The 'Cliff' - Part 2

This was more than I expected when I started the cliff part one.  In that blog I said there was a couple things we could do, and went on to discuss mainly one, the issue of taxation and whether it should go up or what is fair.  Now I would like to turn our attention to a second discussion, which no one seems to be having:  Spending Cuts.

Spending cuts is another way to deal with our financial crisis, but it is a little more difficult because the dollars spent here do affect peoples lives.  Or do they?

The Federal budget has several sections to it.  One section, called discretionary spending, are the things like defense, foreign aid, or anything that is not 'locked' in place.  Discretionary spending is 40% of the budget.  Defense appropriations are discretionary.  Mandatory spending is spending that has been set by law.  Mandatory spending includes things like Social Security, Medicare, Medicaid, and other programs generally considered 'entitlements'.  And mandatory spending accounts for over 60% of the budget.  And this is where laws would have to be modified to accomplish cuts.  This is also the area that would bring the lobbyists down on Congress en masse.  And it is spending we as a country must tackle in order to put our fiscal house in order.

Interest on the national debt is a mandatory spending item, it goes to our character as a nation.  The only way to reduce interest expense is to lower the debt.  Nothing currently being presented in Washington has any debt reduction.  Balancing the budget does not necessarily reduce the debt.  Past Congresses have spent money they didn't have, that is debt.  The debt has been accumulating primarily since the last world war.  To put things in perspective, lets look at a typical family.  They can deficit spend by using credit cards, but they then have interest to pay on those cards.  If they continue to overspend then eventually the interest eats up their entire paycheck, that is bankruptcy.

Congress has used the credit card for too long.  Some people are not capable of wise use of credit, Congress is one of them.  There is not one program we can 'cut' that will solve our problem.  Defense could be eliminated and there is still a problem, foreign aid dropped to zero and still there is a problem.  That problem is that Congress, and this is both sides, is drunk with spending money. 

To illustrate this, we need no more than to look at history.  In 1992 Bill Clinton was elected.  The electorate was so disillusioned with his performance, and that of his party in Congress, that they changed the whole shape of Congress in 1994.  For the first time since the New Deal, the House and Senate were controlled by Republicans.  With Republicans being considered the 'conservative' party, one would think that the debt would have shrunk.  It did not, it did slow down as surpluses were run in the budgets, but over all debt grew.  The Republican Congress, like previous Democrat Congresses, found that spending money was fun. 

Up until the early 1900s, there was no debt problem at the federal level.  And there are times when running a deficit is good, and required.  It is when there is no intention to ever pay that debt off that Congress becomes in my book criminal.  We hear all the time about how much each person owes as their part of the debt, problem is that blame is never assigned to those who run up the debt.  To personalize this, if I went wild with the credit cards similar to Congress, my wife would have me committed and the cards burned.  But Congress never seems to get blamed for spending too much, only for spending too little.  Until that changes, which may be never, the really big problem in the room will not go away.

So what is the solution?  I have ideas, but there are probably many more.  The thing is, will the solutions ever get to Washington.