Thursday, August 6, 2009

Where are the Leaders?

Whenever we talk with friends and colleagues about trimming the federal budget or raising taxes, the inevitable response is “Politicians don’t suggest those things because people don’t want them.” This is undoubtedly true. Left to our own devices, no one wants to make hard decisions, like paying more money to the government or turning down a contract between the federal government and a local business that provides money and jobs to our neighbors.

But just because we don’t automatically want a smaller budget or higher taxes doesn’t mean we can’t be convinced that those things are in our best interest. Where are the leaders to convince us? Who is in government today that can say, “These are hard decisions, but they will make us all better off by leading into this plan…” and then gives us a plan for us to collectively sacrifice for our national benefit? Who?

We’d vote for that candidate and support them for higher office. But we haven’t seen anyone who will make a genuine and not token call to sacrifice.

Monday, August 3, 2009

Turn Federal Pensions into De Facto 401(k)s

It's one of the worst kept secrets in Washington that entitlement spending constitutes most of the federal budget. How exactly does that break down? Here's a brief outline of entitlement programs as a percentage of total US government spending in 2003:

Social Security: 23% Medicare: 12% Medicaid: 7% Other Means-tested entitlements: 6% Mandatory payments (pensions, etc.): 6%

Together, these five categories consumed 54% of the federal budget. By comparison, in 2008, the US government spent 21% of its budget on the military, which is frequently mis-cited as the largest sector of federal government spending (although it is the largest sector of federal government discretionary spending).

We have already touched upon the first category, social security: raise the national retirement age to 70. Although we plan on revisiting that, today we would like to bring up the final sector: mandatory payments, specifically pensions.

Currently, federal pensions are disbursed based on a guaranteed payout system. If you work for 20, 30, 40, etc. years, you are guaranteed a predetermined monthly payment. We used to call this a pension system, but we stopped doing that as fewer and fewer companies offered pensions, opting instead for 401(k) plans.

Why not follow the lead of those companies? The federal government should stop offering a guaranteed payout to its workers after they retire. Instead, the US government should determine how much would be required for the employee him/herself to invest each year for the next few decades at 7% annual interest to receive the same predetermined payout in 20, 30, or 40, etc. years as they are now guaranteed. Every salary should then be increased that amount (after taxes, of course). This would provide a short-term expense for the federal government (the increased salary), but long-term savings, as Washington would not be on the hook for enormous quasi-salary payments to former employees who are no longer in public service (no more pension payments).

A natural concern: most federal employees won’t invest that money. An easy solution: automatically place that money in a 401(k)-like instrument. For bookkeeping purposes, it’s the same thing. For employees, it provides similar a similar retirement plan.

This requires a definite sacrifice by federal employees. They must make the hard choice to forgo a guaranteed pension when they retire. But such a sacrifice will provide great returns to our kids, as the pensions of retired federal employees will not burden future federal budgets. The patriotic sacrifice of these employees will further secure the future of the nation they proudly serve.

Sunday, July 26, 2009

Bush’s Original Sin Revisited

To the Sacrifice Generation, the original sin of President George W. Bush was that in the wake of the September 11th attacks he gave no call for national sacrifice. He had an approval rating in the 90s, the good will of the nation, and the political capital to ask for the moon and get it from the American population. We would have saved more money. We would have sent our children to war in numbers that rivaled World War II. We would have committed ourselves to complete reimaginings of healthcare, social security, NASA, transportation, or energy. We would have done anything. “Fortunately” for us, all he asked was what we already wanted to do: shop.

His clarion call for national action consisted of asking Americans to mob malls and conspicuously consume in order to support the American economy. There was no call for sacrifice. There was no was request that we put aside personal good for common good.

Howard Kurtz has noted that President Obama is repeating that original sin. He has refused to ask Americans to sacrifice for a national healthcare plan. This is inexcusable. We’ve already posted that healthcare isn’t cheap and shouldn’t be treated like it is. The president owes it to the country to level with us: “This will be expensive. This will be costly. But it will be worthwhile. It will help the country. I am asking you all to sacrifice now to make our children better off.”

Americans will respond to this challenge. We want this challenge. Our country has always found its better angels when giving of itself to forward a cause worthwhile. We are better than the president is giving us credit for.

Wednesday, July 22, 2009

Stop Saying Its Cheap

We heard New Hampshire Representative Carol Shea-Porter speak on Monday about the health care legislation Congress is currently batting around. She said something that caught our attention: “The Congressional Budget Office estimates that this plan will only cost a postage stamp per person per day.” We understand why she said this. A postage stamp is an appealing rhetorical device. It’s cheap and convinces listeners that the health care package will be inexpensive.

But that’s not true, and most people either know it or are thinking it already. The health care bill is estimated to cost around $1 trillion. (The US Postal Service would kill for that much mail to be sent!) Telling Americans that they can have an effective national health care system on the cheap undercuts the integrity of the speaker and the appreciation of the listener for such a system.

It’s a cliché that you can’t get something for nothing, but clichés exist for a reason. So when it comes to important national decisions – health care, the wars in the Middle East, the senior citizen prescription drug program, etc. – why do we allow ourselves to be talked into going along with programs that are described as costing “only a postage stamp a day?” Or as “paying for themselves?” We’re getting something for nothing, and then when that programs turns out to be less than we imagined we have the nerve to be surprised and even angry.

What we wish we had heard Rep. Shea-Porter, other representatives, and senators say was something like this: “The health care package is expensive. It should be. If we expect this to lower costs in the future, we have to pay upfront. That’s the way life works. If you want an annuity that pays $100,000 a year for 30 years, you can’t pay $100 up front. You have to pay a lot more. We’re going to reap the benefits of this for decades to come: better care for more people for less money. Ultimately. Right now we have to sacrifice.”

This country was founded and made great by willing sacrifices from our forerunners. We will do the same. But we need to be asked. We need to be organized to make that sacrifice.

Sunday, July 19, 2009

Harry Potter and the Vatican Know Sacrifice is Necessary

The Vatican's newspaper, L'Osservatore Romano, approved of the new Harry Potter movie recently, noting that it accurately depicts that "good is right" and that "sometimes this requires hardwork and sacrifice." This advice could be given to the entire American nation right now: in order to do good, we must sacrifice now.

Tuesday, July 14, 2009

Sacrifice means giving things up

Thus far in this space we have written mostly about giving up low taxes, an early retirement, etc. In many ways, these are the easier sacrifices to make. The easier of the hard choices. In this post, we’d like to address what, in many ways, are much harder hard choices: dropping government programs.

In order to secure the solvency of federal, state and even local governments, it will likely be necessary to shrink those governments. This will require choosing priorities. We haven’t done that very well for a long time. When President Obama described his philosophy of government, he emphasized that he would continue the programs that worked and eliminate the programs that did not. But he never mentioned whether he would consider whether the government should even engage itself in those programs.

What follows are three suggested types of programs that could be eliminated. We do not also suggest that these will be easy choices. But of all the areas that the government is in, we believe that these either could be eliminated or should be in the discussion as to what is eliminated.

  • Arts Programs. Some of the government-sponsored art programs do not provide a significant return on our investment. Many do not significantly improve education systems or increase property values in the communities where they occur. The government should examine the benefits of each art program to determine whether they result in more than merely excess art. To justify government funding, art programs must accomplish more.
  • Farm Aid. There are small-government urban legends that feature landowners in farming areas who have no intention of farming but who still receive farming subsidies. The extent of the truth of these legends is unclear, but as a general principal, we should not pay non-farmers not to farm. Nor should we pay subsidies to profitable farms; that’s what their customers are for.
  • Defense Programs. Surprisingly, Donald Rumsfeld was spot on correct about the nature of our defense program. It’s too big, too archaic. We have a hard time responding to the modern threats of rogue states, terrorist cells, and independent actors. Much of our military is still geared toward engaging in two-front, traditional land-based wars. But almost everyone agrees that those types of wars don’t happen anymore. We tried to fight one of those wars in Iraq, and couldn’t make the new paradigm bend to the old paradigm. Our bloated military budget encourages large and expensive equipment that is not as necessary to our defense as it was during the Cold War.

Again, we don’t expect these to be popular cuts. We expect everyone in the country to take exception to at least one of the broad programs we have recommended making cuts to. But making these hard choices today will help us examine our priorities and make our governments work better. Our hard choices to today will lead to better governance for our children.

Friday, July 10, 2009

Sacrificing Articles

We've been pleased to discover a number of excellent articles and blog entries about the idea of sacrifice, either personal or societal. Check out the links:

David Leonhardt's Economix entry about Club Wagner and his follow up entry

David Brooks' article about shifting from a consumption-based economy to an investment-and research-based economy

Froma Harrop's column relies on the 91% tax rate during the Eisenhower era to argue for higher taxes

Joe Klein on Obama's need to make hard choices

New parents are sacrificing new and expensive for second hand and cheap