In his blog post today on CNN.com, Jack Cafferty discusses the increasingly dire state of federal and state finances. With tax revenues in free-fall, and demands for government services spiking, he correctly points out that something's gotta give. You have basically three options in this situation:1) Debt - put it all on the credit card (although we've just about maxed-out our credit card from the Bank of China);
2) Raise Taxes (always unpopular); or
3) Cut Government Spending and Services (also unpopular).
So what's a government to do? Here's my take, posted today:
It’s truly time to re-evaluate our priorities, and here are a few things I would do if I were Obama-for-a-Day:
1) Eliminate agriculture subsidies, which encourage overproduction and distort overseas food markets (destroying local production abroad, esp. in developing countries).
2) In accord with 1 above – Eliminate subsidies for corn-based ethanol. If we are to go down the road of renewable fuels, they cannot be based on food crops. Better to go the Brazilian way of switch grass or agricultural waste as feedstocks.
3) Increase gasoline taxes to $1 per gallon, and tilt the balance of transport spending away from ever-larger roads, and towards mass transit. I am thoroughly convinced that GM and Chrysler cannot compete in a world of $2 gasoline – the market will never buy the smaller, more fuel efficient vehicles that new owner Uncle Sam wants them to produce, until people have a reason to buy them. Tax gas to reduce environmental pollution, reduce our dependence on imported oil, and then shift transport spending from autos to mass transit, which will give people viable alternatives to driving. If you focus on nothing but automobiles for over 50 years, as we have done here, and you get nothing but more and more auto-induced sprawl and gridlock – how can you be surprised by that outcome?
4) We need to take a good, hard look at the entitlement programs which are sinking our budgets, in particular Social Security and Medicare/Medicaid. We’re going to need means testing for all three programs, and higher retirement ages for SS. It makes little sense to subsidize the wealthiest demographic (retirees) by taxing the poorer demographics.
5) Require the Federal Government to operate under a balanced budget except in times of military conflict, and even then require a two-thirds majority of the SENATE (not the hopeless, parochial House) to approve deficit spending. We are drowning in red ink, and we must begin living within our means.
And while we’re at it: let’s abolish congressional districts for individual states and go to a national, party-based proportional representation system. A Congress tied to individual states has demonstrated that it cannot be trusted with the power of the purse.
6) If we can’t get to a balanced budget by using the ideas above (and there’s no way these steps will be enough), then we’ll need across-the-board reductions in ALL government operations: tell each agency they need to lose their dead wood. As someone with a wife employed by Uncle Sam, let me assure you that 5% of federal staff could be eliminated without affecting services provided! The kind of dysfunction tolerated in government bureaucracies is astounding, and it’s time we created incentives to root out waste. No more free-riders, no more coddling of dead-wood by the nanny-state and employee unions.
Thanks for allowing the rant, Jack!
But these budgetary restrictions, particularly the fifth, are what has caused such an enormous crisis in California, particularly in the face of a recession that drives revenues down even further, creating a vicious cycle.
ReplyDeleteThe power of the federal government to provide a major counter-cyclical economic boost (or floor, if you prefer) rests in great deal on its power to deficit-spend. There may be creative ways to account for these expenditures while technically balancing the budget - taxes or fees that phase in years after they're accounted for, like some massive form of tax-increment financing - but even that requires actual deficit spending, or loans and bonds to be paid later.
I can't foresee a way to satisfy these needs without going into debt, which in your plan would require a state of arbitrary and perpetual conflict. I'm sure you don't want that, do you?
While I agree that deficit spending is useful for providing the counter-cyclical "jumpstart" to get the economy moving again, we haven't been operating in a "crisis" continually for the bulk of the last 30 years - quite the contrary, times have been mostly good, yet Congress STILL spends at deficit levels that would get us kicked out of the Euro Zone were the U.S. a member.
ReplyDeleteOne can always argue that there is a "crisis" of some sort. What I am suggesting is that Congress has proven it has absolutely no discipline w/r/t spending, and cannot be trusted to manage the governments finances in responsible manner. Perhaps we could add another out clause that allows the government to spend at a deficit in times of severe recession (with concrete definitions of severity and a super-majority required to change these out clauses).