Why Government Spending Is So Hard To Cut

One of the reasons why Government spending is so hard to cut is because people do actually rely on it for one reason or another.  Whether it occurs through transfer payments (i.e. benefits) or funding someone’s job, Government spending does actually make a difference in people’s lives.  

One can see this in the implementation of the sequester.  I recently had the honor and privilege of working in a federal public defender’s office.  Those offices are getting hosed right now under the sequester.  In fact, many Federal Defender offices are getting hit up to six times harder than their prosecution counterparts.  The head of one Ohio Federal Defender’s Office fired himself to save his staff.  This is happening in Federal Defender’s offices around the country, including the Boston office that will be representing Dzhokhar Tsarnaev.  

These cuts are raising Sixth Amendment Gideon issues, as federal public defense attorneys now have even less time to work on their client’s cases.  While case loads in the federal system are not as bad as they are in the state system, these cuts nonetheless damage the quality of representation that federal criminal defendants receive.  In other words, calls go unanswered, less motions get filed, and the motions that are filed contain less legal arguments,  Such omissions may make the difference between winning or losing a client’s case.  In federal court, that usually means they end up in prison for a long time, as Congress still loves their mandatory minimums, United States v. Booker notwithstanding.

Elsewhere, there’s controversy over the Chained CPI proposal for Social Security.  According to Robert G. Romasco, President of the AARP, it would result in substantial cuts for beneficiaries:

Under a chained CPI, older veterans would be hurt twice, as both Social Security and veterans’ benefits would be cut. So much for the administration’s claim to protect the vulnerable. Permanently disabled veterans who started receiving disability benefits from the Veterans Administration at age 30 would see their benefits cut by more than $1,400 a year at age 45, $2,300 at age 55, and $3,200 a year at age 65.

Of course, these cuts are kind of the point when you’re cutting Government spending.  The largest parts of the federal budget are military spending, social security, and healthcare spending.  There’s no magic button we can press to cut spending in these places without hurting someone.  Cutting defense spending, even by only a few million dollars, means a decent number of people are out of a job.  Cutting Social Security benefits means people on fixed incomes have to make do with less.

This isn’t to say there isn’t genuine “waste” in Government.  A recent example is the Federal Government spending $890,000 in bank fees for empty bank accounts.  Years back, the Pentagon spent $100 million on unused airline tickets for which it never sought refunds.  The Pentagon in particular is notorious for wasteful spending projects, such as $436 hammers, $600 toilet seats, and $7,622 coffee brewers.   Or how about spending $100,000 for a 2011 workshop on interstellar space travel that included a session entitled “Did Jesus die for Klingons too?”  According to the link, “the session probed how Christian theology would apply in the event of the discovery of aliens.”  I feel safer already.

Nonetheless, even if we got rid of much of this waste, we’d still have to make substantive cuts to make a dent in the federal budget.  Even if we had a balanced approach of 50/50 spending and tax increases on a 10-year plan to reduce to the deficit back to healthy levels, it would still involve cutting a lot of people’s livelihoods.  No matter where you cut from, somebody’s either losing their benefits or losing their job.  and that’s why it’s so hard to cut Government spending, even if doing so is the overall right thing to do.

Somebody Call 911 on Cain's 9-9-9 Plan

“When you take the 9-9-9 plan and turn it upside down, I think the devil is in the details,” Michele Bachmann said in Tuesday night’s Bloomberg/The Washington Post debate in at Darmouth College, New Hampshire.

This plan’s been kicking about for a while now, but only in Andover did it really come into the light. Cain’s solution to America — and thus the world’s — economic misfortune is as follows. First, the entire existing tax code is scraped, in toto: the progressive rates of income tax; corporate income tax; the estate tax; capital gains tax; the payroll tax (and, though he didn’t mention it, you’d have to assume FICA, too).

In its place comes just three new taxes. One, a flat 9pc personal income tax levied on all individuals regardless of wealth or paucity, with room for charitable deductions. Two, a flat 9pc on all business income, save “all investments, all purchases from other businesses and all dividends paid to shareholders”. Three, and most controversially, a flat 9pc national sales tax, better known perhaps to European readers as Value Added Tax.

The problems with this scheme are numerous. Initially, I do not believe this could ever become law in the United States — as such, it reads like the Liberal Democrat manifestos of old, a pie-in-the-sky notion that sounds good when articulated, safe in the knowledge that it’ll never be implemented.

But more than this, nobody has any idea (or at least the Cain campaign is not saying) how much money this would raise. Last fiscal year, the federal government took in $2.2 trillion in tax revenue from individuals and corporations, in a system where the current highest rate for persons earning over $250,000 is 35pc (a rate never paid in full due to the rote of deductions available). Cutting the tax rates on the top 2pc and big corporations dramatically could only have a negative impact on the Treasury.

Whichever way you spin it, 9-9-9 constitutes a colossal tax break from the wealthiest in America, and a huge tax hike for the working poor. At this time, 47pc of Americans pay zero income tax, since they do not meet the minimum requirement. Under a Cain presidency, not only would they now lose 9pc of their income to the federal government, but they would suffer via the introduction of the 9pc VAT rate, raising the cost even of life’s essentials like bread, milk, and potatoes.

Not only is 9-9-9 anti-progressive, in its curtailment of the staggered tax code, it is also anti-conservative, since it constitutes a tax increase on nearly half of Americans in their income, and all Americans due to the sales tax. And, it is anti-American: by burdening the most destitute with such a crippling tithe, it kills whatever slims chance they had remaining of upward social mobility.

Worse still, 9-9-9 is just the beginning. Just wait until you hear about the Fair Tax…