The threats facing the American economy are represented in the state of federal budget; they are not caused by it. Such is the blessing and curse of living in a representative republic. The government is made up of the people and they carry with them to government service a reflection of our society’s values. Living beyond our means is deeply ingrained in American culture. Since the advent of the credit card the American family has been putting off until tomorrow what it cannot afford to pay today. Teaser rate mortgages, absurd Wall Street leveraging and rampant student loans only further reflect this trend. The federal government of course uses far more complex methods of living beyond its means: issuing bonds, manipulating currency values and leveraging our economic position in the world. To expect politicians to go to Washington and live by more responsible fiscal standards than they do at home is unrealistic. However, that being said, something must be done.
To rein in debt we must stop having the idiotic debate over higher or lower taxes; to co-opt a line from James Carville, “It’s the spending stupid.” Putting the federal budget back on stable footing will require cuts in all areas of spending, and redirecting the resulting surplus toward paying down the $9.3 trillion debt, not implementing new programs. No area of government spending can be ignored if this is to be achieved. Defense and entitlement programs are by far the two largest areas of federal spending and both will require intelligent restraint if the budget is to be put in balance.
It may be time to draw down our military presence in the world. We currently have bases in every corner of the globe; closing bases and bringing troops home must be an initial component of fiscal reform. Strategic locations must be maintained but unlimited engagements and permanent deployments must end. The military industrial complex must be eviscerated. I have no idea how to do this, but the unending stream of tax dollars that is redirected into defense sector must be cleansed of corruption and made more efficient.
No discussion of fiscal sustainability can be complete without discussing the impending avalanche of dependents that are about to hit the Social Security and Medicare programs. As long as these programs are thought of as an entitlement, which is to say that citizens are going to get them no matter what, no meaningful changes can be brought about. We need to make people understand that if sizeable changes are not brought about then these programs will not exist when today’s workers move into retirement. I believe that a combination of a higher retirement age, sending benefits to recipients in a progressive fashion, giving workers who can afford it the option of private accounts, raising the cap on the amount of income that is subject to social security taxes and freezing borrowing from the so-called trust fund all must be employed if we are to ensure solvency in the system.
A broad reform that could bring greater accountability to all government programs is doing away with base line budgeting. This practice leads to unnecessary and wasteful spending. Base line budgeting is when the new fiscal year’s budget assumes last year’s spending is static and then adds to it for new programs. The effect is that as one fiscal year draws to a close, departments have an incentive to empty their coffers, lest they be docked the remaining money in the next year because it is deemed unnecessary. This is a dangerous practice that estimates say cost the taxpayers billions of dollars each year. A better system is a regular analysis of programs to determine their value and adjusting funding accordingly. This new system would encourage bureaucrats to make their programs as worthwhile as possible, not simply spend all their money to guarantee future funding.
There are many combinations of reforms that can bring greater accountability, integrity and efficiency to government spending, I only hope that we try some of them before it is too late.