Cutting Spending: Where to Begin

The debt ceiling battle on Capitol Hill appears to have led to an agreement. This is good, because the debate has been both frustrating and refreshing. It has been frustrating because it should not be this hard for responsible politiciansto do the right thing. It has been refreshing because the battle has separated the responsible from the politicians.

However, while the group of responsible debt fighters is being crystalized around the Tea Party Caucus, a new challenge is emerging: how to actually cut government spending.

Wait: A challenge? To cut spending? How hard can that be?

Harder than many people think, actually. We have to keep in mind that American politicians have virtually no experience in cutting spending. Until the Tea Party came around, the ability to cut spending was not part of a politician’s job description. On the contrary: since Thomas Jefferson doubled the federal budget, increasing spending has almost been a force of nature in American politics.

If spending cuts are done the right way they will revitalize our country, both economically and spiritually, in the same way that Reagan brought a new morning to America. However, if done the wrong way, spending cuts could harm the economy and cause an enormous political backlash.

The line between success and failure is thin, and it is defined only partly by economics. There is an ethical dimension to spending cuts that is often overlooked. Fortunately, the most politically viable plan for spending cuts actually contains an element of this ethical dimension. This plan, best known as cut-cap-balance, unifies some good basic ethics with moderately sound economics.

The ethical dimension in the plan is exhibited not in the (very modest) size of the proposed spending cuts, but in where those cuts would take place. The plan concentrates its reductions to “non-security discretionary” spending and to a limited range of mandatory programs.

This is the real strength of cut-cap-balance. Its cap on federal spending at 19.9 percent of GDP comes with genuine analytical problems (what actually counts as government spending?), but the idea to prioritize among spending programs is a sign of ethical responsibility. It is an acknowledgement of the fact that you cannot cut spending indiscriminately across the board, as suggested in the Connie Mack Penny Plan.

Some government spending is no doubt wasted on unproductive bureaucrats or a Wyoming Coast Guard. Most of it, however, goes to our neighbors in the form of Medicare, Social Security, Medicaid, housing subsidies, discounted school lunches, foodstamps, etc. The entitlement recipients have grown accustomed to the checks or subsidized services. Most of them are low-income families who have a hard time dealing with even a small cut in benefits.

In a truly free society, government is not involved in poverty relief. There are reforms that can get government out of welfare, but it will take time to gain political support for them, write and pass appropriate bills and put them to work. In the meantime, we need short-term spending cuts that do not harm those who have been lured into government dependency by irresponsible politicians.  Indiscriminate spending cuts constitute a default on promises to people who have little or no margin for such defaults.

Harsh fiscal realities can dictate spending defaults (or cuts) even if such defaults are unethical. Until we are ready for ethically acceptable reforms to end entitlements, we need to cut spending where the ethical ramifications are minimal. Some examples:

·        Non-defense research and development can easily be funded by the private sector – get the government out;

·        End all federal corporate welfare;

·        Close down the U.S. Department of Education – the states can easily pick up whatever slack they feel is left behind by ending, e.g., NCLB;

·        Transfer funding and regulatory authority over our highways to the states;

·        And stop sending federal Coast Guard funds to states like Wyoming (Oklahoma gets more coast guard money than Alaska).

This list exemplifies cuts that can be done now, with little or no ethical repercussions. While Congress implements these, it can get started on long-term reforms to end all federal entitlement programs. Since those programs are the primary cause of our debt, the elimination of those programs will protect us from deficit problems in the future.