November 6, 2011

Obama: Spending Cuts & Program Cuts!

Our government should be making spending cuts now while Congress is debating program cuts. We have a huge federal budget. Intuitively every American knows there are billions of dollars, that  if cut, would not affect the various programs.

We should be making these cuts now.

There is a divide in America between those who want a smaller government and those who want a more active, and thus larger, government. The issue is what is governments role. This will dictate the size of government.and spending

The Preamble of the Constitution says:
"We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America."
There is little debate that the role of government includes assuring domestic peace and providing an army for defence against foreign tyranny. The quarrel between liberals and conservatives centers around how large should our military be and what to include in defining general welfare. The dispute is in the center, with the extremes being a small contingent of the American people.

The moderate liberal and conservative does not want government to take anymore of their income and distribute it to others in the form of welfare programs.  They also want to curtail borrowing. When liberals say we should help the needy, they are suggesting the help come from someone else. The middle class conservative is unwilling to have government take any additional wealth of theirs for the needy.

We need to go through the complete budgeting process outlined below.
  1. We must define what is meant by "general welfare" as referred to in the Constitution.
  2. We must decide whether the nation still has special obligations to our black citizens as a result of allowing slavery for more than 200 years and discrimination far beyond that.
  3. We must decide whether government has a role in protecting small business from big oligopolies that destroy free markets and jobs.
  4. We must review all departments, agencies and programs and cut back or eliminate any that are not warranted.
This will not be easy and there will be disagreement; however, it must be done. We do not have unlimited resources. Further, the answer to many of the issues will be subjective rather than objective. I cannot recall any department, agency or program created by government that was eliminated. There must be some; however, there are not many. Surely there is allot of fat to cut. Here is an outline to do that.

Simultaneous with the above process our current and next years budget needs to be reviewed and developed.Many opportunities to reduce expenses will be glaring and agreed on before clearly defining what we mean by general welfare. Thees cuts must be made immediately.

Over the last half century our budgeting process was to first determine what we wanted to do and then figure out where we get the money to do it. This is backwards and needs to Change and here is a good approach.
  1. Calculate projected revenues for the fiscal year
  2. Calculate projected expenditures for the fiscal year, including any pay-down of existing debt.
  3. Do one of the following
    • If expenditures exceed revenues, ascertain what expenditures to cut.
    • If revenues exceed expenditures, decide what to do with revenues.
Washington focuses on new laws and it is weak on implementation.  No company would exist very long if its senior executives created a plan but had no means of controlling and reporting on the implementation of the plan on a continuing basis.

Roger Wagoner, former CEO of GM, must be tempted to call all member of Congress to Detroit and have them explain how they got into this mess. No Congressman would be allowed to fly a government jet to the meeting.

There will be some reading this who will say "hogwash". We should just start cutting where we can without understanding what is trying to be accomplished. That would be an unfortunate approach; however, that is exactly what we are telling these 12 individuals to do.  The reults will be a mess.


2 comments:

  1. what is unfortunate is that you and most people think that revenues and spending need to match, and that surpluses are good. Both are wrong.

    Equating government spending to household debt is WRONG, WRONG, WRONG.

    Clearly the gov has mis-spent and misallocated resources, and has enormous waste and fraud. But we do NOT have to pay the "debt" down. The debt is simply the totality of US Gov spending - spending that is done with a printing press. There are trillions of dollars sitting in the bank accounts of large corporations and the wealthy. Since we are clearly unwilling to tax that money out of their hands the only other solution is to spend more money into the economy - except this time get it into the hands of the people who not only NEED it, but will SPEND it.

    We can easily add a 1 or 2 more TRILLION dollars to the deficit and debt and not only not harm anything, it will get our economy going.

    "MMT" is the description of how a fiat economy works, and is simply not understood. Hence we get people who think the US Gov debt is akin to your debt and my debt. It isn't. China doesn't fund us, and they won't be asking for their US dollars back. Pension funds won't either. But should they choose to withdraw the deposits made at the Treasury, we will simply print up some new greenbacks and hand them their money back.

    Japan has 225% debt to GDP, 5% unemployment, and an enormous (compared to us) personal savings rate. We should follow the same model. The BOJ prints money, spends it into the economy, and the people pay down their debts and save AND spend, and with new demand companies start to hire again to fill that demand.

    We have a printing press - we've been using it in all of the wrong ways - it's time to use it correctly. This idea that we need to cut spending is going to destroy an already fragile economy. The idea that surpluses - which is the Gov taxing more than it spends in - is enormously dangerous and exceptionally stupid. That money is gone.... let it be. Fix future spending, not past spending.

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  2. The troubled US economy! Or on the brink of financial collapse!

    Sorry, Anonymous, you are completely wrong. Japan is mired in a recession for over 20 yrs. US told Japan numerous times not to bail out the troubled corporations., but now we are doing exactly what we told them not to. Therefore you can expect US to suffer the same fate if not more, at least 20 yrs. of recession.

    Take Greece, Italy, Spain, Portugal, Ireland, the PIIGS Euro nations, their combined national debts may be 1/1000's of the US's, & yet they closed to bankruptcy, & we know now that Greece & Italy both lose their leaders in their respective governments and a new one is being organized in this very moment. We also know that Greece will be bankrupted, that's a certainty, not if but when.

    The US on the other hand, is 1000 times worst than Greece, we will be bankrupted the moment investors demand higher rates on the bonds that they normally financed (our debts). Once it reach double digits (Greece is over 16%), US will not be able to service its debt. Financial ruin with economy collapse is a certainty. Just Google this subject as much has been written.

    Th US spent way too much, with fraud, waste, corruption in all level of governments, it's not sustainable. Even if the people gave up all their incomes, it is still not enough. That's why we need a new government, just like Greece and Italy is doing to day. But people in power would not give up easily, just take a look at the Arab Spring Nations.

    Einstein said it best: "It is insanity doing the same thing over and over again and expectiong different outcomes!".
    pete

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