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  • How to do spending cuts

    Posted by TM Lutas on February 15th, 2011 (All posts by )

    Right now, the USA needs adults who are capable of cutting spending in order to save the republic. Children are incapable of cutting budgets. Adults prioritize and cut what is least needed, even when the cuts are painful, because they know that they face ruin if their expenditures exceed their income over the long haul.

    As citizens it is our duty to find out if our representatives are adults or children and to replace the children with adults.

    Our country currently faces ruin if we do not cut spending. This economic ruin will most impact the poor and the economically vulnerable as well as robbing our children of their future. It does not matter so much which government expenditures are cut as it matters that our spending stops exceeding our revenues.

    Let the left make a list of gold plated DoD expenditures they want to eliminate. Let the right come up with its list of programs and departments it wants to do away with. And pick some from column A and some from column B and do this thing. We can survive getting the mix wrong of which programs we cut. We cannot survive not cutting.

     

    12 Responses to “How to do spending cuts”

    1. Robert Schwartz Says:

      Meat Ax? No. Chain saw and back hoe.

    2. TM Lutas Says:

      There’s no requirement to be crude about these things. If there’s somebody out there who can wield a scalpel and intelligently cut out things in detail to total up to the needed sums, more power to them. But we can’t wait on that sort of fine analysis. We need to come up with plans this year that stop the gushers of red ink.

    3. Michael Kennedy Says:

      The left wing web sites, like Washington Monthly which I read regularly, are worried about budget cuts causing unemployment. Of government workers, of course !

      President Obama’s proposed fiscal 2012 budget is potentially a massive job-creation engine, with plans to generate millions of them by repairing and expanding highways, bridges and railways. […]

      The plan calls for $53 billion to build a high-speed rail system, $336 billion for highways and a “national infrastructure bank” that would combine public and private money to build national or regional transportation systems.

      They are actually serious. This is not a link to the Onion.

    4. Marty Says:

      I disagree about method. Yes, we absolutely need to cut federal outlays by about $1T ANNUALLY, and we need to do it quickly. But let the left just pick whatever defense programs it doesn’t like? Really?

      If anything, as long as we are fantasizing, it would make more sense to have the people who advocate for program areas identify the cuts. Let defense hawks make DoD cuts to meet a target. Let educators opine on where to cut the Education Dept. But the important thing is that they have to know in their bones that (a) cuts of AT LEAST the identified magnitude WILL happen, and (b) if they try to game it (e.g., the “Washington Monument” strategy) the decision will be taken away from them and maybe the cuts will be even deeper, so they should play it honestly.

      This is not easy, of course. Which is part of how we got into this mess. But I would rather force the experts and advocates to get real about their budgets than have such decisions made by people who are ignorant of the programs and unsympathetic to the goals–and I would count many on the left as unsympathetic to national security.

    5. Blake Says:

      I’ve written my representative, asking for a 20% across the board spending cut. Everything.

      Cut spending that much, watch the value of the dollar rise.

      I think everything is on the table when it comes to spending, even the DOD.

      20% cut in the DOD’s budget leaves it with only 720 billion to spend, if I remember correctly. I suspect the DOD will find a way to get by.

      Oh yeah, I also requested cap gains be capped at 15%, eliminate the death tax and reduce corporate tax rates to say, 20%. I also want every single targeted deduction removed from the tax code. (Yeah, I’m talking about you, GE)

      Did I mention that I’ve been seeing Unicorns flutter about recently? They’re cute….(hey, if you’re writing fantasy, might as well go for the gusto)

    6. TM Lutas Says:

      Michael Kennedy – We’re buying MI-17 helicopters for Afghanistan. The Army and Navy are fighting over how to purchase them with the Navy’s method leading to significant savings. The total jobs lost if we mandate the Navy way is zero. You can certainly find other spending choices to save money without costing jobs. There’s no reason not to do these things but the children who don’t want to cut are not even willing to stand up and advocate for the easy ones.

      Marty – If you were around in the 1990s you might have noticed how we decided to do defense cuts, through a bipartisan commission called BRAC that gave Congress up and down votes on packages of defense closings. I’m saying that we need to start by everybody coming up with their own lists and putting all those lists into a BRAC like process and getting up and down votes on the resulting cuts. If the Democrats are to provide the requisite political cover, they get to pick their own cuts as an input for the BRAC like process to consider. The wishlist cuts are an input, not an output.

      Blake – The problem with pressuring your representative to issue a cut list like that is that they open themselves up to demagogic attacks. It’s unreasonable to expect them to do it without some sort of political cover that gives them a decent chance at re-election. Establishing the expectation in the public that those who do not make such lists are adult children who need to be voted out immediately for the good of the nation is a way to provide that political cover and make the right thing to do the politically safe thing to do.

    7. Blake Says:

      TM,

      Doing the right thing is doing the right thing. Is it better to try and do the right thing, at the cost of your job, or, is it better to compromise your principals to stay in power?

      The GOP has been compromising far too long, which is why the GOP got hammered in the 2008 election.

      20% is a good starting point. Would you rather the GOP start at 5% and compromise at .5%?

      The country cannot afford the political games any more.

      The press is in the tank for President Obama. There is no way for the GOP to avoid getting hammered by the MSM.

      The MSM always loves the GOP “moderate” until someone further left comes along.

      The budget/debt cannot be handled by a politically palatable solution. It requires serious and draconian measures if the Republic is to survive.

    8. TM Lutas Says:

      Blake – Doing the right thing and winning is better than doing the right thing and losing. By making the right thing the politically palatable thing, you add the careerists and the opportunists to your side of the fight and together with those who actually believe in doing the right thing form a durable majority. I’m all about forming the durable majority that keeps this country a going proposition.

      I am suggesting compromise between doing a Democrat cut to some self-propelled artillery system we don’t need and a GOP cut to some education program that doesn’t work. Whether we cut one or the other first is the subject of legitimate compromise and would not affect the trajectory of deficit reduction we both want. In the end, my starting point is to cut about 45% of the government and then I want to go deeper in order to keep the payment promises we made for people who are too old or too sick to realistically make it if we abrogate and start over.

      I’m suggesting a redefinition of what is acceptable behavior so that we get the weight of social sanction on our side and the spendthrifts get to be labelled out of control and out of line. What, really, is your objection to that?

    9. Blake Says:

      TM,

      This is not about winning or losing. I’m no longer interested in playing the Dem versus Rep game. Too many Republicans are merely Democrat light.

      However, that is a side issue.

      I explained myself badly. I don’t think the DOD is sacrosanct when it comes to budget cuts. I think everything is on the table.

      There are too many ostensible budget hawks that think the DOD’s budget is sacrosanct.

      I’m not one of them.

      I also think every entitlement program needs to be cut.

      For examply, my mother lives on Social Security. Mom recognizes that receiving 80% of Social Security is better than receiving 100% of nothing.

      Again, when the compromise game starts being played in Washington, it generally doesn’t work out well.

      Our country is broke and cannot go on like it is. You seem to be interested political games that America can ill afford at this time.

    10. TM Lutas Says:

      Blake – Just saw a great bit from Megan McArdle that seems on point

      This illustrates a challenge facing economists: should they advocate first best or second best policy? I once saw an exchange between a Bush treasury official and a prominent academic critic of TARP, etc. The official argued that the critics were putting forward “solutions” which had no hope of passing congress. The critic sharply rejoindered that it wasn’t his job to suggest stupid things that politicians were willing to do; it was to tell them the right thing to do.

      This is true–but at some level, there’s no point in spending a lot of time designing policies which can’t be enacted in any conceivable democratic polity. Especially if advocating those policies make it hard to advocate things that might work–either because the advocacy takes time away from thinking about feasible solutions, or because you alienate the people you are trying to influence.

      I’m interested in solutions that save the country that are politically feasible. Only if there are none of those is it preferable to fight the good fight and rage against the darkness as our civilization draws to a close. I don’t believe that just delaying the inevitable so that our kids get the deluge instead of us is acceptable.

      So we agree. We’re just doing so… energetically.

    11. Blake Says:

      TM,

      Well, I think our main difference is in how close we think the country is to financial Armageddon.

      I think the situation is dire and needs to be addressed now.

      If I’m understanding you correctly, you think we’ve got a little more time than I do.

      I think we both acknowledge the problem is serious, it’s just a matter of time frame.

      Please don’t misunderstand me, I think it’s obvious you’re not thinking in terms of decades.

      My absolute outside time frame for dealing with the financial problems of our country is 4 years. That’s my best case scenario.

      My gut instinct says no more than 18 months.

      I wouldn’t be advocating the draconian measures I’m putting forth if I thought we had more time.

    12. TMLutas Says:

      You’re not understanding me correctly. I think we’re in the grey zone where the herd of financiers could pull the plug on the US at any time. Is that clear enough? The investor class knows that any sort of meat cleaver approach is open to demagoguery and is likely to be trumped by street protest. That makes the meat cleaver approach less credible and therefore less likely to appease the bond people into sticking with US bonds.

      A prioritization approach with stiff cuts on an up or down BRAC style system would be a proven winner and replicate the only proven major spending cut process the US has had in the recent past. This would be more credible and would buy us the time we need to stave off the bond vigilantes until we can cut down to operational surplus/net balance.

      The bond vigilantes don’t care about principle, just their principal. They want their money and they want a credible story about how we are going to grind down this debt monster to something manageable. If we can do that, we win. If we don’t, we lose.