Tuesday, February 2, 2010

Suggestions For Cutting The Deficit

With Obama producing a $3.8 trillion “budget” (the word is barely appropriate) with a $1.6 trillion deficit, and with 65% of voters saying that deficit reduction should be his highest priority, you’d think Obama could find a way to shave a few pennies here and there. You’d be wrong. Obama has no plan, no ability, and no will to reduce the deficit. So allow me to make some suggestions. . .

Non-Defense Discretionary Spending Cuts
Cancel The “Stimulus”: The stimulus was a ridiculous idea from the get-go. It had nothing to do with “stimulating” the economy or it would have been spent in ways that at least had a chance to create jobs and stimulate the economy. Instead, it was just a give away to left-wing interest groups. Of the $787 billion allocated, $597 billion is supposedly still unspent. Throw away the checkbook immediately. Total Savings: $597 billion

Cancel the TARP: The TARP was good money thrown after bad, given to people who didn’t need it, so they could pay out massive bonuses to people who didn’t deserve it. Of the $700 billion allocated, $200 billion was never spent. Another $92 billion has already been returned and another $364 billion is expected to be returned ($42 billion is considered lost). We should demand an immediate return of all TARP funds. Total Revenue Increase: $364 billion
Note: We should also put the kibosh to Obama’s plan to use the returned TARP money for other purposes. Though this doesn’t represent savings we can count, because it isn't set to be spent yet, it’s still a good idea.
Cut Federal Employment & Salaries: The federal government employs approximately 2.73 million employees, who are paid $213 billion. I have direct experience with Club Fed and I can tell you that at least one-third of those employees could and should be terminated. If we cut the federal workforce by 10% (like a business might do in a recession) and cut pay 10% across the board for the rest, we could reduce the federal payroll by $40.6 billion. Total Savings: $40.6 billion

Discretionary Spending “Freeze”: When Bush came to office, non-defense discretionary spending was $262 billion. Despite there being almost no inflation between 2000 and the present, discretionary spending increased to $420 billion before Bush left office. In Obama’s first year, it increased to $699 billion, in large part because of the $190 billion spent on the stimulus. Even without that, non-defense discretionary spending still increased to $509 billion. Leaving aside the stimulus, a 20% cut on that $509 billion would result in $408 billion, less than a 3% cut from Bush’s last budget just over a year ago. Yet, this would save another $101 billion. Total Savings: $101 billion
Defense Spending Cuts
At this point, without touching defense spending or entitlements, we could save $1.1 trillion, reducing Obama’s $1.6 trillion deficit to $500 billion. But we’re not done there. Look at defense:

Defense: The 2010 Defense budget is $663.8 billion, with $130 billion going to overseas operations (including Afghanistan and Iraq) and the remaining $533.8 billion going to fund “base defense programs.” This represents a 4% increase for “in-country spending” over 2009. Simply freezing that portion of the budget at 2009 levels would save $20.5 billion, without even looking at programs the Defense Department doesn't want but Congress won't quit. Total Savings: $20.5 billion
Entitlement Reform & Economic Investment
Finally, let’s get a bit more speculative. Let’s talk about entitlement reform and energy independence.

Entitlement Reform: CommentaramaCare: Without repeating the finer points of CommentaramaCare, we very conservatively calculated that the reforms proposed could save the government $245.7 billion per year just by bringing the cost of Medicare closer to the cost of private insurance. Total Savings: $245.7 billion

Energy Independence: I wouldn’t normally suggest spending money to save money, but there is one area where this might work (though the reasons will need to wait for a future post): energy. Last year, the United States bought $470 billion in imported oil -- about half came from countries we don’t like, the rest came from places like Canada and Mexico. If we opened off-shore drilling and invested in the conversion from an oil-based economy to a natural gas-based economy, we could send about half of the money we spend in places like Saudi Arabia to places like Arkansas, Florida, California and the Dakotas instead. At a minimum, this would represent $235 billion in additional taxable sales in the United States. But let’s think like Keynes, because there is some truth to his theories. This $235 billion flowing through the economy could result in as much as $1.2 trillion in additional economic activity. If you take 28% of that in tax (the percentage of the U.S. economy that was taken in taxes last year), that would result in $329 billion in additional tax revenue. Total Increase Revenue: $329 billion
Totaling these amounts, we have $1.1 trillion in savings without touching defense spending or entitlements. We could get another $20.5 billion from the defense budget without a single cut. We could get another $245.7 billion from reforming our health care system. And we could get as much as $329 billion by buying our fossil fuels from domestic sources instead of the Middle East and Venezuela. This results in a total potential reduction to the budget of $1.7 trillion dollars. In other words, we could eliminate Obama’s deficit and achieve a $100 billion surplus instead. And none of these cuts would be all that painful to the economy or the ability of the federal government to carry on working.

Yet, Obama can’t find a single one of these? What does that tell you about the sincerity of his pledge to reduce the deficit?


StanH said...

All very sensible Andrew, therefore they mustn’t be considered…Washington mind-think, don’t you know! Fiscal responsibility has to be a real part of the Republican platform, and if presented like your common sense article, someone not on the government teat, will say, “why hell yeah!”

ArmChairGeneral said...

It is non existent. Very good ideas all the way around.

AndrewPrice said...

Stan, Obviously, this isn't the most detailed proposal. Indeed, we could look through specific line items and target programs, etc. etc. But these are some basic, obvious changes that could make a serious dent in the deficit and bring us back from the brink of fiscal ruin with very little pain.

Beyond that, I think there is still a ton more that could be cut, but if we can't even do this, then how do we go further?

AndrewPrice said...

Thanks ACG. I just couldn't believe it when Obama got up there and all he could find were $20 billion in fake cuts, and he claimed that was all the fat he could find in this budget.

And that's before even talking about the laughable assumptions he's included -- like permanent 5% growth for the next ten years!

Writer X said...

Good ideas never seem to be captured by any of the White House commissions. I'm guessing you were never invited? ;-)

Canceling the TARP and the ridiculously named "STIMULUS" don't seem to be on anyone's radar screens. When you look at the brain power of who's leading the White House budget show, it doesn't come as a surprise to most people.

AndrewPrice said...

Writer X, You know, I really do wonder about this White House crew. Not only do they never do the right thing, but they never even seem to consider it?!

Especially given that the stimulus hasn't worked and that Obama is now bashing the TARP recipients, why can't they come up with the idea of repealing that spending at least?

I think the answer is that they just don't want to cut spending. What's ironic about that is that it was his spending splurge that killed the rest of his agenda. If he hadn't blow all that money on the stimulus, the Democrats wouldn't have been worried about paying for health care reform.

BevfromNYC said...

Excellent, Andrew. I am all for a cut in Federal employee salaries including Congress. We could save a bundle if we increased the remaining employee share of health insurance and other benefits. However, wouldn't laying off 10% fed employees just add another 270K people the ranks of the unemployed?

I don't understand how the "stimulus" money is stimulating anything if it hasn't been spent yet? I agree, cancel it.

USArtguy said...

I know your essay is covering basics but to focus on point in particular, when it comes to drilling domestically, we are going to have to kick some Republicans in the head as well (Olympia Snowe for one). The Arctic National Wildlife Refuge (ANWR) consists of 19 million acres. Alalska is 420 million. So ANWR is less than 5% of the total acreage. Only a tiny portion of that 5% was desired for drilling and yet a number of (mostly RINO) Republicans voted against opening it up for exploration. I think it may have been George Will who said if Alaska were the size of a coffee table, ANWR would be a postage stamp.

Additionally, the federal government owns almost one third of all US land or about 715 million acres, nearly double all of Alaska. 85% of Nevada alone is federal land. If 1% was opened up, that's over 7 million acres that could be leased (or sold) for exploration. If the feds lease land for oil exploration, there's no reason they have to do those 99 years for a dollar deals, they could charge a market rate royalty and put that money into the budget.

While I liked Bush in general, one of my chief reasons for voting for him was the hope he would rescind some of Clinton's land grabs in the name of "national monuments" (among other things he did). Unfortunately we all know that never happened.

AndrewPrice said...

Bev, Laying people off does lead to unemployment, but paying them unemployment is a temporary cost as they will eventually need to get jobs just like everyone in the private sector who gets laid off.

The point is that there's no reason to carry these people on the rolls when they aren't doing anything. The federal government just keeps adding people, and never sheds them, and it keeps paying them more and more -- both in terms of pay raises, but also in terms of grade/step increases that somehow don't count as "pay raises."

The office I worked in had around 50 attorneys doing the work of 5 -- and that was not an unusual agency, I and my friends found similar situations throughout Club Fed. Why should the public continue to pay for the other 45 to drink coffee and read the paper?

AndrewPrice said...

P.S. Bev, the stimulus is just a mess. They don't seem to be able to spend large portions of it because the work isn't "shovel-ready." And what they have spent has largely gone to things like meeting shortfalls in state budgets, which can't stimulate anything.

AndrewPrice said...

USArtguy, Land management is a disaster all around, particularly when it comes to oil and gas.

You absolutely right about the inability of the Feds to grasp concepts like market rates. I lay that at the feet of out-of-date mindsets and the influence of people who benefit from these leases.

Also, the worry that a few caribou are going to be offended by drilling is one of those environmental scare tactics that too many politicians fall for. It's total nonsense.

Similarly, I've learned a lot about offshore drilling and it's so much cleaner and safer today than it was when the offshore bans went into effect in the first place, yet the environmentalists just don't want to hear it.

We need to seriously rethink our energy policy -- but, like I said, that's really for another post. This post was just broad spending cut ideas.

(P.S. I think it was a postage stamp on a football field.)

LawHawkSF said...

Andrew: Another step twoard cutting federal employee costs (it won't happen) would be to give them the choice of civil service protection or union protection, but not both. I'm all for getting unions out of government anyway, but it's only a dream.

As for cutting the military budget, it may sound strange, given my article on guns and butter, but I largely agree with you. The military can't be exempt from belt-tightening. There has been well-publicized profligacy on many expenditures. If the budget were handled right, the military expenditures could be carefully gleaned, and likely result in greater efficiency. And in order not to sound inconsistent, it was the percentage of the total GDP which was the actual topic of the earlier post. That is at present too low.

Also, as you mentioned, the military is frequently stuck with programs they don't want in the first place. I'm not sure how overall cuts would affect the current "surge" plan, but it could probably be accommodated by cutting waste elsewhere.

AndrewPrice said...

Lawhawk, There is a lot of waste in the military budget. There are still too many bases, too much money spent on things like flying Congresscritters around, and too many programs that nobody wants.

I absolutely want to maintain our technological edge and I want to make sure our soldiers have the best equipment known to mankind, but there are many projects that are forced on the military by Congress that the military doesn't want or need -- and that squanders billions of dollars a year that could be used better.

Also, all I propose here is to maintain domestic spending at the current level, not increase it -- I don't even touch the overseas money. There is no way that asking them to live on the same budget as last year could hurt our readiness.

BevfromNYC said...

This just in: Number of federal employees to grow to 2.15 million this year.


Yea! More jobs created and/or saved!

LawHawkSF said...

Andrew: And while we're looking at the crucial area of getting our spending back in line with reality, including the military, Congress is addressing the far more crucial and earth-shattering issue of gays in the military. Never let it be said that our government doesn't have its priorities straight (was that last word a bad choice?).

Tennessee Jed said...

Andrew - you have two choices here, I believe. Either you 1) send your proposal to the congressman or senator or potential congressman or senator of your choice or 2) you run yourself.

Hopefully you are photgenic enough. Yes the Dem.'s would try and smear you based on your involvement in disco era funk and science fiction, but I feel certain we could spin that as making you sorta hip for a conservative. I have the full head of grey/white hair to give me political gravitas(lol) but don't want to run against the consevatives we already have in Tennessee! Maybe, Bev in NYC would agree to jump in on the Commenterama platform! :-)

Seriously, great ideas.

AndrewPrice said...

Bev, They never stop adding people. There are fluctations (like with the census workers) but the numbers rarely go down.

AndrewPrice said...

Lawhawk, You know why they're doing that. . . because Obama is trying to energize his base, not provide effective government.

AndrewPrice said...

Thanks Jed, I am seriously thinking about making the switch to politics. In the meantime, I'll forward this to my reps! You can do the same with yours!

LawHawkSF said...

Andrew: Yep. And it proves both that Obama is desperate, and that national security and the going-for-broke budget are less important than his personal wonderfulness.

MegaTroll said...

Good suggestions. I hope the Republicans pick these up. Are you planning on looking deeper into the budget at some point?

AndrewPrice said...

Mega, I might. But it's probably a little early. We need to wait and see what the Congress puts together by way of final budget. What I was doing in this article was simply providing some relatively easy, common sense type ideas that average Americans would do if it were our own budget. The idea was to show how unbelievable Obama's claim is that he wants to fight the deficit.

ArmChairGeneral said...

Here's a question, how many portions of the health bill and cap and trade do you imagine will be broken up and added a riders and pork to other bills in the hopes of passing?

AndrewPrice said...

ACG, That's a good question. I think that maybe 2-3 total, but none of the big ones that they wanted. In other words, we might see some insurance "reform" passed separately, or an increase in funding gor Medicare, but not much more than that.

Of course, if they do that, then they lose the popular parts of health reform and that would doom any future bill, so they might not even try that.

Anonymous said...

Hmmm... I had to take a 5% pay cut and reduced hours to keep my job. Congress willing to step up to the plate? Maybe fewer freebies?

AndrewPrice said...

Anon, Lots of people had to take pay cuts. . . except the government. That's simply wrong. When people are losing their jobs and taking pay cuts, the government should not be handing out pay raises.

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