Tuesday, January 4, 2011

"Small government" doesn't mean much these days

The New York Times reports on a proposed budget cut in Congress:
The incoming Republican majority in the House is moving to make good on its promise to cut $100 billion from domestic spending this year, a goal eagerly backed by conservatives but one carrying substantial political and economic risks.

House Republican leaders are so far not specifying which programs would bear the brunt of budget cutting, only what would escape it: spending for the military, domestic security and veterans.
Let's do some math. The total government expenses for 2011 are currently budgeted at $3.7 trillion. A cut of $100 billion is a measly 2.7%. The total deficit for the year is about $1.1 trillion. A cut of $100 billion will only alleviate about 9% of that. We're not making much progress, are we? And that's even if the Republicans are successful.

Now let's look at where the Republicans intend to cut spending. Of the $3.7 trillion the government will spend this year, about $2.1 trillion of it will come from "mandatory programs," that is, Medicare, Medicaid and Social Security. If Republicans were serious about fiscal responsibility, they'd be adamant about reforming our spending on these programs. Let's look at this in a little more detail.

Social Security will cost us $730 billion this year (this figure will increase to $1.2 trillion by 2020); Social Security payroll taxes will only pull in $674 billion. That's a deficit of $56 billion. Social Security won't pay for itself, folks. Medicare will cost us $492 billion this year; Medicare payroll taxes will only pull in $192 billion. That's a deficit of $300 billion. If the Republicans succeed in cutting $100 billion from the federal budget, they will only have succeeded in making up for about a third of the Medicare deficit alone. The worst part about these two programs is that clearly the young are paying for the old. It is evident that whatever we pay in to these programs now will have long since evaporated by the time we are old enough to benefit from them, and all we can hope is that somehow the government can borrow enough money to support us.

So much for small government.

Now let's look at the rest of government expenses. Of the remaining $1.6 trillion not devoted to mandatory programs, $850 billion (over half) will be spent on security--both military and domestic. Another $250 billion will be spent on interest payments, i.e. money we owe because of our enormous debt. What remains is only $530 billion to be spent on domestic programs.

The Republicans refuse to cut security spending, and they can't touch Social Security or Medicare without major reforms. All that's left is domestic spending. Their proposed spending cut of $100 billion would be a 20% reduction in domestic spending. In other words, it would be crippling to most of these programs. Now how do you think this will go over politically?

Let's review. The Republicans in the House propose a budget cut that would
  1. cripple our domestic programs by cutting them by 20%,
  2. reduce our overall deficit spending by only 10%, and
  3. reduce our overall spending by a measly 2.7%,
all in the hopes of convincing "small-government" conservatives that they're fiscally responsible!

This is nothing more than a political charade. What we really need from our government is
  1. a massive reform of Medicare, which will only become a greater and greater expense as the Baby-boomer generation gets older,
  2. a sensible Social Security reform, preferably one that puts more personal responsibility in the hands of individuals, rather than forcing the young to pay for the old, and
  3. a sensible re-evaluation of our military and domestic security policies, which constitute huge expenses but provide very little in the way of generating real wealth.
If Republicans could address even just one of these points, I would praise them for having some sense of fiscal responsibility. As it is, "small government conservative" appears, for all practical purposes, to be a contradiction in terms.

No comments:

Post a Comment

I love to hear feedback!