Saturday, February 19, 2011

Nibbling around the Edges

There’s an intriguing graphic on the New York Times website. It shows, in scale, President Obama’s budget proposal. The bigger the rectangle, the bigger the budget. The chart also gives an indication, by means of color, of whether Mr. Obama is asking for more or less money than last year's budget for each area: green means an increase, red a decrease.

What’s particularly interesting, however, isn’t the graph that first appears on the site. Rather, it’s what happens when you click on the tab that reads “hide mandatory spending.” What happens then is that “spending that is controlled by existing laws and not subject to the annual budget process” is eliminated from consideration. So, for example, the increase in Social Security spending is overwhelmingly mandated: there’s an increase of about $14.5 billion, of which about a half a billion or so, slated to be used for administrative expenses (off-budget!) is discretionary. In other words, about 97% of the increase is prescribed by law. Of the $17 billion increase in Medicare, less than $1 billion is subject to the budget process. And the $63 billion in new interest load just has to be paid.

But even within the realm of what could conceivably be cut, there aren’t a lot of significant declines. There are a handful of programs that are projected to lose 10% or more of their funding: but all of these line items put together generate a total savings of barely over $30 billion, less than half of the increase in interest payments, or roughly equal to the discretionary increases in various areas of military spending (there are also some cuts in specific areas of the military budget, but, significantly, not in personnel, procurement, or O&M).

The most striking thing about the chart that eliminates mandatory spending isn’t that it’s significantly more green than red (although it is), i.e., it represents more areas of increase than of decrease; what’s striking is how much white (mandatory expenditure) space there is. The total budget: $3.69 trillion, up from $3.6 trillion a year ago. That $90 billion increase matches almost exactly with the mandatory increases in interest and social security… and doesn’t count significant mandated hikes in Medicare (the federal contribution to states) and student financial assistance, for example.

The debt and deficit are both huge, and growing. Two numbers a lot of people talk about: the deficit reaching 10% of GDP and the debt reaching 100% of GDP. One number I don’t see a lot: we’re looking at a deficit equal to about 40% of the budget! That means that for every $5 we spend, we collect $3 in taxes. I’m not an economist, but that sure looks to me like an unsustainable pattern. We are looking, after all, at a deficit in the range of $1.5 trillion in this fiscal year.

This means the spiffy new $60 billion budget cut just passed in the House, even if it were to become law (which it won’t, although parts of it might), wouldn’t make a dent in the deficit. That’s not to say that attempts to rein in spending are inherently misguided: predictably, I’m unimpressed with the specific targets of House Republicans’ budget-cutting axe, but a little fiscal restraint wouldn’t be a bad idea. More to the point, the Tea Party proposal, which would have cut an additional $22 billion from the budget, was deemed “irresponsible” by the GOP power base. It would have cut “everything indiscriminately in a heavy-handed way,” quoth Rep. Hal Rogers of Kentucky. And we can’t have that: Republicans came into power declaring their opposition to federal spending, and they all said that “everything [was] on the table” (Speaker Boehner said so in precisely those words), but of course they didn’t mean their pet projects.

One thinks, for example, of Boehner’s opposition to cutting $450 million for a new engine for the F-35 Joint Strike Fighter plane. (Here are links to good commentary by Dana Milbank and by Jack Marshall.) The Pentagon declares itself happy with the engine it has, making the cut seem a no-brainer. Half a billion dollars might not be a lot of money compared to the size of the deficit, but it ain’t chicken-feed, either. Yet John “We’re Broke” Boehner opposed the cut. Purely coincidentally, of course, the new engine would be made in Boehner’s little corner of the world. You see, “so be it” commentary about the loss of federal workers’ jobs notwithstanding, the good Speaker really does care about the American worker. Or at least the Southwestern Ohio worker, which is pretty much the same, right? It hardly qualifies as a revelation that Boehner is a hypocritical douchebag, but that knowledge doesn’t get us any closer to a sustainable budget.

What will do so, of course, is a recognition of reality. Protestations from both sides of the aisle notwithstanding, our old friends Waste, Fraud and Abuse are alive and well in most if not all federal agencies. My wife, who is a financial aid director at a community college, for example, sees more than her share of lazy and dishonest people whose “job” it is to attend classes long enough to collect a financial aid check, and then to simply flunk out and start over somewhere else. But Pell Grants and other forms of federal financial assistance per se aren’t the problem; indeed, they’re a central ingredient to a long-term solution. A well-educated workforce is crucial to any hope of a vibrant economy in years to come, and that means we as a nation need to provide a means for our best and brightest young people, not merely our most affluent ones, to attend not merely colleges, but good ones. Closing loopholes without throwing the proverbial baby out with the bathwater, however, takes actual work, actual commitment, and actual thought: neither party seems terribly interested in any of the above.

What this all boils down to, and pay attention because this doesn’t happen very often, is that Rand Paul was right in declaring that the federal government “can cut all of the non-military discretionary spending and not balance the budget.” You read that right. We could cut 100% of non-military discretionary spending and still not balance the budget. And that means next year’s debt payment will be bigger than this year’s, making it even harder to make any progress then. And so on ad infinitum.

I have a friend who is a costume designer. For a long time she had a saying posted outside her office: “Fast. Cheap. Good. Pick two.” The resurgent GOP has to make a similar choice, although I’m not sure they can really have more than one. Their options: maintain military spending, maintain current tax rates, and maintain the slightest hint of integrity in their rhetoric about caring about the deficit. It’s pretty clear, unfortunately, that such real resolve is lacking in the Republican leadership. Getting away with smoke and mirrors in the Reagan and Bush years, when the deficit (and spending) shot up but the rhetoric was always about fiscal responsibility, taught the current GOP all the wrong lessons.

Similarly, the Democrats, having slurped the Kool-Aid that makes them distrust the intelligence of the citizenry, seem far more interested in getting re-elected (by pretending to be Republicans), than in solving problems. There are solutions out there: raising taxes, probably significantly, especially on those can most afford it but ultimately on all of us; drawing down the war in Afghanistan and re-defining the mission of the American military throughout the world; recognizing that federal spending is often, even usually, a good thing, but current deficit levels cannot long be endured.

We’re well on our way to Oz. Here’s hoping we find a heart, a brain, and courage.

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