How Congress Can Show Fiscal Leadership

I listened and watched the latest haggling in Congress over the "budget." It was more than dismaying to watch 435 people quibble over a fraction of 1% of federal spending like it was the end of the world. Even worse was the attempt to mix in social policy (Planned Parenthood) with fiscal necessity (an operating budget).

In the last three years, the federal government has spent about 40% more than it has taken in. With the debt at over $14 trillion dollars and equal to the Gross Domestic Product (the value of everything our nation produces in a year), and an annual deficit that creates an additional $1.3 +/- trillion of debt this year, the time for real action is upon us. The president wants to cut $4 trillion over about 10 years, Congressman Ryan wants to cut about $6 trillion in that time. Sounds good? Not hardly. These people are trimming a projected "deficit," not the debt. They are not even getting the budget to balance for years and years. Meanwhile, the debt will continue to expand. What looks like action is only a bandaid over an infection. The recent downgrade by S&P of its expectation for the government dealing with its debt sends a clear signal that the financial markets are getting tired of rhetoric without real action.

Congress is addicted to spending. While the economy cannot handle cold-turkey withdrawal at the moment, Congress needs to become a "Big Loser" and not a casual dieter. Here is one way it could get serious about being fiscally responsible.

Congress and the White House should set an example of fiscal discipline. It will not cripple our economy for Congress and the White to each cut their spending by 10% each year for the next four years. That simply brings these parts of government into fiscal balance. It's time to "man up" and "spend down" in Washington.

With Congress and the President in the lead, the rest of the total budget can be trimmed 5% per year during these next six years to achieve 30% spending cuts while we grow tax revenues by 2% each year for six years to eliminate the deficit and create a surplus to begin modestly retiring the debt. Will this be hard? Absolutely. But failing to act strongly now only makes acting later even more drastic. Don't like 5% and 2%, then try 4% and 3%. This problem needs worked from both directions.

The four largest items in the federal budget are Social Security, Medicare, Defense, and Treasury. Nothing else is even close. With baby boomers banging on the door of the first two programs and an increasingly overweight and obese younger population, who will become sick earlier, SS and Medicare are headed off a cliff. Toss in the government IOU's sitting in the SS Trust Fund and the situation is sad beyond belief. It's time we admit we made promises that changing demographics mean we cannot keep. We must shift from "spending" on services to "investing" in education, infrastructure, and research to rebuild the backbone of our nation and protect our future. Getting less than you thought you would from SS and Medicare is better than getting nothing at all which will happen if the government lets this escalate.

Everyone is nibbling at the margins. That is woefully inadequate given the size of the problem. Send this message to your senators and representatives. Tell them to lead, not squabble.