Probably not the best time to say ‘no’ to spending cuts

Joseph Moser Contributor
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The government will not shut down — a least not for another two weeks. President Obama signed a measure last Wednesday that would finance the government until March 18th. The plan cut only $4 billion in spending from a budget that will overspend by $1.5 trillion.

While this wave of red ink is about to engulf our entire economy, these small cuts do represent a change in spending policy in Washington. Now, Republicans and Democrats are battling it out over a broader spending plan for the rest of the fiscal year. But many still seem hard-pressed to make any serious cuts whatsoever.

Last November, Republicans won big on a platform of getting out-of-control spending under control, and recent polls continue to indicate that Americans have a strong desire for spending cuts. Most striking is data from a recent Rasmussen poll showing that 59% of voters not affiliated with either major party want the government to shut down until the two sides can agree on spending cuts.

Democrats, in particular, do not seem to be listening. They are completely dismissing a plan to cut more than $60 billion from the federal budget over the remaining seven months of the fiscal year. The House-approved measure would eliminate billions in funding for Obamacare and Wall Street “reform” laws, bar any federal agency from spending money on implementing the new health care law, and limit the activities of the Environmental Protection Agency and public broadcasting.

These cuts tiptoe around the issue of government overspending, but at least they are a start in tackling a federal budget that has doubled over the last decade, ballooning to a whopping $3.8 trillion. Budget deficits surged to $1.4 trillion in 2009 and $1.3 trillion in 2010, according to the CBO. Respectively, they represented 10.0 percent and 8.9 percent of the nation’s output — the largest since 1945.  If current laws remain unchanged, CBO estimates that the 2011 deficit will be $1.5 trillion, or 9.8 percent of GDP.

In light of these daunting figures and their harmful implications on future economic growth, Senate Democrats still balked at the House spending cut bill. They actually said the cuts, which amount to a measly 1.7 percent of the entire budget, were too deep and indiscriminate. These Democrats are simply playing politics, stalling the budget process in an effort to protect President Obama’s signature — but fiscally irresponsible — healthcare and Wall Street “reform” legislation. So far, the only proposal coming from Democrats is another short-term extension of funding at 2010 levels through March 31st. This is unacceptable to a country that demands spending restraint.

Meanwhile, trillions more in debt and unfunded liabilities exist at the state and local governments. Here, too, Democrats are resisting any serious spending cuts or reforms, even as they face a combined total of more than $130 billion in budget shortfalls this year. Democrats in Wisconsin and Indiana actually fled to Illinois, shacking up in hotels near their respective borders. Abdicating their duty to legislate, they are grinding the legislative process to a halt to hold up key votes on public-sector collective bargaining and benefit contribution reforms. Both are key cost drivers in states.

It’s clear that these lawmakers are simply trying to protect their political benefactors: unionized government workers whose dues are funneled to union bosses to re-elect the same people — all at the taxpayer’s expense. Nationwide, the average state or local public employee received $39.66 in total compensation per hour versus $27.42 for private workers in 2009, according to the Wall Street Journal. That means for every $1 in pay and benefits a private employee earned, a state or local government worker received $1.45. Comparatively, Wisconsin state employees earn over $70,000 in pay and benefits, about $15,000 more than the average private-sector employee.

But these current fiscal problems are petty compared to the long-term benefit commitments politicians have made to retirees. States currently face about $3.2 trillion in unfunded pension liabilities according to various studies. In particular, Wisconsin’s pension plan is underfunded by a whopping $56 billion, according to economists Robert Novy-Marx and Joshua Rauh. For perspective, the Wisconsin government collected only $15 billion in tax revenue in all of 2009.

Whether Democrats like it or not, the federal and state governments need financial reform. Simply kicking difficult decisions down the road will only make future negotiations tougher. This is not what Americans are looking for from their lawmakers. And anyone who fails to realize this should be ready for a rude awakening come election season.

Joseph E. Moser is a development associate at Americans for Prosperity Foundation in Arlington, VA.