The Big Lie on Deficit Reductions

So you woke up last Friday to the news that President Obama and the Congressional leaders had agreed to pursue the “most aggressive plan” for deficit reduction – a $4 Trillion whopper. Then you’re thinking, Well Mr. Obama and his Democrat colleagues increased the federal deficit by $4 Trillion in just two years, they damn well ought to reduce it by $4 Trillion. You’re starting to feel good about the economy and even about the President – possible even about the Congress.

But then you read the Wall Street Journal and learn that they really aren’t going to reduce the deficit at all. That’s right. This big talk about deficit reduction is really about slowing the growth of the deficit – not an actual reduction.

And then you learn that they aren’t talking about a $4 Trillion reduction over the next two years – the same amount of time that it took the Democrats to increase it by $4 Trillion – in fact, they are talking about $4 Trillion over 10 years. TEN YEARS. That’s $400 Billion a year. The total federal budget for fiscal year 2011 was $4.83 Trillion with a forecasted deficit of $1.27 Trillion for the year. A $400 Billion reduction would not even bring it close to the $2.9 Trillion budget in 2009 – the year before the massive and pointless spending by Mr. Obama and his Democrat colleagues.

But then you find out that we aren’t even really talking about a $400 Billion decrease for the next fiscal year. Rather, you discover that the $4 Trillion is backend loaded. That’s right, the vast majority of the reduction in spending occurs in the very last years of the ten-year plan.

When I was an executive at U S WEST (since absorbed, first by Qwest and then by CenturyLink) market units were created to address the growing competition in the telecommunications market. The new heads of the market units had varying skills and experience but they all had something in common – the five-year planning cycle. And they all responded to the five-year planning cycle with the same hockey stick projections. That means that in the first three years virtually no progress was made, in year four a break even was achieved and in the fifth year business took off like a rocket.

The problem was that in twenty years at U S WEST I never once saw a five-year cycle come to conclusion. At some point in the five-year cycle a change was made – new leaders, realignments of market segments, and on and on. The point is that everyone knew that there would never be final accountability because the plan would be abandoned before the end of the planning cycle.

The same is true with the President and the Congress. Increasing the planning cycle from five to ten years ensures that no sitting president will be held accountable because the life of a plan exceeds a president’s term – even with re-election. Increasing the planning cycle to ten years allows the participants to talk about larger numbers – make the problem and the solution more dramatic. And making the planning cycle ten years allows the participants to push the benefits (or the damage) out even further. But most of all it ensures that there will never be any accountability because of intervening changes and elections.

This isn’t rocket science. You don’t need economists, accountants and actuarials to understand that you cannot cure a deficit problem by continuing to spend more than you receive in taxes. You also cannot cure the problem by continuing to push the problem out in front of you indefinitely. Only a room full of professional politicians can claim victory by proposing a solution that will never reach fruition. It is that phenomena that defines the cause of the problem that this country now faces.

Fred Barnes in the Friday edition of the Wall Street Journal hit the nail on the head:

“In FDR’s time, a surge in spending by Washington was the cornerstone of New Deal effort to lift the country out of the Depression. But unemployment never dropped below 14% in the 1930s and rose to 19% by the end of the decade. ‘Now, gentlemen, we have tried spending,’ Henry Morgenthau, FDR’s Treasury secretary, confessed to House leaders in 1939. ‘We are spending more than we have ever spent before and it does not work.’”

And it doesn’t work any better in the 21^st Century. Government simply cannot spend its way out of a recession – particularly as severe of a recession as this one. Keynesian economic theory doesn’t work. It hasn’t ever worked – not here, not anywhere. And liberals routinely excuse its failures by claiming that we just didn’t spend enough. Even if we spent it all, it still wouldn’t be enough because it doesn’t work.

The solution simply lies not in raising the debt ceiling but rather in lowering the amount we spend. Here again are some things that can be done now to reduce the spending and for which we will recognize immediate benefit – not ten years down the road:

1. Congress should refuse to raise the debt ceiling and, instead, adopt a resolution giving first priority to the payment of interest on the existing debt.
2. Congress should amend Medicaid and the Emergency Medical Treatment and Active Labor (EMTALA) to exclude those illegally in the country.
3. Congress should amend all remaining welfare programs to exclude those illegally in the country.
4. Congress should remove subsidies to agricultural operations, oil and gas production, alternative energy production, and the myriad of other subsidies designed to pick the winners and losers in a competitive marketplace.
5. Congress should immediately repeal Obamacare and all of the mandates and taxes attendant to it.
6. Congress should raise the Social Security eligibility age by one year for those under 55, two years for those under 50, three years for those under 45, and four years for those under forty. Even at that point, the eligibility age will not have kept pace with the advancement in mortality rates in this country.
7. Congress should restrict current and future payments under Social Security to amounts that reflect earnings on actual employer/employee contributions at a rate comparable to the S&P 500 over the same time and amortized over the life expectancy of the recipient at the time of eligibility.
8. Congress should remove troops immediately from Iraq and Afghanistan – no more nation building – and limit active military engagements to incidents where the United States’safety and security are threatened and only until that threat is neutralized. While we can provide encouragement and supplies (military and civilian) for those who seek independence and democracy, we cannot fight their wars of independence.
9. Congress should eliminate the Department of Energy and its entire budget given that it has failed completely in its purpose – to provide energy independence for the country.
10. Congress should eliminate the Education Department and provide block grants to the states based on advancement under national testing programs. It too has failed in its mission given the continuing decline in educational achievement by our students vs. those in other advanced societies.
11. Congress should review and reduce financial participation in the United Nations and its various programs. The same can be said of the International Monetary Fund (IMF), the World Bank, and NATO. Our financial commitment should not exceed our proportional control.

Fundamental change is required to return to a healthy economy with robust job growth. Solutions that will not take effect for a decade are pointless.

Act now or hand in your resignations.