"Washington - A Wasteland"

Sydney M. Williams

Thought of the Day

“Washington – A Wasteland”

July 21, 2011

The recommendation from the Gang of Six that government immediately cut $500 billion in spending raises questions. What do they mean by “immediate” and what programs would be taken to the woodshed? If immediate means reducing the 2012 budget (the fiscal year begins October 1 and the budget is expected to be in the $3.7 trillion range,) then $500 billion (13.5%) is ambitious, though far from unique. In Canada in 1995, Finance Minister Paul Martin reduced spending by 20%. Debt had been 60% of GDP and deficits 8% of GDP. By 1998 debt levels had dropped and deficits were 3% of GDP. Within two years deficits had been eliminated. And this was a liberal administration, led by Jean Cretien who became Prime Minister in 1993!

Critics of Mr. Martin claimed that the economy bailed out Canada, not budget cuts. That may be true, but the steps Paul Martin took made recovery more likely. It is a fact that should not be lost on the Administration, though I suspect it will. A President who decides in the midst of a credit/debt crisis, overseeing entitlements that are already hundreds of billions of dollars in arrears, to introduce another entitlement – Obamacare – is not a person driven by devotion to fiscal prudence.

Cuts in government spending alone, of course, will only aggravate the economic downturn, thereby hurting deficits. What government policy needs to do is spur economic growth by the private sector, which is why tax reform is critical to any solution. Nevertheless, waste runs rampant throughout the government’s bloated bureaucracy. For example, according to a report from Senator Tom Coburn (“Wastebook 2010”,) video games (to pick on an industry that my son Edward follows, and Bill Lennan of our firm follows) last year benefitted from four government grants totaling $3,742,530, including $137,530 to a Dartmouth professor to create a “recession-themed” video game entitled “Layoff.” The National Institute for Health (NIH) was given $800,000 in stimulus funds to study the impact of a “genital-washing program” on men in South Africa – certainly a critical study! In another study, Washington spent $2.6 million in 2009 training Chinese prostitutes to drink more responsibly when on the job. Perhaps, the Chinese are studying the cocaine habits of American hookers? There are literally thousands of such programs all employing thousands of people; however, it begs credibility to believe that those funds could not be put to more productive uses.

The Heritage Foundation reported that in 2008, the federal government paid at least $72 billion in improper payments in 2008. That same year $92 billion was spent on corporate welfare (excluding TARP) versus $71 billion for homeland security. In an article in the New York Times yesterday, Steve Lohr reported that the federal government spends $80 billion a year on technology operating more than 2000 sites, of which they plan on closing 800, saving “billions of dollars a year.”

Amidst all this waste, “Chainsaw” Al Dunlap would have loved to be Washington’s CEO. He would have looked around and beamed. But then, he felt a responsibility to his shareholders. Mr. Obama and those in Congress are nominally responsible to voters, but in reality are accountable to a small number of lobbyists and fund raisers.

It was curious and ironic to listen to President Obama praise the Gang of Six and suggest their conclusions largely agreed with his. Keep in mind that their recommendations mirror those from Mr. Obama’s own deficit commission – recommendations that Mr. Obama ignored in December, and never incorporated into his own 2012 budget message last February. In June, President Obama, in response to growing concerns over the nation’s debt, appointed a five-member Commission to Cut Government Waste to be headed by Vice President Joe Biden. That commission replaced a three-member Commission that most of us never heard of. Mr. Obama has been very adept at appointing study groups, as a means of responding to public demands, but he has been even more adroit at praising their recommendations while ignoring them.

Cutting waste should be easy to do and should yield significant budget reductions, but ultimately the best way out of the crisis is to allow the economy to expand, while keeping increases in government spending to a rate below GDP growth. The best way to encourage the economy to expand is to instill confidence in the private sector, to encourage free trade, to provide assurance that rules and regulations will be fair and that tax policy will encourage, not inhibit, growth. But, I suspect that an Administration that is more interested in expanding their vision of “progressive” socialism, than in committing to pro-growth, entrepreneurial capitalism, is not one that will oversee rapid economic growth.

As tempting as it is to place all blame for our debt problems on the President, responsibility is far more widespread and lies with Congressmen and women from both parties. It also lies with businesses and lobbyists who spend millions protecting their own domains. Congressmen, eager for even more money, take their cash and vote for more pork. An important reason that Washington has become such a Mecca for waste is that lawmakers focus more on earmarks than on performing oversight. It’s where the money is. Quid pro quo has become a way of life on the Beltway. Money and politics are inextricably linked. No one lobbies to end a government program, only to initiate a new one or extend an existing one. Washington may not be T.S. Eliot’s Wasteland, but it is a wasteland nevertheless.