Not Just Leadership, But Anti-Leadership

My column this week in Forbes is a response to yesterday's Presidential budget speech.  An excerpt:

President Obama is working from the assumption that the political leader who suggests painful but necessary budget cuts first, loses.   He had every opportunity to propose and pass a budget when he had Democratic majorities in Congress.   But Democrats feared that showing leadership on the hard budget choices they faced would hurt them in the November election, so they punted.

Even when Obama did produce a budget, it was the closest thing to a non-entity as could be imagined.   A budget that doubles government debt over 10 years and raises interest costs (under optimistic assumptions) to a trillion dollars a year would likely be controversial in any year, but is a non-starter given fresh memories of debt crises in Greece, Ireland and a number of other countries.

Of course there is an 800-lb gorilla in the room that no one wants to acknowledge:  Three programs —  Social Security, Medicare, and Medicaid — grow in the next 10 years under current rules to at least $2.7 trillion dollars a year.  Recognize that this figure excludes all the other so-called non-discretionary payments (unemployment, food stamps, etc.) as well as everything else the government does including the military and Obamacare. The 2021 spending on just those three programs is 25% higher than the total revenue of the federal government from all sources in 2011.

Later in the article, I suggest ten principles that should be the foundation of a budget deal.

  • http://harqueb.us Mike S

    Good article!

    I'd suggest adding to:

    Point 6: Military, close every single military base around the world, and bring those troops home. End all the "kinetic military actions" and wars. Bring 'em home. Put those troops on reserve, and let them get for-profit jobs. This'll double-whammy help by reducing expenses and increasing revenue.

    Point 8: In addition to eliminating subsidies, eliminate all foreign aid. We literally cannot afford it. It is insane to borrow hundreds of billions of dollars to give away to other nations.

  • Don

    Mike S: "It is insane to borrow hundreds of billions of dollars to give away to other nations."

    It's called cosigning, and we have to do for the same reason that you would have to cosign for your teenaged son to get a car... because HE WON"T PAY, and so somebody else has to. Difference being, you're probably smart enough not to cosign for your teenaged son, and even if you did, you got to do so voluntarily. Here's we're cosigning (with our kids' signatures at that) at the point of a gun.

  • Dan

    Mike S.,

    I'm all for cutting military expenses, but I'm scratching my head over your proposal. Right now those troops you propose putting on reserve have jobs - albeit government-paid jobs. There is a dearth of private jobs in this country right now. Adding hundreds of thousands of former soldiers to the unemployment rolls won't help reduce government spending.

    Also, I haven't read the Forbes post above, but when I hear the phrase "Obamacare," which is used as a pejorative for Obama's healthcare plan, I tend to tune out. If you're going to get on Obama's case for being partisan, don't be partisan yourself.

  • Evil Red Scandi

    Dan: You're following the Keynesian / socialist line of reasoning that assumes that the number of jobs in an economy doesn't respond to an increase in the pool of available labor. According to that thinking, there should have been severe unemployment and recession immediately following WWII (in fact, this was predicted by the Keynesians); instead, there was an economic boom period.

    There are many things holding the economy back right now, mainly economic uncertainty caused by the twin leviathans of the government and the Fed stumbling around through the business world like two hopelessly drunk 800-lb gorillas - it's really hard to plan to start a new business or expand an existing one when you have no freaking clue which way they're going to lurch next (or, worse, fall down and smash everything). Massively simplifying the tax code would help, as would eliminating most regulatory departments.

  • perlhaqr

    Dan: One would have to presume that the FedGov might peel back some of the regulatory schemas that make starting a new business so onerous, and let us open up the throttle on American creativity to make more jobs.

    And I don't think Warren is getting on Obama for being partisan, I think he's getting on him for being a complete spineless coward and idiot when it comes to leading us away from the edge of fiscal disaster.

  • Dr. T

    "Adding hundreds of thousands of former soldiers to the unemployment rolls won’t help reduce government spending."

    Sure it would, because unemployment compensation is much less that the salaries and benefits of soldiers plus the costs of maintaining bases.

  • http://www.freemktproject.com Pat

    Loved the last line of your article in Forbes!

  • http://www.archerproductions.com Nick Archer

    There is a language for translating words to symbols, cancelling out contradictions, and translating back to words. It's called symbolic logic, I took it as a Philosophy 101 course at Vanderbilt.

  • marco73

    There is no way that the budget issues can be corrected by raising taxes. That is just a sop to the president's leftist base. Spending needs to come down.
    The speech just demonstrates that the president is not serious about what he is saying. I think that he will be forced to continue the cuts, although he will be cynical and blame any pain on the other party. So maybe Obama will be reelected in 2012, but he will have a very Republican House and probably a majority Republican senate to contend with. President Obama will be forced to sign budgets in the next 2 years that Senator Obama would find repulsive. Welcome to the big chair, Barry.

  • Dan

    Dr.T,

    Perhaps you have a point about the cost of soldiers on unemployment. But for society, I think it's better that these soldiers have jobs, even government jobs. There's no way it's good for the country to have hundreds of thousands of former soldiers sitting around collecting unemployment and seething with discontent. I know it's a bit dramatic of an example, but remember Timothy McVeigh?

  • Mark

    A small change that could save SSA.

    Just make the minimum retirement age 63 rather than 62. Get people taking funding one less year, and those same people will work at their highest income level for one more year. I figure this would add 8% a year to SSA.

    It is shocking how many people retire at 62 in this country, and it has a lot to do with that SSA just defining that minimum retirement age.

  • Dan

    Mike S:

    I agree with you that we need to end the wars. It's time to get out of Afghanistan and Iraq. It's been almost 10 years for Afghanistan and 8 for Iraq, and both need to learn to get along without us, sink or swim. I agree with VP Biden that we only need to keep a small number of troops in the region, perhaps stationed on ships, who can respond quickly if needed to prevent terrorist acts from being formulated against the U.S. I also support continuing the drone program to hunt down militants on both sides of the Pakistan/Afghan border. The drone program is something Obama's team has emphasized, and although there have been bumps in the road, it seems to be working.

    Ending these wars would save hundreds of billions a year.

    Re. your comment on foreign aid: It's a common misconception that foreign aid constitutes a large portion of the U.S. budget. According to surveys, most Americans agree that cutting foreign aid could significantly trim the deficit. That's simply wrong. The U.S. foreign aid budget represents less than 1 percent of the total budget (Americans surveyed think it represents one-quarter of the total budget - a good example of how separated from reality many people tend to be).

  • carnahan

    Crucial distinction.. We are not Greece or Ireland. We issue our own fiat currency which they cannot.

  • perlhaqr

    Mark: 70 would be even better.