 Perhaps you have heard that the so-called congressional "supercommittee" is charged with finding $1.2 trillion in deficit-reduction savings (over a decade, mind you) by the Friday after Thanksgiving. If they fail to do so, according to the recent debt-ceiling compromise, automatic across-the-board cuts will kick in.
It's very unlikely the "supercommittee" will achieve anything meaningful with respect to budget discipline. While there are many reasons for this, the biggest is the lack of presidential leadership.
President Obama has never demonstrated even a morsel of understanding about how far beyond its means the federal government is living. Consider: A president who touts $1.2 trillion in budget cuts over 10 years as some sort of major achievement thought nothing of perpetrating an $862 billion "stimulus" package just months after taking office. And when it didn't stimulate a thing in terms of economic growth, this same president came back and asked Congress for another spending extravaganza worth more than $400 billion.
There's your $1.2 trillion in savings, wiped out not in a single bound, but in two of them. Super, indeed.
In the meantime, Obama is calling on federal employees to suggest ideas for how to reduce spending. Two ideas that have received some attention include making the Social Security Administration's glossy print magazine an online-only offering, and letting federal agencies share tools instead of everyone buying their own.
There's nothing wrong with ideas like these, but there is a lot wrong with presidential leadership that dithers with such trivia while the nation is already beset with more than $14 trillion in debt and upwards of $60 trillion in unfunded entitlement mandates. The problem is big. The president is mired in the small. Debt exceeded GDP this year. The president is happy to propose pretend spending cuts that don't cut anything until the "out years," when we all know there would be no cuts at all.
The real tragedy of this refusal to take the problem seriously is that it is, in fact, a serious and difficult problem, and it calls for a serious approach.
The federal government is wrestling with two seemingly conflicting goals. On the one hand, it is spending far beyond its means, with annual deficits north of $1 trillion now and for the foreseeable future. It must spend significantly less, and must commence in doing so immediately. On the other hand, there can be no real solution to this problem without sustained, robust economic growth. It's not easy, but it's absolutely necessary, to solve both problems at the same time.
Those of a Keynesian stripe – and the Obama Administration is full of them – fret that you can't cut government spending while you're trying to achieve economic growth, because they think the former is the only thing that can bring about the latter. This leads them into a trap of logic in which more spending is always the answer. If the economy is bad, we have to spend to stimulate it. If the economy is good . . . why cut now? Just think of all the "investments" we can make!
That's how you end up with $14 trillion in debt, and nothing but much more of it on the horizon. It's also how you find yourself somehow trying to sell the notion that cuts, some day, which purport to shave tiny portions off future deficits, are any kind of answer.
The fact is that you do have to cut spending, now, even in a sick economy. The debt already incurred is so massive, current deficits are so huge, and pending entitlement obligations are so daunting, there is simply no other choice. But cutting spending is only half the equation. You must achieve robust, sustainable economic growth in order to have any hope of turning the nation's fiscal situation around. And since the government is in no position to spend its way into such growth, it has to let the private sector do it.
The action item for the federal government, therefore, is to remove the barriers it has created to achieving such growth. It must simplify the tax code to eliminate the many hours and dollars spent on mere compliance. It must cut the corporate tax to free up capital, especially with respect to repatriated profits from overseas operations. The tax code is a complicated mess, which is why my 9-9-9 plan is getting so much traction. It fixes the problem.
But it doesn't stop there. The federal government does a lot of other things to hamper economic growth. It needs to repeal Dodd-Frank. It needs to stop abuses like the National Labor Relations Board trying to intimidate Boeing into not expanding its plant in North Carolina. The president needs to stop trying to enact back-door legislative measures via the abuse of his regulatory powers.
There is plenty of wealth in this country, and there are plenty of things people want to buy. Corporations do have cash reserves, but they're not going to invest them in expanded production – which leads to employment opportunities – if they're uncertain about the nation's economic direction. Even with high unemployment, there are people earning money and they can spend it on things they need. But they won't spend much if their income is increasingly usurped by taxes and debt payments – whether that refers to their own debt or Uncle Sam's. And we can't forever ask the private sector to spend more and more of its money on the basic needs and health care of those who are not producing – not to mention a federal government that refuses to take spending discipline seriously – and wonder why there isn't capital left over to expand plants, produce goods and hire people.
Cut spending. (For real, not the Obama way.) Remove the barriers to growth. Simplify the tax code, which my 9-9-9 plan does. That's how you achieve these seemingly conflicting goals.
Of course, all of this requires an understanding of the problem, and the political will to actually solve it. And that will require new leadership, because we already know the current leader has neither. |
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