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Tag Archives: Government

When Spending Cuts Aren’t Really Spending Cuts (or, “They Think We’re Stupid”)

In the ongoing battle between the parties to negotiate a debt-limit increase, there has been much talk of spending cuts.  Republicans are strongly taking a stand on cutting spending but no new taxes.  Democrats are open to spending cuts but are looking for ways to increase revenue to increasing taxes or cutting tax breaks.  But people won’t be surprised to know that both sides are choosing not to be up front with we the people.

When we the people look at a budget, we base it on what we have coming in at the time.  We then decide where we will spend those funds.  We won’t get into the notion that if we were out of money and needed more, if we did as the government does sometimes and print our own, we’d be hauled off to jail rather quickly.  In general, most people don’t have the luxury of just going out and getting loan after loan while continuing to spend above their means.

Not so with the government.

I got a call from a good friend of mine who was watching a show on CNBC.  He said a guy was on talking about how spending cuts weren’t spending cuts and how he’d remembered hearing it from me months ago.  You see, the government doesn’t operate the way normal people do.  Matter of fact, the government doesn’t even operate like a good company does.  And here is where they pull the wool over our eyes.  Let me explain using an example.

When Joe Public is doing a budget, he bases it off of how much he has coming in, and how much he as going out.  If he has more going out than coming in, he has no choice but to cut spending.  If he decides that he must make a spending cut, typically its going to result in him spending an amount less than what he is spending now.  So, where he may be spending $1,000 per month now, a budget cut may result in spending $950 per month next year.  That is a budget cut.

Now, the government doesn’t do that.  The government uses a nice little trick called baseline budgeting.  The government has already planned ahead as to what spending increases will be.  For example, while the budget for program A is $1,000 for 2011, they have already planned that in 2012 it will be $1,100, for 2013 it will be $1,200, and so on (sidenote:  the government tends to project increases in terms of percentages.  I’m using real numbers so I don’t have to use a calculator.).  So when there is talk of a spending cut, it is not like Joe Public, who takes his spending below what he was spending before.  Instead the government says, “well, instead of spending $1,100 in 2012, we’ll spend $1,050, and in 2013 we’ll spend $1,100.”  As you can see, overall spending still goes up, just not as fast.

This is why complaints about spending cuts have to be taken with a grain of salt.  Politicians will make things seem like a program is going to die due to budget cuts, but that is making the assumption that the reduced spending increase won’t be enough.  They also assume (correctly) that the majority of the people have no idea of how they are pulling the wool over their eyes.  If there is to be a serious, authentic discussion about spending cuts, then lets see some serious, authentic reductions in actual spending!

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Clark Howard Nails It: The Country is “Sailing Up Denial” About Taxing Our Way Out of Debt

I happened to hear Clark Howard on the radio while driving back to the office from a business event.  For those that don’t know, Clark Howard (like Dave Ramsey) is a consumer guru known for giving out advice and tips to the masses via his radio and TV programs.  During his program today, he mentioned that the country as a whole was “sailing up denial” when it comes to solutions to fix the country’s long-term debt issues.  While I will still be more of a fan of the saying “denial is a river in Egypt,” Howard definitely nailed the thought process that currently occupies the minds of many Americans–that increasing taxes on the top earners, without making cuts to Social Security, Medicare, and Medicaid, is a viable option for debt reduction over the long term.

The fact that a poll was taken on this subject is quite humorous.  There are a couple of ideas that rule the hearts and minds of many Americans.  The first is that they wouldn’t support the reduction of government benefit programs, knowing they would be affected by the reductions.  Seems to be the simple law of self preservation to me.  The second is that people feel if a person is rich (or seems that way) then regardless of whether or not they actually paid into a benefit, they have money and can do without the government entitlements.  These thoughts reflect, as Howard also stated, that in America, we don’t have a notion of shared sacrifice on the issue.  “Don’t change MY stuff, just make the rich fund it.”  Tricky thing is, as Howard explained, you could tax the upper 1%-2% of income earners all the way to destitution, and the debt problem still wouldn’t be solved.  Further–and I thought this was spot on–if the solution used was more taxes with no benefits cuts, eventually there wouldn’t be enough money coming into the government to pay for benefits.  Before long, individuals would find themselves solely responsible for their own welfare and wellbeing, just like in the old days.  One can only imagine the outcry THAT would produce.

Here’s to hoping that Congress gets it right for a change and puts the sacrifice on everyone, not just a few people.

So Much for Transparency…

One of the pledges made by then-Senator Obama on the campaign trail was a new era of unprecedented transparency.  And in some ways, he has kept that promise.  But a recent article puts a dark mark on that record:

Caught between their boss’ anti-lobbyist rhetoric and the reality of governing, President Barack Obama’s aides often steer meetings with lobbyists to a complex just off the White House grounds — and several of the lobbyists involved say they believe the choice of venue is no accident.

It allows the Obama administration to keep these lobbyist meetings shielded from public view — and out of Secret Service logs kept on visitors to the White House and later released to the public.

Read more: Lobbyists: White House sends meetings off-site to hide them