Budget Cutting For Dummies...And Washington Politicians - Part 2: Government Efficiency

This is a second part of our themed week on how and why the political class needs to reign in its spending as soon as possible to avoid a financial disaster and suggest ways to accomplish the task. Yesterday's post identified anywhere from $100 billion to $140 billion worth annual savings that could be wrung out of government with relatively no pain except for corporate welfare recipients and incumbent politicans' re-election finances.

Today's focus is on making government more efficient, either by doing things better and smarter or just plain eliminating wasteful spending that benefits relatively few Americans. The basis for the following budget cuts is a comprehensive analysis jointly done by Nicole Tichon, Federal Tax And Budget Reform Advocate in the U.S. Public Interest Research Group and Andrew Moylan, Director of Government Affairs, in the National Taxpayers Union. Although I will not review all of their excellent work below, understand that it appears to be relevant, analytically sound, well researched, based on solid, underlying financial and government statistics and best of all, nonpartisan. Their recommendations cross many government functions.

Their work concentrated on four specific areas of government spending that could be reduced significantly or eliminated:

1. Ending Wasteful Subsidies - Budget savings by 2015 = $62 billion
2. Improving Contracting and Asset Acquisition - Budget savings by 2015 = $353 billion
3. Improving Program Execution and Government Operations - Budget savings by 2015 = $77 billion
4. Addressing Outdated Or Ineffective Military Programs - Budget savings by 2015 = $107 billion

Thus, over the next four years, their recommendations could save taxpayers about $600 billion or about $150 billion a year on average. Combine these results with the savings we estimated yesterday from other areas that are not included above and in just two days, we have identified about $250 billion a year in wasteful government spending, or about about $2.5 TRILLION over ten years. Compare these savings with the meager ten year savings of President Obama's budget of $1 TRILLION. And we are not even done yet.

Below are some examples from each of the four categories above that Ms. Tichon and Mr. Moylan identified for savings:

* Ending Wasteful Subsidies

- Terminate the Federal government's Overseas Private Investment Corporation (OPIC) which uses taxpayer money to subsidize the foreign operations of many large multinational corporations via financing and insurance support. This is a blatant form of corporate welfare, let these large corporations support themselves overseas and save the taxpayers $154 million by 2015.

- Eliminate the Market Access Program which uses taxpayer dollars to fund advertising and promotions for private companies that sell agricultural products overseas. Given how well the U.S. farming industry is doing, let these companies fund their own advertising and promotions overseas. Drop this corporate welfare program and save $1 billion by 2015.

- Eliminate insurance subsidies for repeatedly flooded homes through the National Flood Insurance Program. One percent of these policies represent up to 30% of all insurance claims since they are repeatedly damaged by flooding. Eliminate the subsidies for these loser properties and save $891 million by 2015.

- Eliminate the program that subsidizes deepwater natural gas and petroleum research. With oil prices rapidly galloping to over $100 a barrel, eliminate this corporate welfare program and let the oil companies themselves decide whether or not they want to fund the research, saving the taxpayer $258 million by 2015.

- Reduce funding for public timber sales since the Forest Service has spent more on Federal timber sales in recent years than it has collected from the companies that harvest the timber. Save $279 million by 2015.

* Improving Contracting And Asset Acquisition

- If the government implemented the reforms of the bipartisan Defense Acquisition Panel which was passed last year by Congress in an attempt to address Department Of Defense acquisition processes, taxpayer savings by 2015 would be $135 billion.

- A recent audit by the Defense Contract Audit Agency found 32 existing Homeland Security contracts, collectively worth $34.3 billion, that have been plagued by waste, abuse, and/or mismanagement. Eliminate these poorly performing contracts and bank the $34.3 billion.

- The Government Accountability Office (GAO) investigated armed forces purchasing and inventory processes and results and found that our armed forces continually purchase  products that are never used, never required, or are obsolete. Fix these purchasing problems, as identified by the GAO, and save $184.5 billion by 2015.

* Improve Program Execution and Government Operations

- Sell off 25% of the 55,500 buildings that the Federal government owns that are vacant or are underutilized, according to the Office of Management and Budget, netting the taxpayer $24 billion by 2015.

- According to the Congressional Budget Office (CBO), if Medicare better aligned its payments to cover actual costs for its graduate medical education program, the taxpayer would save over $20 billion by 2015.

- According to the GAO, the Federal government wastes large amounts of money through the Housing and Urban Development's programs due to a variety of overpayment errors. If corrected, the government would save more than $4.5 billion by 2015.

- The Troubled Asset Relief Program still has an unspent amount of $15 billion on its books. Given that the banks are much healthier and the economy is much healthier, return that money to the taxpayers and save $15 billion immediately.

- The GAO has investigated and concluded that the National Drug Intelligence Center's functions are  duplicative and its scandals numerous. Terminate the program and save $223 million by 2015.

* End Wasteful or Outdated Military Programs and Systems

- Cancel the production of the overly expensive and under performing V-22 Osprey aircraft and save over $6 billion by 2015.

- According to the Sustainable Defense Task Force, the "F-35 Lightning may represent all that is wrong with our acquisition process." It is overly expensive, has serious cost overrun problems, and "would provide a capability that is not warranted, considering emerging threats." Drop the program and save $22.5 billion by 2015.

- Terminate spending for high risk satellites and replace them with low-cost alternatives since the Defense Department has already determined that ground based radars "not only provide a viable alternative to a space based system but also provide this capability at significantly lower risk and costs." Drop the expensive system, go with the less costly and less risky alternative and bank the $5 billion in savings by 2015.

- Align or right size the nation's nuclear arsenal and save $56.75 billion by 2015.

- Eliminate the outdated, unreliable, and unneeded Expeditionary Fighting Vehicle which even the Secretary of Defense does not need or want. Savings would exceed $16 billion by 2015.

Thus, these judicial and intelligent budget cuts are similar to yesterday's cuts since:

• No animals were killed or harmed in the development of the budget cut list.
• No Americans went hungrier, sicker, or poorer as a result of any of the identified cuts.
• Corporate welfare was cut back, personal welfare or aid to the poor was unaffected.
• Americans' freedom was unaffected but the freedom of politicians to use taxpayer money to fund their re-election campaigns via earmarks, defense contractor and lobbyist donations, and corporate welfare donations was negatively affected.

This is an outstanding piece of analytical work from these two Americans, each of them representing two different views of the world. The U.S. Public Interest Research Group usually comes at the world from a left leaning, Democratic party perspective while the National Taxpayers Union usually comes at the world from a right leaning, Republican party perspective.

However, on this issue they come to the same conclusion: "Our nation faces unprecedented fiscal challenges, as the commitments we've made now and into the future far outpace our fiscal capacity.... It will be critical to reach out across party lines and across ideological persuasions to achieve common-sense reforms that bring us closer to balance."

Now look at their statement relative to the petty actions and petty politics that the Washington political class have engaged in relative to this grave problem. Pretty pathetic performance from our politicians' perspective. It does not appear that they appreciate the "unprecedented fiscal challenges" the nation faces with their meager and petty attempts at budget reform. 

A typical, non-political American found over $100 billion in annual budget cuts yesterday and these two smart people, Ms. Tichon and Mr. Moylan, from two widely different perspectives, have found about $600 billion in budget cuts within just a very small sample of government operations. It is not that difficult... any dummy can do it. Well, most any dummy.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at http://www.loathemygovernment.com/. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.


Please visit the following sites for freedom:

http://www.cato.org/
http://www.robertringer.com
http://realpolichick.blogspot.com
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment

Wisconsin, Simple Math, Simpleton Politicians

As most of you probably know by now, there have been some rather large demonstrations going on in Madison, Wisconsin by public employee union members who are upset that the new Republican governor and legislature are about to pass a bill that would eliminate collective bargaining for certain public employee unions and require union members to contribute to their pension and medical benefit costs. The reason for this legislative action is that the state is faced with a looming budget deficit of $3.6 billion and the Republican lawmakers believe that this is only way to effectively close that deficit.

Now, I was struck by the idiocy of a lawmaker who was supporting the protesters on the news by saying that that wealthy in Wisconsin should be taxed more and that the unions should not be required to do any givebacks to save the financial solvency of the state. That got me to doing a little math to see if the math was simple in this case or the politician was simple:

• To support a previous post in this blog I went and found out how many Americans earn how much money as reported to the IRS. Thus, these are official Federal government numbers, they are not Fox News numbers, Tea Party numbers, Republican numbers. These are 2008 final, official IRS numbers, the last year which this data was available to this detail
• I also checked out the results of the 2010 Census which showed that Wisconsin was home to 1.82% of the nation's population.
• For 2008 IRS filings, 321,294 households nationwide earned over as million dollars. If you assume that the number of millionaires are spread throughout the country in the same proportion as the population, then we would expect Wisconsin to have about 5,847 millionaire earners in the state, 1.82% of 321,294.
• If this lawmaker wanted the "rich' to pick up the state budget shortfall, then each of those 5,847 state residents would have to pay a whopping $615,700 to eliminate the shortfall ($3.6 billion divided by 5,847 people).
• I would venture a guess that there are even fewer millionaire earners in Wisconsin than the 5,847 estimate above, making the budget reduction burden for Wisconsin millionaire earners even greater. Other, richer  states (New York, California, Texas, New Jersey) probably have more millionaire earners relative to their population than Wisconsin.
• If you ever did such an insane move you can be sure that shortly afterward there would be no millionaires living in Wisconsin.
• Since we know that the average American household spends almost 30% of its annual income on income taxes, sales taxes, Social Security taxes, Medicare taxes, property taxes, gasoline taxes, excise taxes, etc., and Wisconsin is already one of the most heavily taxed states, many of these Wisconsin millionaires would not be able to pay their $615,700 share since after taking more than 30% of their earnings via other taxes and paying for food and other basic necessities, they would not have enough left over to cover their $615,700.

Simple math, simpleton politicians. The government debt burden has gotten so high in this country that even if you confiscate all of the earnings from the richer Wisconsin families, you still might not be able to cover the budget shortfall. Does not the political class understand this simple math fact of reality? You can no longer tax the rich to pay off the bad financial management of the simpleton politicians.

Last year we did a similar analysis for the national debt. Fortune magazine annually publishes its list of the richest Americans along with an estimate of their worth. If you added up the richest 400 Americans from their last analysis, you found that their total net worth was about $2.7 TRILLION. Thus, if you confiscated all that these richest Americans owned, (bonds, cash, boats, houses, cars, furs, property), you would not come close to paying down just the deficit that Obama, Reid, and Pelosi rang up over the past four years. You cannot tax the rich enough, even if you take all that they own, to cover the shortfall. Simple math, simpleton politicians.

Want more examples? Last year, my home state of New Jersey was looking at a state government expense stream of about $30 billion and a revenue stream of about $20 billion, leaving a budget shortfall of about $10 billion. What were half of the New Jersey political class worried about? Was it the $10 billion? No, it was the fact that the governor refused to raise the income tax on the highest earners in the state by 2%.

By the outcries from the state employee unions and the state Democrats, you would have thought that this single action was responsible for the $10 billion shortfall. However, if you did the math, you would have found that raising the income tax 2% for that small percentage of earners would have raised far less than $1 billion, still leaving the state more than NINE billion dollars short. Rather than attack the underlying root causes of the problem, the politicians were intent on arguing and politicking over a nit that would not have made any significant difference in the overall crisis. Simple math, simpleton politicians.

That is what is so disconcerting about the Federal government's skyrocketing national debt. It seems most of the political class do not understand simple, logical math and the simple reality that goes along with it. And even the small percentage of politicians that might get the simple math, they are too busy continually running for office to make a stand for sanity. Let's review the looming financial crisis at the Federal level once again for the simpletons in D.C., I will try to speak s...l...o...w...l...y:

1. We are about to hit a national debt level of $14 TRILLION.
2. With about 115 million households in the country, that comes out to a debt burden of about $122,000 per household.
3. In the best of all economic worlds, if Obama has his way, his budgets will add another $7 TRILLION to the national debt in the next ten years, making the household burden in excess of $182,000. This debt will eventually have to be paid off by us and FUTURE generations of Americans, our kids and our grandkids.
4. Very soon, within the next few years, American taxpayers will pay more on interest on the Federal debt than they do on all other discretionary areas of the Federal budget combined, meaning less money for transportation, education, etc.
5. By paying so much to cover the national debt, Americans will be less free to spend their earnings on things they want such as charities, better schooling for their kids, their own businesses, and their own lives, resulting in a sustained and deep loss of freedom.
6. Speaking of freedom, the Chinese now own almost $1 TRILLION worth of our debt, restricting our freedom in the international arena, i.e. do not tick off one of your largest bond holders regardless of what compromises you have to make on human rights.
7. Smart Americans from across the political spectrum recognize and understand the problem and most have come up with ways to eliminate the problem, with the one exception being the American political class. These partisan and bipartisan Americans include, but are not limited to, the Cato Institute, Obama's own debt reduction comimission, the Concord Coalition, the National Taxpayers Union and the U.S. Public Interest Research Group.

Simple math, simpleton politicians. Simply a travesty. 




Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at http://www.loathemygovernment.com/. It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:

http://www.cato.org/
http://www.robertringer.com
http://realpolichick.blogspot.com
http://www.flipcongress2010.com/
http://www.reason.com/
http://www.repealamendment