President Obama Wants To Cut Spending (But Not Really)
The news leaked several days ago that in tonight’s State of the Union address, President Obama will speak about the need to curb the government’s out of control spending. He will announce spending freezes on “non discretionary,” non military spending, as well as pay and bonus freezes on some political appointees.
To put this announcement in context, I want you to imagine a 400 lb man who was eating 3100 calories per day a year ago. A year ago, the man started eating 3555 calories per day (an increase of 455 calories–14.67%) and gained 64 lbs during the past year and now weighs 464 lbs–an increase of 16%. Now, the even fatter man realizes that his weight has become an even more serious problem and he hatches a plan to deal with it. He decides that he will freeze the increases in his caloric intake from most snacks for the next three years. However, he decides that instead of cutting his meal sizes, he will actually continue to increase their sizes. He will also increase the sizes of some of his snacks, while freezing the growth in the sizes of other snacks. He concludes that these meals and snacks are essential to his survival and that therefore he must increase their sizes if he wants to get healthy.
Does this example sound far fetched? It isnt. The numbers used above are scaled down numbers from our federal budget.
Our 2009 budget, passed in 2008 under President Bush called for $3.1 trillion in spending. Of this, $1.89 trillion was “mandatory”–it funded government social welfare programs. These are the meals described above. The remaining $1.21 trillion was considered discretionary funding–these are the snacks described above.
But, included in the discretionary funding of that budget was $515.4 billion for the Defense Department, $145.2 billion for the War on Terror, $37.6 billion for the Department of Homeland Security, and $44.8 billion for the Department of Veterans Affairs. That total is $743 billion. These are the snacks that the man above will not only continue to eat, but will actually increase the size of.
Now, lets look at the 2010 budget which was proposed by President Obama last February. This budget had $3.55 trillion in spending. Of this, $2.184 trillion was “mandatory.” This is an increase of 15.6% in only one year. As you can see, the costs of Social Security, Medicare, and other programs are rising rapidly.
The remaining $1.368 trillion was considered discretionary. The cost of these snacks increased by $13.1% in that single year.
In other words, while discretionary costs are rapidly rising they are not the biggest problem. Our mandatory costs are not only bigger than our discretionary costs–but mandatory costs are increasing at a much faster rate than are discretionary costs.
But,this budget included $663.7 billion for the Defense Department, $52.5 billions for the Department of Veterans Affairs, and $42.7 billion for the Department of Homeland Security. The total here was $758.9 billion. This is an increase of about 2.14%.
If President Obama were proposing to cap the annual growth in the total budget at 2.14%, the majority of Americnas would be pleased. However, as mentioned above this spending freeze will not include mandatory spending–the biggest and fastest growing part of the budget. But, just like the fat man described above, our national debt increased by 16% in President Obama’s first year–and just like that fat man, we are going to increase what we eat.
The government is cooking itself bigger meals as well as increasing the size of its snacks. This is not the way to get in shape. Using our analogy of the overweight man, we see that at best, this will only slow the rate at which the man gets fatter.
And, we would be fools to think that the President’s freeze on discretionary spending actually means a freeze on discretionary spending. The news of the spending freeze was leaked the other day, but this morning news leaked that the President was going to request a 6.2% increase in the education budget.
Of course this money will come with strings attached. Federal money always comes with strings attached and efforts to increase federal control. Federal funding for education is nothing more than a move by the federal government to expropriate the money from Americans through taxes and then sell that money back to State education departments and local districts in exchange for influence. The Carter Administration nationalized education in 1979 and the effect has been disastrous: steady declines in education all across the nation and sharp increases in costs of education. These federal actions have made the American people pay more money for less education. But, we cant be surprised by the Obama Administration’s efforts to further erode local and family control over yet another aspect of our lives.
On top of this, President Obama will announce an $8 billion high speed rail initiative in Florida tomorrow. This sounds nice, but the fact of the matter is that the high speed rail systems proposed by the government is a horrible idea that will be extremely costly, bad for the environment, and will not be high speed! This isnt actually a new plan, but rather a rehashing of a plan that President Obama put forward last year.
The good people at the Georgia Public Policy Foundation put together a report on this plan last year. You can find that report here. Here are a few excerpts:
“The FRA is not proposing to build 200-mph bullet trains throughout the U.S. Instead, in most places it is proposing to upgrade existing freight lines to allow passenger trains to run as fast as 110 mph – which means average speeds of only 55-75 mph. This would actually be slower than driving for anyone whose origin and destination are not both right next to a train station.” (Page 6)
“Even with these optimistic assumptions, high-speed rail reduces corridor transportation energy consumption by only 8.3 percent. This means the operational energy and greenhouse gas savings fall to zero if we assume instead that automobiles and airplanes are, by 2025, just 8.3 percent more energy efficient than they are today. If automakers meet Obama’s fuel-efficiency standards, autos will be more than 30 percent more efficient in 2025 than they are today, so high-speed rail will actually be wasting energy.” (Page 21)
“the FRA system will carry each person an average of 58 miles per year.” (Page 25)
But, these are just the two spending increases that have been leaked today. If we factor in the “mandatory” increases in social welfare programs, the increases in defense and intelligence budgets, and the new jobs/stimulus programs that Congress is almost sure to pass, we are still looking at heafty budget increases.
The man in my analogy would be stupid to not go on a diet. Our government should do the same. It needs to stop eating snacks where it can and begin to reduce the size of its meals to a sustainable level.
If President Obama is serious about preventing the looming debt crisis from wiping out decades of economic growth, he needs to change his tone. Instead of just freezing spending in certain areas while allowing the already bloated budget to expand, Mr. Obama should cut the budget where possible. He should also look for ways to stop the increases in the costs of mandatory spending before it is too late.
But of course, it may already be too late.
Americanly Yours,
Phred Barnet
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