Wallowing in a budget crisis
There is some good news this week. The private sector added 217,000 jobs in February. This means that some lucky individuals are now back to work, earning money, and paying taxes. As for planned layoffs, this month there will only be 50,000. This is a lower number than in previous months, indicating that businesses are recovering. Thank goodness for the private sector!
Meanwhile, our friends in Congress continue to wallow knee-deep in rhetoric as they again failed to pass a budget for this fiscal year. Another continuing resolution permits the government to operate for two more weeks to give our representatives time to create an acceptable budget. This budget should have been ready last August for the start of the fiscal year on October 1, 2010. We are well into the month of March and there is no hope in sight for any budget let alone a balanced budget. There are clowns on both sides of the aisle who refuse to recognize that money must be managed. Every family knows that they have to be careful with their finances. Most families have budgets and they stick to them! When a family over spends, they know that they are compromising financial independence. Those who are unemployed or on welfare have to be extra careful with their limited resources. Clearly they have a better understanding of cash flow than our highly paid and well fed elected officials.
Since our elected representatives are having trouble with the budget and the ever-growing deficit, I have a couple of simple ideas for them. First, read the GAO report released this week that identified government waste (http://www.gao.gov/new.items/d11318sp.pdf). By cutting duplicated or overlapping programs in the federal government, the government could save $200 billion over the next decade. The GAO report mentions that there are 82 different programs to improve teacher quality. Can't we just have one or two programs and get rid of the rest? We would be wiser to get rid of the underperforming teachers and provide the teachers who overachieve with better salaries. If you want to improve teacher quality, get rid of those teachers who cannot teach! Sounds simple to me. Lets fire a few teachers and get rid of 82 ineffective government programs.
Another item I found humorous in this report is that there are 56 programs designed to help Americans budget better. We only need one program to do this and it should be a requirement for all of our elected officials to participate in it. Since we do not have a national budget, I suggest we pass one continuing resolution to fund the government until the end of this fiscal year. Our representatives should cut spending by $25 billion per month for the next six months, even if that means shutting down entire departments. Both the Department of Education and the Department of Energy are utter and complete failures. We can shut them down right now with little impact. Lets flatten the many bureaucratic layers of unnecessary managerial overhead and do it quickly. Corporate America did this over the last 20 years and as a result became much more effective and profitable.
Business people know how to identify waste and eliminate it from their organization. Instead of calling a few CEOs for lunch with the president, let's get a small army of entrepreneurs to go through the government and slash waste and ineffective processes. For starters, let's cut the number of government employees by 10% immediately. Start with those at the top of the pay scale and move down until a tenth of the employees are gone. We should do this within the next 45 days. After this is complete, we can start analyzing each and every job to determine if it adds value to our nation. Next we should cut entire programs that no longer make sense. The secret is to cut programs which do not add value and to dismiss those who are employed but do not perform useful work.
Our congressmen can start by trimming the size of their office staff. They can close offices in smaller towns. Most of us never go to our Congressman's office anyway. We write them, fax them, and e-mail them. The only reason to visit your representative is to get a flag that was flown over the White House or the Congress or to have a picture taken with them.
In the next three or four months our elected representatives should review each government process and each budget line to determine where cuts can be made. We can start with foreign aid to dictators and subsidies to corporations and farmers. There is no point funding a future Mubarak or Qaddafi, instead let us fund the repayment of our debt. The 2012 budget year starts October 1. The budget for fiscal 2012 year should be finished in August and approved by the House, the Senate and the president. It should be a balanced budget even if we have to curtail services. A simple way to save money is to ensure that welfare, unemployment insurance, medical care, and education, just to name a few of the many government services, are provided only to U.S. citizens and legal residents. Illegal residents can and should be deported. Anchor babies can stay in the U.S. with legal relatives or they can leave with their families. As U.S. citizens they can come back by themselves when they wish.
The Democrats who abandoned the State of Wisconsin rather than participate in the legislative process have reneged on their responsibility to the voters. They should get no pay and no financial support for their offices or their staff until they return to do the people's business. If they don't return to work in one week, they should be suspended and subjected to recall. In future, if the Republicans or Democrats pull a stunt like this again, the party should be fined as well as the representatives. They have a job to do when they're in the majority and they have a job to do when they are the minority. We expect them to work every day and earn their wages just as we do.
As spring approaches we can look forward to warmer days and better weather. Spring is a time of renewal and growth. Our elected representatives should apply themselves to the issues facing our country with enthusiasm. They should cheer every budget cut and clap their hands for every useless program that is defunded. In fiscal 2012 our deficit should be attacked. It may be time to suspend interest payments on some of our obligations and possibly reduce the principal. The Obama administration wiped out the General Motors bondholders (including me) when they decided to bail out the auto industry. They stole the company from the bondholders and shareholders and redistributed it to the union while keeping some shares under government control. If they can do this to GM then they can do it to the debt we owe to China, Saudi Arabia and other countries that are constantly holding us hostage for oil or commercial goods.
The suspension of debt service and the forced reduction in debt obligations could cut our $14 trillion debt in half or even more. This has two benefits. The first is we have less money to repay. The second is that other nations will choose not to invest in the debt of the United States of America. As a result our politicians will be forced to balance the budget and only spend money that we have. Is this radical? Not as radical as you think. After all, the dumb economic moves made by our government have depreciated the value of the dollar. It is already down by 20% against some currencies. That means if a foreign debtor loaned us a dollar a few years ago, they will only get back 80 cents because of the devaluation of the dollar. They are already taking a haircut caused by inflation. Let's grab control of our debt and settle it for fifty cents on the dollar like the bankrupt nation we are. This is much more than the GM bondholders received and is an amount we might be able to repay. The alternative is to default on the entire debt, which would create a worldwide economic chaos.
© Gordon Smith - All Rights Reserved