Sunday, January 9, 2011

Is ‘CUTGO’ Gonna Be Enough To Save The Republic?

You are going to start hearing a lot more of this ‘CUTGO’ process as the GOP Congress takes hold of this raging bronco bull called' the federal budget' and tries to wrestle it to the ground like some crazy rodeo rider.

It is always amazing to watch a 150-lb man try to stay on a 2000-lb whirling dervish of sinewed muscle for 8 seconds…and keep his cowboy hat on at the same time, don’t you agree?

You have to be 1) brave enough to try to do it in the first place and 2) possibly a little ‘touched’ in the noggin as well to even think about succeeding, we think.

Same as with the federal budget nowadays that has been spinning out of control for these past 10 years or so.  We might start calling the federal budget ‘El Diablo’ to put it on par with these spectacular Brahman bulls on the rodeo circuit.

Anyway, one of the things the new GOP majority has said they are going to do in the 112th Sitting of Congress is to institute the ‘CUTGO’ budget mechanism…’Cut-As-You-Go’.  Meaning specifically, if any Member of Congress wants to ‘increase’ spending in one area of the budget, say education for example, they also have to produce a corresponding ‘decrease’ in spending in another part of the budget, say, agriculture, to balance it out.

‘So far, so good’, you might say.

We are mighty partial to the old ‘PAYGO’ mechanism passed in the 1990 Budget Agreement that so many assailed President Bush 41 for signing, ostensibly for allowing any tax increases to be included which, in effect, ‘broke’ his now infamous campaign pledge of 1988: “Read My Lips!  No New Taxes!”

Maybe he should not have been so emphatic but the 1990 Budget Agreement set the boundaries for what became balanced budgets from 1998-2000, perhaps the last 3 we will ever see in our lifetimes….ALL of us.  Think about that for a moment.

PAYGO instituted the most comprehensive of all deficit-fighting efforts in that it forced every bright Congressman or politico to answer this simple question when introducing a bill or an amendment on the floor of Congress:  “How are you gonna pay for it?”

If we heard that one time, we heard it 10,000 times from 1991-1994 while serving in Congress and for the 6 years thereafter before Bush 43 and the GOP Congress quietly started to put PAYGO on life support and pulled the plug out from it ever being effective again.

PAYGO meant that if you wanted to increase spending somewhere, you had to cut it elsewhere to balance things out in a ‘deficit-neutral’ manner.  And conversely, if you wanted to increase an entitlement (think: ‘the $10 trillion net present value liability embedded in the passage of Medicare Part D 2003), you had to raise taxes to pay for it OR cut entitlement spending somewhere else of a commensurate amount.

And on top of that, if you wanted to pass a massive tax cut such as the Bush tax cuts of 2002/03, you had to either: A) cut entitlements or B) increase taxes someplace else to keep it budget-neutral in deficit terms.

The heck of it all is that, in terms of keeping the budget deficits and national debt relatively tame, PAYGO ‘worked’! What PAYGO did is exactly what a balanced budget amendment to the Constitution would force Congress to do:  Make reasoned decisions and set priorities about spending our taxpayer money and find the income (taxes) to pay for them. Period.

Three balanced budgets out of the last 60 years? Are you kidding me? The balanced budget years of 1998-2000 represents ‘success’ in anyone’s books. Anyone who is still sane, that is.

But CUTGO? We dunno. We have our doubts.

We are thrilled beyond measure that discretionary spending increases in certain programs have to be balanced with spending cuts in other programs.

That is a major, major step in the right direction after the past 10 years, the last 2 especially, when zero spending discipline has been exhibited by either party in Washington, DC.

But will CUTGO apply to everything, including the Wars in Iraq and Afghanistan where annual supplemental bills are passed routinely outside of the annual budget and appropriations process to avoid having to cut spending or raising taxes to pay for them? Will it apply to entitlements…ever? Health care reform…is it an entitlement or a discretionary program or some hydra-headed monster of both?

Our biggest concern is that under CUTGO, Congress could conceivably cut taxes to absolute zero on the Kelvin scale….and it would not violate the CUTGO principle. Taxes could be cut, cut and then cut again…and the deficits would just increase, increase and increase exponentially over time as the accumulated debt generates $1 trillion+ in annual interest service costs that are sure to come when interest rates return to their normal level of 4-5% or so.

Which they will…you know it and I know it and so does every Member of Congress. It is just a question of: ‘WHEN?'

So think on these things as we head into the new year. CUTGO seems like a step in the right direction but is it just a baby-step when we really need a Jolly Green Giant step?

Like now?

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