Tag: budget cuts

What Do the Subsidy Recipients Think about Cutting Subsidies?

Ever since President Trump and budget director Mick Mulvaney released a proposed federal budget that includes cuts in some programs, the Washington Post has been full of articles and letters about current and former officials and program beneficiaries who don’t want their budgets cut. Not exactly breaking news, you’d think. And not exactly a balanced discussion of pros and cons, costs and benefits. Consider just today’s examples:

[O]ver 100,000 former Fulbright scholars, among them several members of Congress, are being asked to lobby for not only full funding but also a small increase.

As a former Federal Aviation Administration senior executive with more than 30 years of experience in air traffic control, I believe it is a very big mistake to privatize such an important government function. 

On Thursday, all seven former Senate-confirmed heads of the Energy Department’s renewables office — including three former Republican administration officials – told Congress and the Trump administration that the deep budget cut proposed for that office would cripple its ability to function.

This is nothing new. Every time a president proposes to cut anything in the $4 trillion federal budget — up from $1.8 trillion in Bill Clinton’s last budget — reporters race to find “victims.” And of course no one wants to lose his or her job or subsidy, so there are plenty of people ready to defend the value of each and every government check. As I wrote at the Britannica Blog in 2011, when one very small program was being vigorously defended:

Every government program is “well worth the money” to its beneficiaries. And the beneficiaries are typically the ones who lobby to create, expand, and protect it. When a program is threatened with cuts, newspapers go out and ask the people “who will be most affected” by the possible cut. They interview farmers about whether farm programs should be cut, library patrons about library cutbacks, train riders about rail subsidy cuts. And guess what: all the beneficiaries oppose cuts to the programs that benefit them. You could write those stories without going out in the August heat to do the actual interviews.

Economists call this the problem of concentrated benefits and diffuse costs. The benefits of any government program — Medicare, teachers’ pensions, a new highway, a tariff — are concentrated on a relatively small number of people. But the costs are diffused over millions of consumers or taxpayers. So the beneficiaries, who stand to gain a great deal from a new program or lose a great deal from the elimination of a program, have a strong incentive to monitor the news, write their legislator, make political contributions, attend town halls, and otherwise work to protect the program. But each taxpayer, who pays little for each program, has much less incentive to get involved in the political process or even to vote.

A $4 trillion annual budget is about $12,500 for every man, woman, and child in the United States. If the budget could be cut by, say, $1 trillion — taking it back to the 2008 level — how much good could that money do in the hands of families and businesses? How many jobs could be created? How many families could afford a new car, a better school, a down payment on a home? Reporters should ask those questions when they ask subsidy recipients, How do you feel about losing your subsidy?

Slashing the Budget?

I’ve written before about the propensity of journalists to declare modest budget cuts—or reductions in the rate of growth of government spending—in apocalyptic terms such as “slashing” and “draconian.” I was thus amused by this line in a Washington Post editorial today:

Mr. Hogan is slashing those payments by half, which will mean cuts approaching 1 percent to the school budgets of both Montgomery and Prince George’s counties.

The editorial is generally sympathetic to budget cuts proposed by the new governor of Maryland, and of course the “extra funding from Annapolis mainly to cover higher teacher salaries” may actually be subject to larger cuts. Still, when the impact on the county school budget is “approaching 1 percent,” I’d think “slashing” is, well, overkill.

Still Looking for the Anti-Tea Party

Covering the budget fight and President Obama’s tepid and misleading budget proposal, NPR’s Scott Horsley reported this morning on opposition from the left:

We saw sort of the counterweight to the Tea Party on the right yesterday … protesting  outside the White House.

Big rally against budget constraints, eh? Like the Tea Party rallies such as this one?

Tea Party rally

Well, not exactly like the Tea Party rallies. According to various news stories, the rally was supported by numerous groups, including the AFL-CIO, MoveOn.org, the National Organization for Women, Progressive Change Campaign Committee, Democracy for America, and National Committee to Preserve Social Security and Medicare. Speakers included Sen. Bernie Sanders, liberal activist (and brother of former presidential candidate Howard Dean) Jim Dean, and at least two members of Congress. 

And here’s how the AP reported the results:

Liberal lawmakers from Congress and a coalition of like-minded groups rallied outside the White House on Tuesday, voicing frustration at the Democratic president they say has let them down by proposing cuts to Medicare and Social Security.

“If they vote to cut Social Security, they may not be returning to Washington,” Sanders told about 100 people who gathered with signs that read “No Chained CPI” and “We earned our Social Security.”

I’m not sure the president should have too much confidence in this “counterweight to the Tea Party.”

So You Want to Cut Spending

Back in 2011 there was a titanic fight between President Obama and the newly energized House Republicans over the federal budget. The ballyhooed result, which averted the frightening specter of a “government shutdown,” was “the largest annual spending cut in our history,” in the words of President Obama and the national media. I raised some doubts about it at the time, noting that it certainly wasn’t the largest budget cut in history and then pointing to a National Journal story suggesting that the cuts weren’t really there.

Now, in the Sunday Washington Post, David Fahrenthold follows up: What happened to the much-touted $38 billion in cuts (out of a $3,800 billion budget)? Oops. Not so much: 

Nearly two years later, however, these landmark budget cuts have fallen far short of their promises.

In some areas, they did bring significant cutbacks in federal spending. Grants for clean water dried up. Cities got less money for affordable housing.

But the bill also turned out to be an epic kind of Washington illusion. It was stuffed with gimmicks that made the cuts seem far bigger — and the politicians far bolder — than they actually were.

In the real world, in fact, many of their “cuts” cut nothing at all. The Transportation Department got credit for “cutting” a $280 million tunnel that had been canceled six months earlier. It also “cut” a $375,000 road project that had been created by a legislative typo, on a road that did not exist.

At the Census Bureau, officials got credit for a whopping $6 billion cut, simply for obeying the calendar. They promised not to hold the expensive 2010 census again in 2011.

Today, an examination of 12 of the largest cuts shows that, thanks in part to these gimmicks, federal agencies absorbed $23 billion in reductions without losing a single employee.

Read it all. It’s just an amazing investigation into what happens in the bureaucracy when Congress announces it’s cut the budget, and the reporters move on.

Which is why I wrote last week that if you really want to cut spending, you should shut down agencies and programs. Then you have some hope that the spending will actually stop.

WP: ‘Many 2011 Federal Budget Cuts Had Little Real-World Effect’

Today’s Washington Post has an excellent article by David A. Fahrenthold on the gimmicks used by both Democrats and Republicans in the April 2011 budget deal to create phantom ‘cuts’ in federal spending:

In the real world, in fact, many of their “cuts” cut nothing at all. The Transportation Department got credit for “cutting” a $280 million tunnel that had been canceled six months earlier. It also “cut” a $375,000 road project that had been created by a legislative typo, on a road that did not exist.

At the Census Bureau, officials got credit for a whopping $6 billion cut, simply for obeying the calendar. They promised not to hold the expensive 2010 census again in 2011.

Today, an examination of 12 of the largest cuts shows that, thanks in part to these gimmicks, federal agencies absorbed $23 billion in reductions without losing a single employee…

Congress, for instance, “cut” $14.6 million from its own budget to build the Capitol Visitor Center. That changed nothing. The center was already built…

At the Pentagon, for instance, the April 2011 bill required a whopping $6.2 billion cut to military construction. But through a combination of congressionally installed gimmicks and military ingenuity, the Pentagon escaped nearly unscathed…Total real-world savings: $25.2 million. Just 0.4 percent of the total that Congress counted as “cut” on paper.

Not all the bill’s cuts were illusory, however. The Post’s analysis found five large cuts that turned out to be very real.

None of them actually caused an agency in Washington to shed federal personnel. Instead, they reduced the money that passed through those agencies to state and local projects…

Now Washington is facing the “sequester,” which would cut $85 billion starting March 1. The administration has sought to persuade Republicans to cancel it or replace it with a package of spending cuts and tax increases.

That, at times, has made for an awkward argument. Two years later, it appears that some of the budget cuts from April 2011 turned out to be less painful than originally believed. But the White House says that can’t happen again.

This time, it says, the cuts would be very real and very painful.

“Reductions that were possible in 2011 are not possible in 2013,” said [Robert] Gordon, of the Office of Management and Budget. “The resources that could be cut, they’ve been cut. The low-hanging fruit is gone.”

Of course.

Paul Ryan’s Spending Plan

House Budget Committee chairman Paul Ryan (R-WI) has introduced his annual budget blueprint. The plan will likely pass the House but won’t become law this year.

However, the plan signals the direction that House Republicans want to go in budget battles with the Democrats this year, and it also shows the likely thrust of policy under a possible Republican president next year.

Here are a few highlights:

  • Total federal outlays would fall from $3,624 billion this year to $3,530 billion next year. Those figures are $24 billion less than under President Obama’s budget this year and $187 billion next year.
  • Of the $187 billion savings compared to Obama next year, $38 billion would come from discretionary programs, $146 billion from so-called entitlements, and $3 billion from interest costs.
  • Ryan’s proposed spending in 2022 of $4,888 billion would be a modest 13 percent less than Obama’s proposed spending that year. That’s a useful statistic to remember when you read the inevitable stories about how Ryan would slash, burn, and pillage the government safety net.
  • Indeed, Ryan’s proposed increase in federal spending from $3,624 billion this year to $4,888 by 2022 represents fairly robust annual average growth of three percent.
  • As a share of GDP, the Ryan budget would trim outlays from 23.4 percent this year to 19.8 percent by 2022. That reduction would simply get spending back to around the normal historical level. And note that spending would still be higher than the 18.2 percent achieved in the last two years under President Clinton.
  • Ryan would repeal the 2010 health care law and reform Medicare by transitioning to a consumer-choice model. Those changes are expected to reduce annual outlays in 2022 by $258 billion.
  • Perhaps a more important proposal is the block-granting of Medicaid and other entitlement programs such as food stamps. Those Ryan reforms would save $313 billion annually by 2022.
  • Converting entitlements to block grants would allow the federal government to clamp down on federal costs while giving the states strong incentives to improve program efficiency.
  • The Ryan budget does not propose Social Security reform. Paul Ryan favors major reforms to this program, but he apparently thinks that reforming health care and other entitlements is a higher priority right now.
  • Aside from a few obvious targets—such as high-speed rail and the 2010 health care law—the Ryan budget shies away from abolishing specific programs, agencies, and departments.
  • Too often the Ryan budget proposes to fix broken programs when the proper reform would be elimination. Ryan proposes to “consolidate” federal job-training programs, for example, but these programs have a history of failure over the last five decades. Furthermore, job training is not a proper federal role within the U.S. constitutional structure.

In sum, Ryan’s proposals would make modest reforms to the giant federal welfare state. By Washington standards the Ryan plan is bold, and Paul Ryan certainly deserves his reputation as the sharpest and most energetic budget reformer on Capitol Hill.

However, there is too much happy talk in the Ryan plan about how failed big-government programs can be made to work better, and not enough focus on terminating activities that are properly state, local, and private in nature.

P.S. I think my budget-cutting plan is a better one.

Civilian Personnel: The Missing Piece in the Pentagon’s Budget Puzzle

While most news stories have accurately characterized the Obama administration’s proposed military spending cuts as “modest,” the Pentagon is planning significant reductions in the number of active-duty troops in the Army and Marine Corps. Both forces will be larger than they were in 2001, but the active-duty Army will fall from a post-9/11 high of 570,000 in 2010 to 490,000. The Marine Corps will go from 202,000 to 182,000.

The DoD should likewise reduce civilian personnel.

The reason the Pentagon’s plan places so much emphasis on personnel is stated clearly in the document (pdf):

Military personnel costs have doubled since 2001, or about 40% above inflation, while the number of full-time military personnel, including activated reserves, increased by only 8% during the same time period.

Ben Friedman and I have argued for an even smaller Army and Marine Corps, on the understanding that we should not permanently station U.S. troops in Europe and Asia. Such forward deployments are not essential to U.S. security and might ultimately undermine global security by encouraging other countries to defer spending for their own defense.

But the current proposal is clearly a step in the right direction, and it reflects the fact that Washington—and the American people—are not anxious to repeat the bitter experiences of the past decade. The costs of regime change followed by aggressive counterinsurgency are almost never outweighed by the benefits. We don’t have to build nations in order to destroy terrorists. The Army and Marine Corps grew to fight these types of wars, and they will now shrink back to nearly pre-war levels.

Other savings are possible, but not likely to be achieved in the near future. The president will ask Congress to authorize use of the Base Realignment and Closure (BRAC) process for changes in physical infrastructure. However, some members of Congress are already linking arms to prevent another round of base closings. Still, another BRAC (if it is ever convened) won’t generate significant savings in the next five years, and perhaps not in the next 10. Additionally, the proposal calls for Congress to empower “a commission with BRAC-like authority” to review the full range of costs associated with the military retirement system, with the added stipulation that any “reforms should only affect future recruits.” Thus, any potential savings will not materialize in the near term.

Yet, there is a way to realize more savings in personnel within the next five years. A smaller active-duty force that requires less physical infrastructure should require fewer civilians as well. The budget highlights released yesterday, however, made no mention of additional reductions in the DoD’s civilian workforce. The individual services might seek to reduce their civilian personnel in order to meet the department’s efficiency goals ($60 billion in savings over the next five years), but it does not appear that the Pentagon as a whole is currently planning such cuts.

It should. Consider these statistics from the DoD’s 2012 Green Book: In 2001, when the active-duty force totaled 1,451,000 (all four services, plus mobilized Guard and Reservists) there were 687,000 DoD civilians and their pay accounted for $58.6 billion (in today’s dollars). In 2011, there were a total of 1,510,000 persons on active duty (a 4 percent increase), but the civilian workforce had grown to 790,000 (a 15 percent increase) and the civilian payroll totaled $70.8 billion. If the Army and Marine Corps are cut as planned, and the Navy and Air Force remain at current levels, a commensurate (and I don’t know yet what that would be) reduction in the civilian workforce should generate additional savings.

Such savings might not amount to much in the grand scheme of things, but, at a minimum, I hope that the budget document released in a few weeks will reveal the department’s plans for a civilian workforce that will soon be far larger than necessary.

Pages