The battle continues to cut the size of government budgets
and, as a result, the size of government itself.
In Maine, the proposed cuts come under the cover of tax
reform. In Washington, the struggle
comes more openly.
The federal government is now operating under a rule called
“sequestration.” That effectively places
a cap on federal spending and requires that for every increase there must be an
offsetting decrease or tax increase.
It’s like an informal balanced budget amendment.
But it turns out there may be much less room for budget cuts
than we might think.
Scott Lilly, senior fellow at Washington’s Center for
American Progress, has provided a sound explanation and the following review is
based on his work.
The budget has three pieces.
One is composed of “mandatory programs.” which obligate the government
to make previously agreed payments. Most
are payments to retirees, mainly for Social
Security and Medicare. These expenditures are larger in total than
what the federal government spends on all the rest of the budget.
That remainder consists of defense and non-defense spending,
about equally divided between the two.
Together they amount to only about one-third of all spending. Because these are supposed to be
“discretionary,” they may be decreased or increased.
In other words, only about one dollar of every three spent
by the federal government is subject to the budget balancing game.
Few expect defense spending cuts. In fact, many in Congress seek to increase
it. Their ploy is to shift some of the
increase into accounts outside the budget itself, so it simply doesn’t count in
the balancing game. Of course, that
blows up the whole point of trying to cut the size of government.
If defense spending is either untouched or stealthily
increased, the balancing game has to be played in the remaining 16 percent of
total federal government spending.
That’s all of the non-defense, non-mandatory money there is in the
budget.
On what do we spend that money? The top programs are veterans care, law
enforcement, protecting health, fighting cheating in the mandatory programs and
education. Foreign aid, the favorite
target of many, accounts for far less than one percent of all spending.
The problem with the spending cap, especially in the
non-defense, discretionary area, is that new problems can suddenly arise to absorb
funds. Who could have foreseen the Ebola
virus and the need for federal action to prevent its spread?
Many people and interests support cuts in federal spending
so long as they are not in programs they consider vital or from which they
benefit. The sum of all their demands
cannot result in major savings. That may
translate into increased support for more tax increases to support
spending. That’s where Lilly’s analysis
leads.
If the budget and government cutters have their way, the
outlook is not for tax-based solutions, but for non-defense reductions,
possibly pretty deep.
The obvious targets are the “mandatory” programs. They are only mandatory, because Congress
says so, and Congress can change its collective mind. Benefits under both Social Security and
Medicare could become rich targets if spending shifted to a massive military
buildup.
Within the discretionary spending for purposes other than
defense, both health protection and research and education could be targets. Although not really a big budget item,
spending on environmental and consumer protection could be slashed.
Congress could raise taxes without leaving
fingerprints. Just recently, it
increased Medicare payments to doctors by increasing the contributions of
higher income participants. There was no
outcry against this tax increase on the wealthy.
The tax laws are riddled with “tax expenditures,” breaks
that have to be covered by revenues from others or by cutting spending. For example, they make it possible to
subsidize the oil industry, even if that means cutting education spending. Revenues could come from closing such
loopholes.
The objective may go beyond blocking added expenses that are
not covered by cuts or new revenues. Gov. LePage’s proposed “tax reform” was
obviously intended partly to reduce the size of government not merely block
increases.
Reductions in government revenues coupled with the
prohibition on deficit spending, such as exists in Maine, lead inevitably to
reductions in the scope and programs of government itself.
A key reason for capping government spending is the claim that
taxes are too high. No matter that, compared
with almost all other major economies, taxes in the U.S. are not high.
But people have grown accustomed to resisting government
taking their money for common purposes, which they consider not essential for
their personal well-being.