Cut! [But Not My Program]

db00ff025da945b957b19cfa4ce54a06One of the main reasons I set up this web site and began my weekly posts to its blog section is the simple fact that if this country does not get its fiscal house in order and get on a sustainable path to financial
stability, all the ideological battles being fought with so much fervor these days will become moot
— because we will reach a point at which we will have no choice but to focus all of our attention on temporarily getting past one financial crisis only to realize that another one is not far in the future. I won’t repeat what I’ve said before on the details, but a quick review of this site’s Unsustainable Fiscal Path page will provide more depth. We are much closer to being in the situation Greece and other countries have gotten themselves into — teetering on the edge of financial insolvency — than most Americans [and unfortunately, most of those in our leadership] realize.

The Scarlett O’Hara Mindset …

In my blog posts, I have focused on other more philosophical/ideological issues, but my opinions on those issues are expressed in the context of my keen understanding of our underlying financial situation [i.e., that we are on an unsustainable fiscal path, which if not altered will ultimately result in rendering ideological issues irrelevant]. As I look back over how our leadership has dealt with this underlying and insidious financial problem for decades now, I’m reminded of Scarlett O’Hara’s [Vivien Leigh] famous line in Gone With The Wind, “I don’t want to think about that today; I’ll think about that tomorrow” [see this 70-second video clip for Rhett Butler’s [Clark Gable] “Frankly, my dear, …” line (0:00-0:15), followed by Scarlett’s line I’m referring to here (0:15-1:10): Scarlett (there’s an ad at the beginning, but you can click to skip it at the bottom right once it starts)]. I don’t recall the context [which was offered sarcastically, I’m sure, knowing his general philosophy about government], but Ronald Reagan referred to this line during his presidency. Some administrations — under the “reigns” of both parties — have made at least some progress on the fiscal responsibility front. However, all administrations — under the “reigns” of both parties — have failed to address the problem at its root. …

The “Not In My Back Yard” Mentality …

Since release of the Trump Administration’s first budget proposal recently, the news media is abuzz with doom and gloom about all the good things implementation of that budget will throw by the wayside and how many people will be adversely affected. Interestingly, though, most Americans generally answer “No” when asked if it’s okay for the federal government to continue spending beyond its means. Unfortunately, what that dichotomy reveals is a mentality that is as old as our government itself — a “not in my back yard” mentality when it comes to finding ways to bring our spending in line with our income. That is, “Cut those programs to the bone, but leave my program(s) intact”!

Unfortunately, there are only two ways to deal with this mentality and also achieve the goal of getting our spending in line with our income [either, or a combination of the two]: 1) find a way to reach consensus on what should be cut and/or how we can ensure that revenues will increase as planned; or 2) cut across the board, spreading the “pain” to all areas so nobody “wins” and nobody “loses” the “not my program(s)” battle.

Ideally, method #1 should be the best way. An attempt to do just that resulted in the Simpson-Bowles Deficit Reduction Plan, which was a 2010 bipartisan report on the best way to fix the national debt.  It offered six steps that would have reduced the budget deficit to 2.3% of GDP [Gross Domestic Product] by 2015, thus lowering the debt by $3.8 trillion by 2020. Obama essentially ignored this plan, so it was never adopted, thus triggering “sequestration” and the 2013 “fiscal cliff” crisis. “Sequestration”, a major part of the Budget Control Act of 2011 [which didn’t actually go into effect until March 2012], was a direct result of Obama’s shelving of the Simpson-Bowles plan, and was at least a step in the direction of method #2. None of that really matters much at this point, though, because as we have seen, “sequestration” has since been “modified” [worked around] to a degree that one could question whether or not it still exists [when the plan was released in December 2010, the deficit was at 8.65% of GDP and the total national debt was at 92.09% of GDP; in December 2015, they were at 2.44% and 103.84% of GDP; in December 2016, they were at 3.18% and 105.87% of GDP — the highest national debt level since 1946 (World War II)!].

So since 2010, instead of “lowering the debt by $3.8 trillion by 2020″ as the Obama-ignored Simpson-Bowles plan projected, actions [or better said, lack of actions stemming from the Scarlett O’Hara mindset] by our leadership, fueled by our “not in my back yard” mentality”, increased the debt by $6 trillion as of 2016 — and absent a plan much more “drastic” than the 2010 Simpson-Bowles plan, by 2020 it will be somewhere in the low 20s of trillions of dollars!

And About “Cuts” …

First, let’s make sure we all understand what lawmakers and administration officials mean when they say “cuts”.  Nobody in my recent memory [in either party] has ever used this term to mean actual immediate cuts in existing expense levels — it’s all about “cuts” in future programmed increases in expenditures. In the infamous “government shutdown” of 2013, all the highly-publicized “pain” was nothing but political theatrics designed to assign blame on “them, not us” — 6th grade classes having to cancel their White House and Capitol tours, barricades at the entrances to the most popular national parks and monuments, etc. Nobody was actually terminating or laying off people immediately [or if they were, it certainly was not because of the “shutdown”].

For whatever it’s worth, as a senior executive in some fairly large companies during my career, I never had any “future programmed budget increases” [and would have been laughed out of the Board room had I asked for them]. And, even after I was managing to the budgets I did have, there were times when I had to make some very painful mid-year decisions to enable real cuts in current expenses that would show up on the company’s next quarterly operating statement. In one case, the percentage level of cuts was several times what any government bureaucrat would consider “devastating”.

And even more interesting about the business and industry setting, there isn’t much sympathy for managers and executives who don’t take budget cuts in stride and focus on finding innovative ways to “do more with less“. Contrast that to the top Veterans Affairs bureaucrat who, in testimony when called on the rug for the extreme [egregious wouldn’t be much of a stretch] mismanagement of that agency, had the audacity to suggest that giving the department more funding was a major part of the answer.

One more important point I’d offer before “closing out” this post — a word about “Continuing Resolutions” [CRs]. This smoke-and-mirrors tactic is probably one of the worst things that our clever lawmakers ever dreamed up to allow the Scarlett O’Hara mindset [to which I alluded above] to govern their actions when it comes to this pesky financial problem. CRs are simply cop-outs — a smoother way of saying “Kick the can down the road” — or to paraphrase Scarlett, “I don’t want to think about that today; I’ll think about that after the next election”.

And The Answer Is …

[Drumroll as The Price Waterhouse Coopers Partner Opens The Envelope 😊] …

The bottom line is that we all need to understand that our fiscal house will never return to stability without somebody’s program(s) being eliminated or at least curtailed from a funding perspective.  However, we also need to realize that funding reductions do not have to always mean functional reductions! [see my description of comparatives in business and industry, above; developing that culture in government, particularly our federal government, would literally be a sea change — or as President Trump has put it, would require “draining the swamp”].

If we have ever had a legislature and an administration in place that could get on top of this situation, it is now. I honestly hope that they — all of them, collectively — will come around to understanding that, and get it done.

In future posts [in conjunction with some structural changes and new pages on this web site], I plan to focus on the two areas where I believe our biggest opportunities lie if we are to get back to a sustainable path to a future that avoids financial collapse: 1) our budget; and 2) healthcare, the one component of it that is already the largest and most problematic component [and that will, absent major changes in approach, reach a point of totally consuming every discussion of financial viability].


img_7026 Charles M Jones

Charles M. Jones


Author: Charles M. Jones, PE, CPA

[retired — neither license active]

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: