Since the 112th Congress convened there has been non stop talk about the Budget (both the one for the fiscal year we are in now that began in October and the one that there should be an outline passed this Spring for the 2012 fiscal year beginning in October 2011).
President Obama wants to freeze spending (except for Social Security, National Defense, and National Security) at current levels. In rough terms this would freeze in place an annual deficit of $1.5 Trillion. Even if the economy recovers and tax revenues increase deficits still might be $1 trillion plus annually. – Some plan!
The Republicans by contrast want to cut spending by $100 Billion in spending from the current budget outline. They are having a very rough time to even agree on $40 Billion in cuts (that makes it a long way to $100 B.) Republicans claim if their plan is adopted there would be overall deficit reduction of $2.5 Trillion by 2020. (I just love promises in the “out years”.) Given that the current federal debt is approximately $14.5 Trillion, even if the GOP plan were adopted (it won’t be) the federal debt would still be in the order of $20 Trillion by 2020.
The message of the 2010 election was stop the spending (i.e. outrage over nationalized health care and ineffective stimulus (pork barrel) spending.
Sidebar - what did the last Congress and the President do after the election? When passing an extension of the Bush era tax cuts (yes I favored that) they cut the Employee’s F I C A tax contribution by 2%. I guess the social security trust fund had a surplus. While the theory goes that the extra money in worker’s pockets would boost the economy. While that is true to some extent, I think it is more likely that much of the money is being saved (not altogether a bad thing.) Consumers still are very uncertain about the future of the economy. To create jobs, it might have been a better idea to cut the Employer’s share of F I C A.
All of this brings me to the current brouhaha over the eliminating the federal Essential Air Service Program (EAS). For reference EAS carries a $200 million annual price tag. In the overall scheme of the federal budget this is peanuts. You can argue the merits of the program till the cows come home (essentially that this is a worthwhile program that benefits rural areas and economic development) but the truth is economics will always dictate the allocation of resources and a subsidy dislocates resources. Certainly EAS is not an essential government service. A nice program yes, but there are many nice programs… if we are serious these niceties have to go!
If we can’t cut this program how will we ever cut any spending? At election everyone is a tax cutter and pontificates about cutting wasteful spending. Funny beyond W F A (Waste, Fraud, and Abuse) they never are very specific. But when it’s time to go to work and change Washington, we can’t seem to find cuts or change Washington.
If you believe our rhetoric that we are mortgaging the future, that we will become a second rate economic power, that the Chinese will own us, then we have to start taking some pain and now! If we can’t eliminate $200 mil how will we tackle Social Security Reform or the Farm Programs?
There will be pain but it won’t go away without strong medicine.