Getting Serious About Cutting Spending

“Looks like there’s not a lot of options, kid.  Somebody’s gonna have to make the hard choice if we’re gonna get out of here alive.”

            —Morgan Freeman as Joe Matheson in RED

 

Just to recap, the national debt now stands at $16.4 TRILLION and climbing.  Last week’s “fiscal cliff” deal will add another $4 trillion, meaning it will top TWENTY TRILLION DOLLARS by the end of the Obama administration.  And the federal government currently borrows about 40 cents out of every dollar it spends, meaning it spends roughly 67% more than it takes in.

Now, against that backdrop we see that apparently the $632 billion in additional taxes built into last week’s debacle just isn’t enough for the Left; Nancy Pelosi and the Dems are now making noises about seeking an additional $1 trillion in new revenue (read: yet more taxes).

Where does this end?

Now I will agree that we are in serious need of some reform on the revenue side of the fiscal equation.  When the income tax was instituted in 1913, the Internal Revenue Code was just 400 pages long, roughly the length of a Harry Potter novel.  Today, that same body of law weighs in at a staggering 70,000 pages, and that’s exclusive of the thousands of court decisions and IRS opinion statements interpreting the law.  It’s no wonder that over half of Americans have to hire a tax professional in order to navigate the law and make some attempt at actually paying their taxes.  Moreover, one suspects the complexity of the tax code is a major reason the Treasury budget in 2011 was $532.3 billion.

That’s right kiddos: we spend over a half-trillion dollars a year on taking money from ourselves.

And this alone highlights the fact that the real issue isn’t revenue, it’s spending.  We’ve previously covered the fact that you can’t raise enough taxes to cover our spending.  There simply isn’t enough money to tax.  And yet the solution—in the interest of ensuring that “everyone pays their fair share,” and not making the middle class and the elderly bear the burden—is always more and more taxes (or more and more borrowing).

The District has for too long promised too much to too many, and far more than it actually had to give.  And what’s so perverse about this whole fiscal discussion is that the spending is not only the cause of the problem, it is now so entrenched as fait accompli that it actually becomes the justification for more taxes.  We see the same argument now coming from a number of corners on the debt ceiling debate.  They point out that the debt ceiling isn’t really about future borrowing, but about covering money already spent; you can’t argue about increasing the debt ceiling, they say, because that’s just paying off what’s already been done.  And so spins in a never-ending cycle of increasing spending, then throwing up the hands and saying we have to raise additional revenue (higher taxes/higher debt limit) because we already spent the money.

To be serious about addressing our fiscal problems, you must cut spending.  You must cut it drastically, and you must cut it now.  This is how you know nobody in the District (on either side of the aisle) is serious, because they simply never address this fundamental reality.  The best they do is speak in vague terms about “considering” spending cuts over time in the future, which really means at most reducing future spending increases.  That’s never going to get it done.

Any legitimate, adult consideration of the issue has to focus on the big ticket items:  Defense, HHS (Medicare), and Social Security.  These three alone cost $2.28 trillion in 2011, 59.7% of the total federal budget.  Add in another $532 billion for the IRS, and you account for three-quarters of all federal spending.  I submit there’s some room to maneuver here.

Let’s start with Defense.  I believe in peace through strength, and I understand that we have a legitimate interest in maintaining some global presence (or at least capability).  But come on.  Looking at the Defense Department listing linked in Wikipedia, and the DOD base roster, we have over 600 overseas military facilities in over 150 countries.  Pardon the unintentional pun, but that’s overkill.  I mean, do we really need a military presence (however small) in Nepal?  In Papua New Guinea?  In Chad?  Surely we can still project power and help our allies without stationing troops on every square inch of the planet—that’s why the Constitution gave us the U.S. Navy.

This massive global presence carries a massive price tag.  According to the Stockholm International Peace Research Institute (SIPRI), our current defense budget not only ranks first in the world, it comprises 41% of the entire planet’s military spending.  We spend five times as much as China, the next biggest military spender.  We spend ten times as much as Russia, the next biggest.  In fact, we spend about as much as the rest of the top 15 military spenders COMBINED, and many of the others on that list are our friends.  Let’s cut that budget by 40% by putting an end to the occupation of Afghanistan, Iraq, and Libya, closing the bases in Japan and Europe, and turn it back over to the rest of the world to defend themselves.  And just to put it in context, a 40% cut would still leave us spending $444 billion a year, which is really only ratcheting back to about 2005; we’d still be spending three times as much as China, and twice as much as China and Russia combined.

We can parallel that 40% cut in HHS, through serious rollbacks in Medicare and other unconstitutional “services.”  As with Defense, this cut isn’t as harsh as it sounds, as it reflects only a return to 2005 spending levels.  And if you reformed the Tax Code as I suggest, my guess is the Treasury budget could be cut in half (probably more); $266 billion a year is still more than insane.

Other big-ticket agencies that, frankly, it’s difficult to see what they do anyway, could take cuts of 50% to 67%, and for the most part would only be returning to the levels of the Bush 43 administration: Agriculture, Education, Energy, HUD (I would cut entirely), Labor, International Assistance, and the Office of Personnel Management.  One could make a strong argument for doing away with most of these agencies altogether.  I mean, what do they do, really?  The Department of Agriculture doesn’t grow anything (if anything it subsidizes farmers not to grow).  The Department of Education doesn’t educate anybody.  The Department of Energy mostly impedes the production of energy.  HUD doesn’t house anybody.  And so on.  So why do we pour hundreds of billions of dollars into these things year after year?

That leaves Social Security and the remaining “other” spending.  Social Security needs an overhaul, but it’s sticky because for all its problems you are talking about beneficiaries who spent a lifetime contributing into a system based on the promise that they’d get that money back.  We can’t renege on that.  Any reform would have to come over time, and it will require a younger generation accepting the difficult premise that they’re going to have to contribute in and NOT get anything back.  But surely the SSA can find 10% of waste it can trim.  As to the rest of the budget, I think a 20% haircut is a modest request.

These are big-ticket cuts on big-ticket items, and that’s the only way you’re going to get serious progress on correcting our financial situation.  All together, these proposed cuts would yield a budget of about $2.4 trillion—still a huge federal edifice, but a good start towards getting things back under control.

But more than a few in the District are going to have to own up to the problem like grownups, and I don’t see that happening any time soon.

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