:10 PM
Of course you need to raise taxes, on everyone and you should probably introduce a VAT too. I don't agree with just a flat-rate cut it would be ridiculous. I think immediate savings can be most quickly made in defence, because it's the largest discretionary bit of the budget. There's lots of other small cuts that can be made across other departments - in the long-term you need to do something that stops the healthcare inflation you've seen in the US since the early 90s.
You're not wrong, but that's pretty much the boilerplate. Except VAT isn't happening in the US. Way too volatile. Even if we do all that stuff you said though, it's just a down payment toward actually fixing the problem. There aren't enough cuts to make in defense to close the gap. And we can't tax our way out either. The combined net worth of every billionaire in the US wouldn't even close the
annual deficit if we seized it all right now Grallon-style. Another thing that isn't often considered by Europeans is that our federal taxes may be lower than yours, but we pay on several levels that often add up to something very equivalent to what you would see in Europe. I know you personally know this, but it bears mentioning. Our tax burden is pretty close to the rotw in most of the more eh..developed states. Corporate tax is higher than pretty much the whole world except Japan. There isn't much room to grow there. We could go tariff-protectionist and start a new Great Depression I guess.
We need a structural change. The population needs to have a completely different set of expectations when it comes to what they expect their governments to do and what they have to pay for those expectations. I don't know what to do that would be politically palatable other than an across the board slash to be honest. What if the Fed has to raise interest rates to stop inflation like in the 80s? Do you know what that would do to our deficit? I don't think the sovereign bond markets would hold together. All those "safe" retirement accounts our grandmas all count on loaded with T-bills? That worries me.
Edit: The point about medical costs is a great one. Maybe if Obamacare had had single payer in it or something, I dunno.
Quote from: MadImmortalMan on March 18, 2011, 04:20:07 PMYou're not wrong, but that's pretty much the boilerplate. Except VAT isn't happening in the US. Way too volatile. Even if we do all that stuff you said though, it's just a down payment toward actually fixing the problem. There aren't enough cuts to make in defense to close the gap. And we can't tax our way out either. The combined net worth of every billionaire in the US wouldn't even close the annual deficit if we seized it all right now Grallon-style. Another thing that isn't often considered by Europeans is that our federal taxes may be lower than yours, but we pay on several levels that often add up to something very equivalent to what you would see in Europe.
Well you can't tax your way out of it but there's no fiscal tightening in history that doesn't include increasing revenue and the one's of the size the US (and UK) are facing have, historically, been roughly 50-50. The UK's trying roughly 30-70 on spending cuts right now but that would be the most lop-sided. You can't tax your way out of this but you also can't cut your way out of it. My understanding is if you eliminated all non-defence discretionary spending you still wouldn't have closed the gap.
It's nowhere near European levels even if you include state and city taxes - and especially if you include sales taxes and all of the tax deductions and credits available - and that despite having a reasonably attempt at a welfare state and the biggest military budget by a significant distance. On this I'm almost right wing. I think the US (and UK) needs to get rid of a lot of deductions and credits that are available, but lower rates and brackets generally so more people are paying tax, but the rates are low and simple. It's worth saying that right now I think the US has the problems Ireland had of depending on taxes that were particularly hurt in the recession to remove people from paying income tax. I mean I think the US system is simply not fit for purpose any more and I think the complexity as much as anything else is a killer. One of the most striking things I've read about US tax policy was in a report commissioned by W which had a poll that found a majority of Americans would be willing to pay more tax if they didn't have to fill in a tax return.
QuoteI know you personally know this, but it bears mentioning. Our tax burden is pretty close to the rotw in most of the more eh..developed states. Corporate tax is higher than pretty much the whole world except Japan. There isn't much room to grow there. We could go tariff-protectionist and start a new Great Depression I guess.
Japan also has the lowest sales tax of the developed world with the exception of the US (Federally). The corporation tax is very high. Again I think there are too many deductions and credits available. They should generally be abolished and the tax rate lowered (incidentally I think this would be politically more difficult than most public spending cuts). I also understand that the US corporate tax system makes it far easier to expatriate profits than most developed countries - that should be cut down on too and to his credit all of Obama's budgets have tried to change this, but failed.
QuoteWe need a structural change. The population needs to have a completely different set of expectations when it comes to what they expect their governments to do and what they have to pay for those expectations. I don't know what to do that would be politically palatable other than an across the board slash to be honest. What if the Fed has to raise interest rates to stop inflation like in the 80s? Do you know what that would do to our deficit? I don't think the sovereign bond markets would hold together. All those "safe" retirement accounts our grandmas all count on loaded with T-bills? That worries me.
I agree. I think it's like a revolution; it looks impossible until it's inevitable. At some point this will stop and no-one knows when or how.
QuoteEdit: The point about medical costs is a great one. Maybe if Obamacare had had single payer in it or something, I dunno.
I don't know. I don't even know what causes medical inflation in the US to start shooting up as it starts to in the early 90s.
Quote from: Sheilbh on March 18, 2011, 06:39:19 PM
I don't know. I don't even know what causes medical inflation in the US to start shooting up as it starts to in the early 90s.
It's not just the US. Health care costs have been steadily increasing for the last couple decades in Canada as well. I think that's also the case in the UK.
I just read an article that 43% of Alberta's entire spending is going to health care, and that % is set to increase further,
Quote from: Barrister on March 18, 2011, 06:46:45 PM
It's not just the US. Health care costs have been steadily increasing for the last couple decades in Canada as well. I think that's also the case in the UK.
Oh yeah. But I think I read that only Ireland and the UK (post-1997) had high growth rates of healthcare expenditure. Ireland was splurging for most of those 20 years and the UK splurged abit too after 1997, but they're both caused by healthcare inflation but also a conscious decision by the respective governments to spend considerably more - that excuse doesn't work in the US.
Quote from: Sheilbh on March 18, 2011, 07:00:51 PM
Oh yeah. But I think I read that only Ireland and the UK (post-1997) had high growth rates of healthcare expenditure. Ireland was splurging for most of those 20 years and the UK splurged abit too after 1997, but they're both caused by healthcare inflation but also a conscious decision by the respective governments to spend considerably more - that excuse doesn't work in the US.
Prescription drug benefit. :contract:
Quote from: Admiral Yi on March 18, 2011, 07:30:41 PM
Quote from: Sheilbh on March 18, 2011, 07:00:51 PM
Oh yeah. But I think I read that only Ireland and the UK (post-1997) had high growth rates of healthcare expenditure. Ireland was splurging for most of those 20 years and the UK splurged abit too after 1997, but they're both caused by healthcare inflation but also a conscious decision by the respective governments to spend considerably more - that excuse doesn't work in the US.
Prescription drug benefit. :contract:
How does that increase the cost of healthcare, as opposed to government healthcare programs? Also when did they come into effect?
Quote from: Sheilbh on March 18, 2011, 07:36:18 PM
How does that increase the cost of healthcare, as opposed to government healthcare programs? Also when did they come into effect?
Remove the budget constraint, increase demand. Same as with all socialized medicine.
Early in Bush's first term.
Quote from: Sheilbh on March 18, 2011, 07:36:18 PM
Quote from: Admiral Yi on March 18, 2011, 07:30:41 PM
Quote from: Sheilbh on March 18, 2011, 07:00:51 PM
Oh yeah. But I think I read that only Ireland and the UK (post-1997) had high growth rates of healthcare expenditure. Ireland was splurging for most of those 20 years and the UK splurged abit too after 1997, but they're both caused by healthcare inflation but also a conscious decision by the respective governments to spend considerably more - that excuse doesn't work in the US.
Prescription drug benefit. :contract:
How does that increase the cost of healthcare, as opposed to government healthcare programs? Also when did they come into effect?
It increases utilization. Increased utilization of drugs also hinders people's ability to die early, further increasing their need for medication as they grow older.
Quote from: Admiral Yi on March 18, 2011, 07:38:52 PM
Remove the budget constraint, increase demand. Same as with all socialized medicine.
Firstly most socialised medicine systems don't remove the budget constraint.
Secondly US health inflation is far higher in this period than anywhere but Ireland and the UK who make a conscious decision to spend lots of money. Given that the rest of the developed world has a form of socialised medicine that answer doesn't seem to work.
QuoteEarly in Bush's first term.
Okay but healthcare cost inflation kicks off in the late 80s/early 90s. It's one of the major reasons that HMOs become the main form of insurance.
Edit: Also from 1998-2008, according to the Kaiser Family Foundation, Medicare expenditure actually grew less than the expenditure of private health insurance. It's apparently generally the case that the costs to government programs in the US, while higher than inflation, are still lower than the costs experienced in the private sector. So I'm not convinced this is the answer.
Quote from: Sheilbh on March 18, 2011, 07:43:59 PM
Firstly most socialised medicine systems don't remove the budget constraint.
Removing the budget constraint means the end-user is indifferent to the cost.
The cost is hugely inflated by corporate bullshit.
Quote from: Admiral Yi on March 18, 2011, 08:18:04 PMRemoving the budget constraint means the end-user is indifferent to the cost.
Well I don't think that's entirely true in most socialised systems which generally include some cost for the end user, but they are heavily subsidised.
But this is one of those things where it has a different meaning in the UK. Budget constraint in the NHS means the government isn't increasing spending. So they still have to deliver care that's free at the point of need but with less money. So you have the NHS that was over-worked and under-funded in the 90s with massive waiting lists, but also the incentive for various governments to constantly reform it to try and squeeze out productivity. There's no consumption budget constraint, but one is opposed from above.
I was using budget constraint in the microeconomics sense of the term.