In previous blogs, I’ve suggested that the “economy” was one of four critical issues in this election. When we look at the economy, we think first about jobs, wages, economic growth and tax code revisions. These are critical points which need discussion and debate, but there are several other areas of our economy which need the light of day and our candidate’s attention.
Amidst all the bluster and blunder of this nasty election campaign, we have heard little or nothing about the national debt and its consequences, as well as government waste and inefficiency.
Let’s look at each of these three economic costs:
Item 1: The National Debt and Its Consequences
In the five years between 1996 and 2001, the debt hovered around $5 trillion. Not exactly pocket change. In the next five years, it climbed to about $8.5 trillion. Since 2008, it’s now on the way to $20 trillion. Wow! The debt is not some abstract academic number. It has consequences which affect each and every one of us.
Mike Mueller, former Chairman of the Joint Chiefs of Staff, said, “I think the biggest threat to our security is our national debt.”
There are several reasons he probably feels that way. About 47% of our debt is owned by foreign countries. The top two are China, who has 30% of that pie, and Japan, who owns 20%. Does that compromise our ability to deal with them objectively? Quite possibly!
In addition, we have the interest we have to pay on the debt, which runs about $380 billion a year. That’s close to our annual deficit, about 80% of it. With so much money needed to pay the interest in our debt, it hinders our ability to run the business of government. It keeps us from maintaining our infrastructure and impedes our ability to fund our national defenses and other needed programs.
If interest rates rise as the Fed keeps threatening, the interest in our debt will increase the deficit even more.
Item 2: Waste and Inefficiency
The Congressional Pig Book is the annual report from the Citizens Against Government Waste. This year, they have outlined 121 earmarks that congress people slide into our budget to the tune of $5 billion—all questionable expenditures.
And that’s chicken feed compared to The Cato Institute, a libertarian think tank, who has identified 10 areas that could and should be cut. Here are the areas and their annual savings:
Corporate Welfare – Farm aid distorts agriculture, harms the environment, and nearly all goes to well-off business. Energy subsidies have been disastrous—from a $500 million loss on Solyndra to $700 million wasted on a clean coal project in Mississippi. Phasing out farm and energy subsidies would have $16 billion.
Privatization – President Obama has suggested privatizing the Tennessee Valley Authority. TVA and other businesses may “no longer require federal participation,” his budget noted, which would “help put the nation on a sustainable fiscal path.” Other candidates for privatization include Amtrak, the Corps of Engineers, federal dams, airport screening, and air traffic control—which would save at least $11 billion.
Intelligence Budget – The budgets of the CIA, NSA, and other intelligence agencies have become bloated with spending on vast and often invasive data collection efforts and armadas of drone aircraft. Cutting intelligence spending by one quarter would save $11 billion.
Subsidies for the States – Washington runs more than 1,100 aid-to-state programs. They are hugely bureaucratic and stifle states and local innovation. Phasing out federal subsidies for K-12 schools would save $18 billion and free states to improve the quality of their own education systems.
Subsidies for Individuals – The government’s vast array of individual aid programs would be better handled by state and local governments and private charities. Programs such as food stamps should be turned over to the states. Phasing out federal food stamp subsidies would save $40 billion.
Military Overreach – The Constitution envisioned a military to “provide for the common defense” of the United States, not one that serves as the world’s policeman. Congress should reduce overseas military commitments, avoid foreign wars, and create a leaner force structure. Making reforms to meet the budget caps for 2016 and beyond could save at least $20 billion.
Drug War – The war on drugs wastes a huge amount of resources in our police and justice systems. It also harms civil liberties, foments violence, and does little to curb drug use. Ending the federal drug war and returning drug policy to the states where it belongs would save $11 billion.
Social Security – Social Security has huge unfunded obligations. Meanwhile, spending on federal disability programs has soared as the number of recipients has multiplied. America should move to a system of personal accounts for retirement and disability, but meanwhile we would save $64 billion by indexing initial benefits to prices, modestly raising the retirement age, and trimming the disability rolls by one quarter.
Medicare – Medicare is the largest factor pushing the budget into crisis. Raising premiums and increasing cost-sharing would save $33 billion. Policymakers should also restructure the program by directing payments to enrollees, not insurers or providers. That would generate greater choice, spur innovation, and improve access to care.
Medicaid – Medicaid’s open-ended matching grants to the states have led to huge cost growth, but not better health care. Congress should give each state a fixed amount of funding and free them to experiment with better ways of providing care for the needy. Limiting annual growth in the block grant to five percent would save $76 billion.
That’s a grand total of $289 billion a year that could be saved and reduce our annual deficit by 75%. Then there’s the debacle of overlapping agencies and the inexcusable waste they create.
Consider how the U.S. government stores data…
Like businesses, the federal government sets up data centers. Also like businesses, different departments set up their own data centers, which wastes money.
We had 432 data centers in 1999. By 2010, the number had ballooned to more than 1,100. In 2015, that number was up to 11,700.
In 2009, the Office of Management and Budget estimated utilization rates as low as 5% across federal data centers.
Different departments chose to run their own data centers, no matter what the cost, rather than sharing facilities with other agencies.
David Powner, the Information Technology Director for the General Accountability Office, estimates that closing just 2,000 unnecessary data centers would save $5 billion per year.
That’s real money!
There are a dozen or more examples just like this—$5 billion here, $5 billion there. Pretty soon, you’re talking about real money.
Of course the military has always been famous for wasting money. Right now we spend just over $100 million per year to maintain and heat unused buildings in Afghanistan. This includes buildings that American troops occupied but left behind, along with buildings that were built but never occupied by anyone.
One such building is dubbed “Boondoggle HQ” by ProPublica (the independent, non-profit newsroom). It cost $25 million to build even though the military didn’t want it and three generals tried to kill it.
The worst part? The general who approved the construction was eventually appointed as the Army’s Inspector General. He’s in charge of identifying waste, fraud, and abuse.