Budget Sanity or How to Bring the Deficit in Line

Congressman Gus Bilirakis offered the opportunity to look into the budget process at two workshops he sponsored on May 2.  I attended the workshop in Trinity along with 30 other curious individuals.  Tom Jackson from the Tampa Trib was also there and he wrote a column regarding the meeting. Below is a copy of the letter I wrote to Tom regarding the meeting.

I felt the workshop on the budget was an interesting exercise.  Certainly the options available are difficult, regardless of what response is selected.  There are no simple, clear cut solutions to the numerous problems our budgetary crises presents us with.  We must consider the full range of options and what those options mean to all of us.

I am inclined to take more of historical point of view than what many people have taken in regards to the on going debate.  These are some of my observations.

First and foremost, the overheated, overblown rhetoric needs to be stopped.Regardless of which side of the issue one favors, the “shock” comments need to be loudly and strongly denounced and condemned by everyone.  The individuals who make these comments strive to gain column inches and attention for themselves, and fail to advance the needed political dialog.

Everyone needs to sit down and reach mutually acceptable  agreements on how to proceed.  How we got here is immaterial, what we must do is come together, and universally agree on how we all move forward.  Whenever one speaks with someone active in the political realm, almost invariably they point a finger at the other guy.  To my mind, what is lacking in Washington today is open, honest and effective communications.  Our current leaders seemingly fail to understand the art of compromise.  From what I can see, we have an almost classic case of trench warfare raging in Congress.  In World War I, trench warfare led to a stalemate, not dissimilar to where we are today.  At the workshop, the people I was sitting with,  generally had their own  preconceived ideas and often they were not open to considering other options.  I used to jokingly tell my employees  “Let’s save an argument, do it my way the first time.”  That method did not work with my employees, and  it  does  not work today with the current dilemma.

In talking with the people at the table where I was seated, I asked when was the last  time we had a balanced budget?  The quick knee jerk answer was "never". When I said that we had balanced budgets in 1998, 1999, 2000 and 2001 the reaction was almost dismissive.  I suggest that the Clinton era balanced budgets are a blue print which can be used today.  Three facts to keep in mind looking at the changes from those balanced budgets to now, are as follows:

In $100 in 2000 has the same buying power as $133.21 does today. That is the impact and result of inflation over the past 12 years. According to the Urban Institute and the Brookings Institution, using constant dollars, we see the following for total federal receipts.  In 2000 total receipts where  2.310 trillion dollars and projected revenue for 2012 is 2.089 trillion dollars.  As a percentage of  GDP receipts in 2000 where 20.6% and in 2012 15.8%.  This is a decline of 221 billion dollars over the period and the percentage decline of GDP is 4.8%.  I have not seen that information presented in the general news media.

Continuing to use the same source for information of expenditures we see the following.  Again, please do remember that these figures are using constant dollars.  In 2000 total outlays where 2.040 trillion dollars, while 2012 total outlays are projected to be 3.212 trillion.  This is an increase in spending of 1.171 trillion over the period or a growth of 36%.  If you look at the percentages of GDP we see the following.  In 2000 outlays represented 18.2% and this outlays are projected to be 24.3% of GDP for an increase of 6.1% of GDP devoted to federal outlays.

Something that must be mentioned is should we revert to the balanced budgets of the Clinton era, the so called Bush tax cuts would expire.

One of the seemingly quick fixes that has been tossed out is the simple elimination of whole departments in the government.  One department that has mentioned frequently for elimination is the Education Department.  Implicitly the unspoken suggestion is that by doing this we will move a long way towards restoring budget sanity.  The Education Department currently administers a budget of $68.1 billion in discretionary appropriations including discretionary Pell Grant funding. Pell grants historically have formed the core of many college students financial package which allows them to gain the prized bachelor’s degree.  The maximum an individual may receive from a Pell grant is $5,500 per year, however the individual may receive less depending on any number of factors. With the seeming elimination of Pell Grants how will students and their family’s pay for  the ever increasing costs of a college education.  If one attends Florida State University and is a resident of Florida, the estimated undergraduate costs for this year are $19,694, while  a non-resident’s costs would be approximately $36,508.  

The workbook which we used at the meeting Wednesday night had as a one item a reduction of funding for the National Institutes of Health, with a value assigned to this line item of $43 billion over 10 years.  The amount of time we had available did limit the group’s ability to discuss items in anything more than a cursory fashion.  Our group was in favor of reducing the funding for NIH, the reason being that the research was already being done by private industry.  Why should we have the injection of the government into private industry, was the question asked?  Our group would not consider that NIH works in conjunction and funds private industry’s efforts in basic science research in areas such as cancer treatment and  Alzheimer’s disease.  It is this partnership that drives much of the innovation and advances we have seen in health care and preventative measures. I would suggest that the value of this research is incalculable.

During the course of the workshop I had a moment to speak with Phil Smith of the Concord Coalition, the moderator for the event.  We very briefly mentioned Defense spending.  Let me preface my comments by saying there are many amazing people who routinely do amazing things in the military.  Secondly, I am of the opinion that all too often we are unsure what role we expect the military to fulfill.  

Our youngest son was in the Marine Corp.  Prior to 9/11 he was home on leave. He and I got into a conversation about the future role of the Marine Corps. and the military as a whole.  He went on at length to repeat what was a common enlisted men’s barracks topic of conversation.  What is the place of the Marine Corp?   He was very quick to point out that a Marine division was less expensive to operate than an Army division.  He went to discuss what was the expected role of the Marines and the military in the world.  How was the military to be employed?  Often the role they where given was along the lines of nation building, not what they where trained for.    

I mentioned to Phil that one of the things that has occurred is “rank creep.”  The composition of the Officer Corp is established by Congress.  I believe that during the Viet Nam era we  had 19 active duty four star generals or admirals.  Today we have 38 active duty four stars.  A four star has a large support staff with them, this staff is very expensive.  To see this, all one needs to do is look at McDill which is the home of two different four star officers.  With the reduction in the overall size of the military, might we be not be able to shrink the number of four stars?

Often we hear the expression of shared sacrifice tossed about like last week’s newspaper.  The expression has a great sound to it,  but the problem arises where the rubber meets the road.  Today, Congressmen are paid $169,300 per year.  Perhaps Congress would be willing to accept the same pay they had in January of 2000 which was $141,300 per year, which is about a 16% increase over the past 12 years.   

$45,230 is the average annual mean wage of all Americans.

I did have a opportunity to speak with our host on Wednesday evening and mentioned to him how figures for outlays and revenues have been tilted over the past dozen years.  I mentioned that something that Congress should consider in with all of their cuts is cutting their own compensation.  Shall we say my suggestion was not well received?  I have yet to meet anyone that will say they are over paid.

In line with other reductions I would seriously suggest that Congress reduce the cost of the offices.  The Richmond Times Dispatch in an article dated Dec 23, 2010 written by Jim Nolan details the increase in office payroll expense of Eric Cantor.  The author states that Mr. Cantor payroll has increased 81% since 2001.  
One significant issue that I have not heard discussed when anyone has mentioned drastic reductions in total federal spending,  is possibility of a deflationary spiral.  One of the comments that is often tossed about is how this economic recovery has seen little increase in employment.  Two comments in regard to this.

Often during previous economic downturns there has been any number of projects funded by the federal government which served to stimulate local economies.  That has not been the case this time.  I am not opening the can of worms regarding the wisdom or lack of wisdom in taking this approach.  

However we have however seen a slow steady decrease in the unemployment rate.  When underemployment is considered then the estimate is 20.3% of the labor force is displaced.

Do recognize that there are some significant issues with how the unemployment rate is calculated. The employment population ratio, which is a different methodology in examining the state of the total working population of the country, shows steady decline from 2000 to date.  In April 2000 64.7% of the population was employed, today 58.4% are employed. 

Certainly looking at the employment picture using this as a frame of reference changes the picture.  

There are no quick easy fixes. If there were, we would have implemented them already.  Addressing the issues we all face will demand heavy lifting.  I hope and pray we are all up to the task, the price of failure is simply too high.