by Dheeraj Keshav

Introduction

Over the course of many years, U.S. citizens have sat idly by and watched as the US government tries to spend its way out of an increasing portion of our nation’s problems. As our spending increases along with our national debt, we will eventually have to bring ourselves to ask the same two questions that we all ask ourselves when we find we’ve made a mistake: What went wrong and how do we fix it?

I’d like to contribute my two cents as to what the answer to this question is, across two articles that will attempt to bring about an understanding of our mistakes thus far and how to control the damage.

Background

The current budgeting process, enacted in 1976, came from the Congressional Budget and Impoundment Control Act of 1974. Small problems started to pop up not much longer afterwards. Over time, these problems have grown, slowly but surely, like a snowball rolling down an ever-growing hill, culminating in the sticky situation we find ourselves in today. The statistics can be slightly alarming at first, but after the shock subsides, the trends reveal themselves quite quickly.

The first glaring problem relates to a term you probably heard many times around the turn of the year: Government shutdowns. The 1974 revamp of the budgetary process put a deadline on when the government has to produce a viable spending/taxing plan, motivated by the idea that we can’t spend money we don’t plan to get. Unfortunately, the idea hasn’t played out well over the last few decades. The 43 years since the Act went into effect have seen 21 shutdowns and continuing resolutions (agreements to continue current levels of spending, usually due to a lack of consensus or time constraints) in all but 4 years.

While the shutdowns have had various effects on the economy throughout the years, they’ve generally been getting worse. The first 6 shutdowns were only “technical funding gaps,” whereas 4 out of the last 6 were classified as significant shutdowns. This is all indicative of and an accompaniment to the underlying problem of uncontrollable spending and debt increases over the past few decades, describing the situation we’re in now.

The first major cause of this worsening crisis is the expansionary nature of the national government. This is reflected through steady increases in federal spending. The topic that comes into focus is why this spending has such drastic effects on fiscal and budgetary outcomes.

The reasoning functions off of a simple and rational analysis of outcomes and probabilities. As the national government expands, it brings more and more issues to the table at the end of the fiscal year. Even if the government has finally decided how to fund the military, its new roles in funding early education and creating standardized curricula are breeding grounds for new disagreements. A wider variety of issues to cover means that more consensus is needed in order to get a budget through. When the deadline is fixed, the effect is clear: Shutdowns will only become more frequent and longer-lasting if the national government keeps expanding its roles.

There are two ways that the government can begin to remedy this crisis by addressing its scope, which include changes in discretionary and mandatory spending.

A Return to Federalism

Regarding discretionary spending, funding responsibilities should be relegated back to the states. This economic “devolution” is justified by a need to rethink what the government should be doing. Recent movements have pushed the national government to expand and fund new areas, but the results of the national government going past what it was meant to do have almost always been suboptimal.

A key example is the Common Core educational standards, set by the national government in 2011 as a way of evaluating and standardizing education. Unfortunately, like most attempts to apply a “one-size-fits-all” approach to such a diverse nation, the standards ended up putting lower socioeconomic class districts and special education programs at a disadvantage while encouraging curricula that pump out machines, not students. The national government was meant to do what can reasonably taken care of all at once.et its funds go into areas like education that would be the same, if not better off, if left to the states.

The core premise behind this devolution is that states have a much easier time coming to consensus because they have far fewer interests to represent. Pew Research Center polls reveal that most of the time, the nature of a community attracts people in groups by political party. Liberals prefer walkable communities while more conservative individuals want larger houses and more room between them. This geographic grouping means that the more local funding becomes, the easier it becomes to decide its direction. On top of that, funding can be used more effectively because its use is personalized to the needs of the area, not the standards of the nation.

The final reason to support an economic devolution is to control the impact. Our nation is getting larger, and some could argue that our expanding citizen base is going to lead to more spending no matter what we do. However, the whole nation shouldn’t have to suffer if we can contain the impact to a smaller area. If funding disagreements were to occur in a more devolved world, you’d still prefer those shutdowns to the ones we deal with now because those shutdowns are only in 1 state. Fewer workers miss pay, and fewer people lose out on government services. Devolution stands to make the funding process more efficient and effective, while controlling the fallout. It’s a win-win.

Addressing Entitlements

Now, I wish I could sit back and say that if the national government just takes a step back and reels in its discretionary spending that we’ll suddenly be fine. Unfortunately, we’ve trapped ourselves in a far greater problem: Entitlement spending. This is spending mandated by Congress through a previous law and, therefore, unavoidable when directing funds for the budget. Problematically, this spending is set to triple by 2050, and entitlements already approach half of all national government spending. Drastic legislative reform is needed, to make the hard but necessary cut to entitlement spending.

This is always a tough subject to talk about, due to the nature of entitlements and the fact that the people they go to usually need them. But the fact of the matter is that the government has simply bit off more than it can chew. ither it cuts down now willingly, cuts down later when interest payments grow too large, or collapses entirely under a weight it was never meant to bear. At the very least, drastic changes to entitlements are necessary if we’re ever going to make it out of this problematic position in which we find ourselves.

For one, programs would have to be far more need-based and exclusive. A key example is Social Security, whose prerequisite to access is earning a set number of credits, 40 for those born after 1929. Credits have a dollar value of around 1300, and a cap of 4 per year, so most people would need to work for 10 years to qualify, which already blocks off those most in need or who can’t find employment from qualifying. Furthermore, since the dollar value of a credit increases every year, the system is built to become more exclusive over time. The government can only afford to help so many people, and when it has to make the tough choices, only those who need help the most can remain.

The second modification would be to decrease entitlements’ burden on states. The national government’s spending has realized that it can’t sustain itself, and has solved that problem by digging into the coffers of state governments’ revenues. The increase in entitlement spending on the national level is the primary cause for the predicted trajectory of state spending being so unsustainable, as the Government Accountability Office reports. Medicaid, Medicare, and Social Security are going so far as to crowd out state funds, to the point where the GAO predicts that most states will be forced to cut public services over the next 50 years, all to pay for the national government’s mistakes. Cutting entitlements is the tough choice to make, but in the long term, it might just be the right one.

Conclusion

Throughout this article, I’ve proposed many things that seem like a stretch at the moment. But in reality, sustaining our current levels of spending is a one-way road to disaster. We have to be drastically different, unflinchingly practical, and extremely critical if we hope to save our government from drowning in its own debt.

The next part of this article will discuss how these spending changes should be incorporated into the budgeting process and how new mindsets about budgetary policy could help us cut away unnecessary spending.

 

Dheeraj Keshav is a Policy Research Fellow at the American Freedom Institute

Featured Image Credit goes To: By Valugi – Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=19523830

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