Wednesday, February 16, 2011

Balance the Budget with Non-Security Discretionary Cuts? No way!

All of Washington is buzzing about the release of competing budget plans to cut the deficit.  The whole thing is a bad joke.  Last year's budget deficit was over 1.4 trillion dollars.  If you would've told me that last year I would've thought that was a major problem.  However, now I realize that federal spending is restrained by inflation, not revenue.  Don't get me wrong, I look at the size of the budget deficit with angst, but it's because I view it as a symptom of an anemic economy, not necessarily as a problem in of itself.

Unfortunately, everyone in Washington thinks the budget deficit is the problem and are trying to eliminate it through spending cuts(this is in spite of the massive tax cuts passed late last year).  In his state of the union, President Obama promised to freeze "non-security discretionary spending" over the next five years.  In his latest budget proposal he went further and cut non-security discretionary spending.  I guess he thinks there is no waste to be found in the various defense budgets.

This is where we get to why this whole thing is joke.  Let's pretend for a moment that I actually care about the size of the federal deficit and want to reduce it.  So far, President Obama is concentrating entirely on non-security discretionary spending.  I pulled up the report from the 2010 public budget database, and crunched some numbers.  Check this out.
(click here if you don't see the image above)
Do you see that?  In 2010, non-security discretionary spending only accounted for 13.2% of all spending.  That's only $477 billion.  So even if you cut out all non-defense discretionary spending, the budget deficit would still be nearly a trillion dollars.

So what about the Republicans.  What about their plan?  The house republican plan cuts 100 billion dollars.  81 billion of it is from non-security discretionary and 19 billion from security discretionary.  Even though it's a baby step better, it's still laughable if your goal is cutting the budget deficit.  81% of the cuts comes from non-security discretionary spending, while 19% comes from the much larger security related discretionary spending category.

Both of these plans are such jokes and do very little to put a real dent in the budget deficit.  Even if both parties got real and started talking about cutting the defense budget's they'd still have a rough time trying to balance the budget.  See that big red blob in the chart?  That's Mandatory spending and it's approaching 2/3 of total federal spending.  Inside of mandatory spending are things like social security, unemployment insurance, food stamps, and many other programs.  These are all programs that exist and will continue to pay out even congress and the president pass neither a budget nor a continuing resolution to fund the government i.e. a government "shutdown".

A real plan to balance the budget would involve cuts to non-security discretionary spending, drastic cuts to defense spending, and painfully deep cuts(30% or more) to mandatory spending, and the most unthinkable thing: raising taxes (gasp!).  Of course, if they actually did all these things it would probably be disastrous to our economy.  One more reason why I think this budget deficit hysteria is a bad thing.  In the end, the budget deficit will be reduced in the same way that it's always been in the past:  An improving economy moving people off of the unemployment and food stamp lines and into jobs that turn them into tax payers.
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