Free Markets, Free People


It is budget day in Washington DC

Today is the day President Obama’s budget is published.  It promises “cuts” and “savings”.  Before we venture too far in our analysis of the budget, let’s be clear on what those two words usually mean in Washington.  A “cut” in spending usually means that whoever is saying it is talking about not spending as much as originally planned.  And neither have a thing to do with debt reduction.   What they actually mean is they’re still going to spend buckets of money we don’t have – they’re just not going to spend “buckets and buckets” of it.

“Savings” is normally used in about the same way.  I call it wife math (my apologies to the ladies, but come on, admit it, you’ve used it).  Wife math announces, “I saw this scarf on sale for $75.  It is normally $100.  I "saved" $25.”   Of course what she really did was spend $75 that perhaps the family didn’t have or couldn’t afford.

So when you see or hear the words “cuts” and “savings” in discussions of the budget this year, please understand the context of the words when used in those discussions.  “Cuts” mean they don’t plan spending as much as they originally planned to spend.  In the case “cut”, not a single dollar has yet been spent, but they’re going to try to convince you that those “cuts” translate into “savings”.  For most of us “savings” means we have spent less money on necessities (by being frugal)  and the money we’ve saved (i.e. actual money in hand – not borrowed, but earned) can be applied to paying down something else– such as credit card debt or something.  Yeah, it’s real money we have in hand, not spending we “cut” from something we didn’t have the money for to begin with.

Not so with double talking Washington – “savings” in their jargon means not spending as much.  It is slightly different than “cut” in that “savings” are usually “realized” from a proposed program of spending while “cuts” usually come from an existing program of spending.   In the case of “savings” what is “saved” can’t be applied anywhere because we’re in a cycle of deficit spending.  It isn’t revenue they’re talking about that they can spend elsewhere to reduce the debt, it is borrowed money of which they don’t plan on borrowing as much.

This year alone we’re looking at a record deficit of 1.6 trillion dollars.  What they’re talking about “saving” over the next 10 years (1.1 trillion – or 110 billion a year – chicken feed in 3.x trillion dollar budgets) is simply proposed reductions on what they had planned to borrow.  Meanwhile the debt continues to climb.

Keep in mind that we’re looking a 4 years worth of budgets from the administration with over a trillion dollars in deficit spending.  What they’re trying to do is soften that with is 1.1 trillion in “cuts” and “savings” over 10 years that will help “reduce the deficit”.  I’m sure you’re able to do the math and realize total debt keeps climbing.  But also remember that “cuts” and “savings” are what are going to be trumpeted, not the truth:

An administration official, who spoke on condition of anonymity before the budget was released, said one-third of the $1.1 trillion in deficit reduction the administration is projecting over the next decade would come from additional revenue with the bulk of that reflecting the limitations on tax deductions by the wealthy.

So not only are they “cutting” money they don’t have or haven’t spent, they’re “saving” money that will trim the deficit (while the debt still goes up) by assuming revenue not in hand.

The point?  Well, when you see things like this from AP Economics Writer Martin Crutsinger …

“Two-thirds of [the budget's] savings [of $1.1 trillion over 10 years] would come from spending reductions including $400 billion in savings from a five year freeze on spending in many domestic government agencies. The other one-third of savings would come from tax increases. The biggest tax hike would come from a proposal to trim the deductions the wealthiest Americans can claim for charitable contributions, mortgage interest and state and local tax payments. The administration proposed this tax hike last year but it never advanced because of widespread congressional opposition."

… You’ll now know how to translate it. 

I mean where else would you find a line like “the other one-third of savings would come from tax increases” than in a Washington DC budget discussion?


Well join the club … and it will get worse.


Good news–GOP to “upend” spending process

One bit of advice I’ve been consistently throwing out there for the incoming GOP House majority is to act on those things that lead to less spending and smaller less costly government.  If they sit back and complain that even if they pass these things the Senate will vote it down or, if by chance, it gets past the Senate, President Obama will veto it, they’re gone in 2012.

So I was rather pleased to see that they intend to do exactly that in a POLITICO article today:

On some level, their plans may create a sense of organized chaos on the House floor — picture dozens of votes on dozens of federal program cuts and likely gridlock on spending bills. And don’t forget that a lot of these efforts will die with a Democratic-led Senate and a Democrat in the White House.

But the intent is to force debate as much as to actually legislate — and make Old Guard Republicans and Democrats uncomfortable with a new way of thinking about the size and scope of government.

For every action, however, there is an equal and opposite reaction.  And, per POLITICO, that opposite reaction is going to come from the “Old Guard” Republicans and Democrats who feel they’ve earned their power via seniority and don’t want to see it threatened or disrupted.

Insiders who have made a living under the old system are sure to push back, and many fear that Rep. John Boehner (R-Ohio) may not understand what he is doing.

“John should talk with the professional appropriators about the complexities, rather than talk off the top of his head. His plans would take a huge amount of the House’s time, but what would it accomplish?” said a dubious former House Republican member of the Appropriations Committee who spoke on condition of anonymity.

A former Democratic appropriator also was skeptical about describing prospective changes at that committee, which has a strong tradition of producing 12 bills every year from 12 subcommittees run by 12 very powerful Appropriations “cardinals.”

“On the practical side, it has to be nuts. Given the difficulty in passing the current bills, adding these changes would be a dream world. … There could be a revolt by members, who will want to get home and campaign.”

What is Boehner’s heresy? 

The plans include slicing and dicing appropriations bills into dozens of smaller, bite-size pieces — making it easier to kill or slash unpopular agencies. Other proposals include statutory spending caps, weekly votes on spending cuts and other reforms to ensure spending bills aren’t sneakily passed under special rules.

Yup … real change comes hard.  The “cardinals” want their power to be undiminished.  There’s a shock.  So let’s attempt to answer the question of the “dubious former House Republican member of the Appropriations Committee” shall we?

What would it accomplish?

Well, let’s see – one, if it took more time, it would be more time spent on bringing sanity to the appropriations process – a vital job of the House – and less time celebrating such things as the Smackover Arkansas junior league squash team’s championship or recognizing National Skunk Ranchers day.

Secondly, it would take a serious look at the appropriations process in detail.  Understandable, “bite-size pieces” that one can wrap their head around and vote down if the spending can’t be justified vs. huge omnibus bills so large and complex that it is difficult for anyone to understand what they’re voting for.

Third, as the paragraph states, doing it that way would “ensure spending bills aren’t sneakily passed under special rules.”  Or said another way – actual debate would be encouraged, not avoided.

And frankly, I like this idea as well – for the “detailed look” and context it would bring to the process:

Perhaps the most dramatic change is Boehner’s planned Appropriations Committee overhaul to require funding on a department-by-department basis, first reported by POLITICO on Wednesday. His proposal would subdivide the dozen current appropriations bills so that funding for each major federal agency would require a separate House vote.

Size and complexity are the enemy of good legislation and certainly sane appropriations.

“The [suggested] changes may be easier to follow and make more sense” than the existing practices, said Tom Schatz, president of Citizens Against Government Waste. “As long as members can make a case for or against a particular program, they will have the basis for objective decisions.”

Precisely. And an objective process in which to identify and eliminate waste, fraud, abuse, parts of agencies (redundant) or entire agencies (unproductive bureaucracies)if the case could be made (and it can – the question is whether it will). But this sort of process at least is a step in the right direction of bringing fiscal sanity back to the appropriations process if it can be introduced and followed.

Of course we’re talking politics and vested interests here so you never know.  And, of course, the GOP members must “buy into” the new process to make it work.  That, of course is a leadership problem, and it will be among Boehner’s first tests if he and his leadership group truly hope to change the way the House does business and enact measures that will indeed reduce spending and dial back government’s size and cost.