Saturday, May 21, 2011

‘What If’ Congress Told Congress To Run The US The Same Way Congress Runs Big Banks, Wall Street and Detroit?’

Well, the first thing that would happen is that the entire Board of Directors (Congress) and the CEO (The President) would be fired.

Hopefully, without a golden parachute and $50 million in severance pay and a jet to fly to Aruba every weekend like many seem to get in the Wall Street corporate world when they screw up and run a company into the ground.

But let’s try to think about how Congress treats malfeasance and stupidity in the companies they regulate versus their own behavior as budgeteers and managers of simply the largest enterprise the world has ever known, the $3.6 trillion annual budget of the United States of America.

Wal-Mart, by comparison, had revenues of ‘only’ $418 billion in 2010, a mere measly 1/9th the size of the federal government. A proverbial drop-in-the-bucket. (but can you believe that Wal-Mart’s revenues are really over 10% the size of the US federal government?)

Anyway, what would be the first thing Congress would tell Congress to do if they treated our federal budget like a failed bank, Wall Street investment bank or Detroit automaker? (Have you seen the Chrysler ‘Made in Detroit’ commercials with Eminem? Honestly, do they make you want to run out and buy a Chrysler today?)

We have a $1.6 trillion annual deficit so the first thing we have to do is what, class?

That’s right:  Cut. Spending!  It is the only thing any manager of a budget has 100% control over. He/she can cut spending today at the drop of a hat. He/she has no total control over revenue (taxes) coming in the door, especially in economic dips like we have had, plus the fact that really wealthy people can tax-plan their brains out and avoid paying any tax they want to avoid, basically.

But what to sell first? And to what purpose do you put the proceeds….reduce annual spending or reduce existing debt?

We think reducing debt is important because it will cut our annual interest expense later.

So #1, let’s sell Alaska back to the Russians. Sarah Palin and all. With their oil reserves, that must be worth $1 trillion at least what with their 4 billion barrels of oil in reserve at $100/barrel plus the value of all that timberland and whale and seal blubber.

$9 trillion in actual debt held by people outstanding today less $1 trillion from the sale of Alaska to the Rooskies…check. Net 'real' debt (as opposed to the illusory intragovernmental 'Social Security Trust Fund Debt') would now be $8 trillion and declining.

But you also have to reduce current spending so you don’t keep adding on more debt and never get out of it, don’t you?

So using the rules of Congress vis-à-vis the banks, let’s restructure corporate compensation. That means the President’s salary will be cut 30% to $300,000 per year (dirt-cheap for that job, isn’t it?) and every Congressperson and Senator gets their salaries cut from $177,000 to about $130,000.

And every staffer gets their salaries cut commensurately down the line.

But that only saves maybe $10 billion total across the entire government. We gotta find $1.6 trillion in annual savings, not just mere billions.

So, here we go:
  1. We can cut the entire defense budget of $700 billion plus the entire domestic discretionary budget of another $700 billion and just about get there, can’t we? All we will have left is ‘a government of the old/poor people (SS/Medicare/Medicaid), by the taxpayers and for the old/poor people. Nothing more, nothing less.
  2. Conversely, we can cut the entire SS and Medicare budgets to zero and save about $1.4 trillion per year that way. Sure, that means we will throw all the old people out of their retirement homes but we’ll have a balanced budget finally, won’t we?
  3. Or the last option would be to cut the entire Medicaid budget down to zero and either eliminate SS or the defense budget, take your pick. They are all about the same size so we’ll have to choose one or the other, but not keep ALL of the spending intact like we have in the past.
Maybe we can sell Texas and California back to the Mexicans while we are at it. California is going to fall into the Pacific Ocean anyway one day so why not get something of value for it before the Big One hits the San Andreas Fault?

There you have it, the stark choices all laid out for you, the American people, to decide what it would take immediately to get out of this fiery furnace of financial ineptitude we find ourselves now in.

And we all know that none of the above things will ever happen.  That is why we have to be a little more mature than the average kindergartner and start talking about such serious issues as curtailing the spiraling costs of health care inflation by addressing tort reform; defensive medical practices; raising the eligibility age in Medicare to 70 among about $10 trillion worth of other spending reductions and reforms we have advocated in the 222 previous postings here on Telemachus.

(If you can't find the resources or references here on this blog somewhere, you don't need to know it, we promise)

We need to reduce and reform spending in every sector of the federal budget from defense to education to welfare to Medicare to Medicaid to Social Security.  There is not ONE single federal line-item in the budget that can be truthfully called '100% spending efficient and critical in total', except payment of net interest on the debt on time.  We fail to do make timely interest payments and then we truly do enter The Twilight Zone on creditworthiness and financing for the future.

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