The Heritage Foundation has engaged in its own hypothetical budget-cutting exercise, more detailed but similar in concept to my “Tyrant for a Day” exercise (hat tip: Glenn Reynolds). Its plan cuts $343 billion from the federal budget.
I agree broadly with their proposed cuts. I’d quibble with some but in general I agree with them. However, don’t be dazzled with the array of budget items they’ve headed towards the block. When considered more closely just eight items comprise fully two-third of the cuts. Here they are along with some comments from me:
| Item | Amount (billion $) | Comment |
| Replace farm subsidies with Farmer Savings Accounts and improved crop insurance. | 15.0 | |
| Halve federal program payment errors by 2012 | 44.0 | To some degree this is hand-waving. It’s the “waste, fraud, and abuse” that shows up in everybody’s list of pet budget reductions. If it were this easy, it would have been done long ago. |
| Rescind unobligated balances after 36 months | 20.0 | I’m surprised that this cut saves this much money. “Unobligate balances” are budget items extended over more than a single year. |
| Halve the $25 billion spent to maintain vacant federal properties | 12.5 | Presumably this means by selling them or abandoning maintenance to many altogether. |
| Cut the federal employee travel budget to $4 billion (half of FY 2000 spending) | 10.0 | In all likelihood the easiest way to accomplish this would be to hire more federal employees and disperse them throughout the country. I have a feeling that the net effect of this will be to spend more but it’s only an intuition. |
| Devolve the federal highway program and most transit spending to the states | 45.0 | |
| Eliminate the additional child refundable credit | 26.0 | |
| Repeal unspent stimulus spending | 60.0 | |
| Total | $232.5 |
As is pointed out at the end of the post, each of these items has its own constituency for which it is is of, literally, vital interest which will make the cuts difficult enough. Two important constituents are Barack Obama and the Democratic Party. Effecting all of Heritage’s cuts will strip President Obama of many of the accomplishments of his administration to date, unlikely to be palatable. But Heritage’s exercise is a fanciful one as mine was.
Conspicuous by their absence from the list are any meaningful cuts to the largest components of the budget: defense, Social Security, and Medicare. I think that all are necessary if real budget discipline is to be achieved and, frankly, defense cuts are politically necessary to accomplish the entitlement cuts. Without cuts in Medicare in particular other cuts will largely be moot since increased spending on healthcare will offset these painful and contentious cuts with alarming rapidity.
It should also be recognized that even if every single one of these cuts, in real life sure to be fought bitterly to the last dollar, were to be magically enacted by a wave of the hand, it would reduce the budget deficit by less than one-third. Not the budget. The deficit. Keep cutting.
I see (another Heritage page) that total farm subsidies are $25B. I guess cutting them to $15B of crop insurance costs (every year?) is a moderate proposal. I’d support it, while wishing we could go further.
This is good work though somewhat tame. If they would have looked at Medicare, social security, and defense, they could have made some real progress.
I wouldn’t have a problem with Congress starting out small, with a few hundred billion in cuts, to prove they can do it.
Certainly if they can only do a few tens of billions we will know they aren’t serious.
BTW, the Debt Reduction Commission has a Dec 1st deadline. I guess I’m still an optimist, in that I hold a small hope that they’ll produce something useful.
http://www.nytimes.com/2010/11/02/us/politics/02fiscal.html
john personna:
In theory I wouldn’t have a problem with that approach, either. In practice I think it’s unworkable for one reason: each set of cuts poisons the well for the next set. That’s the problem with incremental healthcare reform, too.
Cutting spending is like taking off a bandage: better to remove it in one painful tear than to inch it off.
I see two likely scenarios for the Debt Reduction Commission: either their recommendations will be DOA or fundamentally irrelevant, e.g. propose reductions too far below what’s needed or tax increases too much above what can pass. One can always hope, I suppose.
What’s their constituency? A constituency of the whole is a constituency of none.
Sallie James at CATO notes that ag subsidies might be off the table. Medicare and defense spending were already being defended. The Heritage guys are just playing pretend here if they dont go after Medicare.
http://www.cato-at-liberty.org/post-election-outlook-agriculture-edition/
Steve
If we can’t do cuts iteratively, if we can’t get back on track for sensible legislation, then I’d guess we just can’t do it.
I think the theory/hope is that the Commission’s purpose is to provide political cover. The base-closing commission is often cited as a model. In that sense their lack of constituency is an advantage.
(perhaps i should also say that this might be a situation where we all know what to do, but no one can politically do it – hence the need for cover)
I get disheartened when I see the word “fanciful” used. Its just so defeatist.
I understand political reality, but if we just lean on that excuse we are headed for disaster.
As always, I draw on experience in business – with all due respect to politics (and I might add, govt isn’t the only organization with political constituancies) – that you simply tell your managers to hit their numbers: its not an option; manage your unit. As I’ve often quipped – you are probably sick of hearing it – we have a term for those managers who tell us that “its impossible”: ex-managers. This is serious stuff people, the country is in serious fiscal turmoil and the excuse making just has to stop.
I find myself in complete agreement with JP’s initial comment (and Dave’s subsequent observation that you can’t drip-drip-drip it in): if the program is bad, and the money is a waste, then no halfway solutions. Cut the whole gd program. That’s the way well run businesses operate. This is one of my problems with “compromise” and moderates.
Heh. Long ago in the mists of the distant past my immediate superior in the company I was working for at the time (don’t remember whether he was a director or VP) told me that one of the things he liked about me was that he had never heard me say that something couldn’t be done.
And that reminds me of a story. True story. Many, many years ago (when I was working for the same Fortune 500 company as I mentioned above) I was doing cleanup after a fiasco of a project. The cost had run into millions of dollars of cost overrun and had stretched years longer than had originally been scheduled. I brought back the guy (now at HQ) who had originally laid out the project and mentioned to him that everybody who’d been involved with the project from the outset had set that he’d characterized the project as easy. His response: “I meant easy for me, not easy for them.”
Which reminds me of another true story. Client brought me in to help them figure out how to finish a project they’d been working on for more than a year, cost overruns, etc. I took the CEO out for a drink that evening and told him that I could show them how to finish the project in a week under one condition. They’d need to scrap everything they’d done on it for the year and start over from scratch. He was reluctant. I told him that if I was wrong he didn’t need to pay me. He agreed. They were done in a week.
“As always, I draw on experience in business – with all due respect to politics (and I might add, govt isn’t the only organization with political constituancies) – that you simply tell your managers to hit their numbers: its not an option; manage your unit. As I’ve often quipped – you are probably sick of hearing it – we have a term for those managers who tell us that “its impossibleâ€: ex-managers. This is serious stuff people, the country is in serious fiscal turmoil and the excuse making just has to stop.”
I agree, yet we have the Verdons of the world who say that government cannot solve anything. My impression was that you always agreed with him on that. If so, I was wrong. While I think that there are some things government cannot solve, most of what we debate here can at least be made better. We can make budgets. We can cut spending. We can find some way to resolve the health care costs issue. We need our elected officials to practice good policy and not politics.
Steve
To some degree this is hand-waving. It’s the “waste, fraud, and abuse†that shows up in everybody’s list of pet budget reductions. If it were this easy, it would have been done long ago.
One person’s waste fraud and abuse are another person’s slush fund. Don’t forget that the crooks are also a constituency!
As always, I draw on experience in business – with all due respect to politics (and I might add, govt isn’t the only organization with political constituancies) – that you simply tell your managers to hit their numbers: its not an option; manage your unit. As I’ve often quipped – you are probably sick of hearing it – we have a term for those managers who tell us that “its impossibleâ€: ex-managers.
Drew, sometimes senior management DOES ask for stuff that’s impossible. Here’s an example that I witnessed personally, with names changed to protect the guilty and those that were correct.
A senior VP whom I’ll call Vince wanted to cut benefit costs. Our company was a large entertainment/retail/hospitality/etc company. (You’d recognize the company.) Some director (call her Diane) came up with a plan – slash the full-time workforce by hiring a legion or three of part-timers. This was presented at a large meeting which I was fortunate to attend – a few senior analysts were permitted to attend this large meeting with the SVP, a couple of JVPs and a bunch of directors and managers.
All of us from all the other various HR departments knew this couldn’t work. One of the managers (call him Michael) articulated a long list of reasons that it couldn’t work. I was a little surprised that Michael spoke up – he had been characterized as a complete suck up. That characterization was wrong; he simply had a great ability to disagree without offending anyone. (A skill I wish I could understand and master.)
Michael had a great many points, involving demographics, geography, fuel consumption, local economic conditions and a host of others. Clearly he had been considering the problem for some time. However SVP Vince waved all those aside with the observation, “People won’t care that it will cost them to work for us, they’ll do it for the prestige!” He signed off on the idea that day.
Well, the plan didn’t work. However the department that came up with the idea spent at least half their time for several years claiming that if their plan hadn’t been implemented we would have been in much worse shape. They argued that their plan had prevented the company from hiring a certain number of full-time workers over that time, despite the fact that part-timers had remained constant and full-time employment had increased significantly. Their argument was for the exact opposite of “jobs saved or created”. I wish I could remember the euphimism they used as it was completely non-sensical.
Anyway, the fact that the department in question spent a huge amount of their time justifying their plan instead of doing their actual work was bad enough. What was worse was that they had a lot of other departments supplying supplemental analysis to justify their work. It was utter bullshit and we all knew it. However that director had enough pull with that SVP to get us all to do her grunt work.
That time spent justifying a failed program was the most work I ever saw committed to one project in the time I worked for that company. TO be certain I knew of other projects that took more effort. But I was just a number cruncher in HR, so I had little to nothing to do with building new theme parks or cruise ships.
So I guess the lesson is that managers who say something can’t be done are ex-managers, but senior management who actually propose impossible plans are candidates for promotion. Big profit margins can and do cover up a lot of mistakes.
We need our elected officials to practice good policy and not politics.
steve, what one considers to be good policy depends on one’s politics.
“They’d need to scrap everything they’d done on it for the year and start over from scratch. He was reluctant. I told him that if I was wrong he didn’t need to pay me. He agreed. They were done in a week.”
Heh. First thing they tell you in an introductory programming class is, rather drive yourself nuts trying to rescue a program that just isn’t working is to scrap the whole damn thing and start over. Amazing how often that works.