Saturday, February 05, 2011

Trimming the fat from the Federal budget

Hal Gershowitz and Stephen Porter in an important article, “Obama to Debt and Deficit Reduction Commission: So Long, It’s Been Good To Know You,” suggest several debt and deficit reducing measures of their own.




Gershowitz and Porter observe that in his State of the Union address “As an answer to the budget crisis, the President’s call for a freeze in spending was less than weak; it amounts to little more than camouflage to mislead the electorate into believing that his Administration is serious about controlling spending.”




The President and the Congress need to begin to address the debt and the deficit now.


However, it appears that it will be up to Congress, because the President, according to Gershowitz and Porter, “…(C)learly signaled (in his SOTU address) that reducing spending will not be part of his agenda (freezing costs isn’t reducing spending) nor will his agenda include very much of the Debt Reduction Commission’s recommendations regarding tax reform…quite the contrary…


The authors also note that the President is ignoring his Debt Reduction Commission’s key recommendation which included “… (A) simplification of the tax code, reductions in tax rates for all tax payers, treating capital gains and dividend income as ordinary income, and the elimination of itemized deductions and many sacred-cow subsidies, credits and other corporate tax incentives … The … Commission also recommended establishing firm ratios of allowable Debt to GDP and Taxes to GDP, a sensible way of keeping America from spending and taxing itself into European-type economic extremis.  Not a word from the President, other than a sentence about lowering tax rates for business, on any of these key recommendations, all of which would be anathema to his far left base.”





The authors of the article cited above state, “… (F)uture Social Security benefits and Medicare funding will have to be addressed.  Medicare premiums will have to be substantially increased or Medicare benefits will have to be substantially reduced.” We have kicked this can down far too long. It is time to cut the benefits and increase the premiums and come up with private-based retirement alternatives for younger people.




Gershowitz and Porter wrote, “Perhaps it’s time to dust off old zero-based budgeting plans and reconsider a realistic, but modified approach to zero-based budgeting.  Under a zero-based budgeting regime (quite common in the private sector) every agency and department would have to build its budget from a zero base each year, eliminating (or reducing) every unproductive, inefficient or duplicative expenditure.  A government zero-based budgeting process would, admittedly, be very time consuming, labor intensive and cumbersome.  However, a modified zero-based budgeting process just might work.  Under a modified zero-based budget plan, managers would be charged with the responsibility of on-going evaluation of their agency or department’s productivity and identifying those operations that can be reduced or eliminated. Perhaps every three years or five years, every agency’s budget would be adjusted consistent with these rolling assessments of productivity.”

Zero-Based Budgeting is a wise idea. I wrote about this earlier this year in an article, “How about ‘taxing’ government? Where’s the Budget?


  1. Rand Paul has proposed $500 billion in cuts. Even this won't be enough to balance the budget, but the proposal of Paul Ryan of $58 billion in cuts is really a drop in bucket. Even the Republicans, for the most part, are not really serious about reducing the deficit.

  2. Matt -

    The GOP does not seem to be serious about getting the deficit/debt under control do they? I have very disappointed that they are not doing more. Sen Paul is right ...

  3. Matt C9:30 AM

    Why don't you show an accurate piechart of the federal budget, like the official one from the Office of Management of Budget data (OMB)? National Defense is only 20~% according to official government source. Why such a bias? Click on the popup to view an interactive chart of the 2012 proposed budget.