Sunday, November 14, 2010

Militant Ginger Balances America's Budget - Part Four

Militant Ginger Balances America's Budget
Part Four

On Wednesday, I launched an ambitious project in which I attempt solve America's financial crisis.

In my introduction, I outlined the fact that America's federal spending has reached crisis point - with the government splashing out $1.5 trillion dollars a year more than it brings in from tax revenue.

Just three facets of the federal government alone account for more than $2.13 trillion in spending - the Military, Social Security and Medicare. Combined, that’s $36 billion more than the government brings in.

On Thursday, I explored Social Security and Medicare - and concluded that the state of these beleaguered systems would effectively drive them both out of existence with a decade or two.

On Sunday, I wrote about America's other big financial drain: The military – and concluded that the US Military budget should be halved. America spends more on defense than every other country on Earth combined. Surely, that’s ridiculous.

But the truly astonishing thing is this - that even after tackling those enormous money pits, we’re still left with a whopping cash shortfall in the federal budget.

It’s time to turn our attention to the stuff that the right wing and the tea partiers are wailing most about – the rest of the government’s budget, and where exactly it goes.

Pork, Earmarks and Waste?

In the first part of my project, I dismissed all other areas of government spending and concentrated on Social Security, Medicare and the Military – which isn’t really fair, as it ignores the fact that all the less easily classified ‘stuff’ that the federal government spends their money on still adds up to a cool $1.3 trillion dollars.

What exactly is this 'stuff?'

It’s not easy to define. In the fiscal year 2009, $151 billion of it was Obama’s ‘stimulus package’ - which included road building, public works and a host of other stuff to get America working again. Another nearly $200 million was interest payments on America’s nearly $13 trillion worth of loans. The rest included the cost of running the federal government, America’s welfare program, federal funding for public schools, the park service and other projects.

It’s a bit disturbing that such a mind-boggling amount of money can just vanish without a clear understanding exactly where it goes – but in the metaphor I gave earlier (comparing America’s budget to that of a husband and wife with a combined annual income of $50,000) it’s no different to how $2,000 a month disappears from so many families’ checking accounts without anybody being sure how much was spent on essentials (gas and groceries) and how much went on Starbucks coffee and lottery tickets.

The American Recovery and Reinvestment Act: Your tax dollars at work

And indeed, the right wing are right to demand more accountability from Washington. In the past year alone, a total of $98 billion dollars was ‘improperly spent’ according to the Office of Management and Budget (and those opposed to Obamacare would be interested to note that roughly half of those improper payments were made under the auspices of that program.)

Yet when you look at the budget line by line, you’d be surprised how tight it actually is right now. The right-wing think tank Citizens Against Government Waste publish a book every year marking the so-called ‘pork barrel’ earmarks made by congressmen and senators from both parties – and tracked $16.5 billion in spending that met their strict 7-point definition.

Now that’s a lot – almost $60 per person in the United States. However, in the great scheme of things – in a budget that ‘improperly spends’ $100 billion – it’s just a drop in the ocean.

One sticking point will always be the so-called ‘entitlements’ that the right wing complain about – food stamps, welfare payments and housing benefits. These make up almost 15% of government spending – a cool $500 billion dollars. Many suggest that these should be slashed – but it’s worth nothing that this spending keeps 15 million working Americans out of poverty, and reduces the dept of poverty for another 29 million America.

Considering that number is almost 1 in 6 Americans, the effect of cutting the safety net would be potentially devastating (a look back in history will prove it – most welfare programs were enacted to prevent a repeat of the ‘Hoovervilles’ and shanty-towns that sprung up during the Great Depression.)

A Depression-era 'Hooverville.' The Republicans eye this as a possible alternative to welfare.

In addition, the entitlements program has been skewed by the economic recession – there’s more demand for unemployment insurance, food stamps and other public assistance, while simultaneously less tax revenue to pay for it.

Which ultimately means that when it comes to reining in spending in Washington, there’s no silver bullet. We can certainly improve things – by making sure the government’s more accountable for its spending (no more $100 billion ‘improper spending’ sprees) and curtailing pork barrel earmarks.

I also believe we can alter the way in which welfare is administered, to encourage people to get back to work, or start their own businesses, instead of encouraging them not to.

I remember when my wife and I were both laid off simultaneously. We had to close up a promising small business we’d just started because the $100 a month it was bringing in was sufficient to cancel my eligibility for unemployment insurance. If I'd have been able to offset the two, it's possible I'd have been able to start earning enough to live off, instead of relying on handouts.

In any event, I strongly disagree with some of the more ambitious objectives of the right wing, even though I approve of their intentions.

For example, just 3% of the federal budget is spent on education, but some right wingers demand that the Department of Education be shut altogether (despite the fact that economic prosperity and education are directly linked.)

Others suggest we stop investing in America’s infrastructure, even so such investment makes up just 3% of spending and our nation is literally crumbling around us from lack of upkeep.

In short – we can make cuts, but not enough to balance the budget – not even once we rally Social Security and Medicare and halve our Defense budget. This is where the sheer scale of our economic exigence becomes apparent – even slashing the budget with a machete cannot solve our problems.

So what can?

Well that, my friends, I’ve saved for the final part of my project.

Read part five...

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