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Downsizing government to reduce the deficit

Published May 29. 2010 09:00AM

We reached a new milestone this week as the national debt hit $13 trillion. If we divide the debt by the number of American families, each family owes $689,000. (See The average family income is only $62,500 annually.

Clearly the combination of debt and the rapidly accumulating deficit, with comparatively small family income indicates that the debt will take generations to repay.

While the debt continues to grow, the private sector continues to contract as more are added to the ranks of the unemployed. Public companies are reporting good profits this year. Let me understand the logic here. To become more efficient and profitable companies reduce staff. This increases profits, enabling companies to grow, which eventually creates more jobs. In prior recessions, those laid off did not have the benefit of 99 weeks of unemployment, so they started businesses or took other jobs.

This recession is different. I know several people who are unemployed, but are in no hurry to get back to work. If they take temporary jobs at low wages their unemployment insurance payments will be reduced or cut off. Even if they are making less than working, the costs of commuting, wear and tear on the vehicle and other work related expenses, exceed the benefit of taking a low level position. You have to be nuts to look for a job when the government is willing to pay you to take a two year vacation! Cut the benefit period back to 26 weeks for those who are doing nothing to improve their job prospects. Extend the benefit period for those in college education or retraining programs. The new message should be if you are not enhancing your skills, find a job!

The next issue is the inability of small businesses to get loans. Banks are not lending to the very businesses we need to generate job growth and boost our economy. The banks would love to lend. They have access to money. They are very profitable at the moment, but their hands are tied by the regulators who are overly focused on potential loan losses. For the nation to grow out of this recession we need small business to expand, hire the unemployed, which will result in hire tax revenue and lower expenditures. So far our government has decided to prolong the agony by restraining the banks. Well I have a solution for them. Lets' downsize the government and free the banks to lend sensibly.

Corporate America has improved efficiencies, paired staff, outsourced and off shored some operations to lower their costs. The government has just gone along on its merry way. We have not seen efficiency gains, nor have we seen cost reductions comparable to those in the private sector. Clearly it is time to downsize the federal government. That said, the current plan is to add 193,000 new federal government jobs over the next two years. ( Instead of hiring, I think it is time to vastly downsize the government without impacting programs and entitlements. (Changing these items will require legislation which will take several years to pass).

In December of 2008 there were approximately 2.8 million federal employees, paid $15.5 billion a month. Initial federal staff reduction should be in the range of 800,000, starting at the top and working down. Let's start by identifying the various levels of management in the government. In the private sector, we reduced the management layers dramatically as a first step in downsizing. In most large businesses, there are now only four or five management layers. This makes the organization more efficient and enables speedy communications up and down the command structure. The message to government is Collapse the structure, remove the bottlenecks!!!

One method to identify those who should be "de-hired" is to identify those who spend more than 50% of their time in meetings. We need active working management, not people who occupy chairs in meetings while they twitter, update their Facebook page or do email from their Iphones and Blackberries. If they have nothing to contribute, then it is time to issue them their pink slips. De-layering should continue until only the best and most efficient managers are left. My next target are those government employees who are employed, but do very little work. Give these people their walking papers. This is a longer process, but it is well worth the investment. Imagine the day when government employees work together in an effective and efficient manner.

Downsizing government is just the first step. We need to address the entitlements, social assistance programs and money foolishly wasted. I'm sure you have some ideas on this. Please email them to your senator and representative. Now is the time to put pressure on them to make government work for the people, not vice versa.

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© 2010 Gordon Smith - All Rights Reserved.

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