RANCHO SANTA FE, Ca., November 10, 2014 – The United States’ economic recovery has been slowed by the absence of a well-defined economic policy. It also seems to have been limited to the rich and missed entirely by the poor; the latter of which has been supplemented by individuals who were formerly members of the ever-dwindling middle class.
Far too often, federal programs dramatically exceed their cost projections and fail to deliver their “guaranteed” savings or accomplish their stated objectives. Meanwhile, the national debt continues to skyrocket.
A funny thing happens when we don’t have an economic policy: Fiscal chaos. Some of the impact is good and some of it is bad. The positive is celebrated as a political achievement while the negative is assigned a political blame. The problem is that progress is almost left to random chance.
We addressed that issue when we created an economic policy statement in Part 1 of this series (FREEDOM: Not having an economic policy is expensive). Now, it is time to explore a few applications.
Congress’ authority to “lay and collect Taxes, Imposts and Excises” is granted “to pay the Debts… of the United States” that are incurred for a relatively narrow range of purposes; i.e., “to provide for the common Defence (sic) and general Welfare of the United States.” What if Congress were to be held to those two specific standards?
Debt incurred to fund programs designed “to provide for the common Defence (sic) … of the United States” is relatively easy to identify. The key is to assure that any such expenditure is necessary as opposed to politically expedient. The test is relatively straightforward: Is a program strategically essential to our Nation’s defense or is it driven by lobbies or to score political points through the delivery of a needless Defense contract to a particular State or District? This simple examination might save tens of billions of dollars with respect to the Defense budget and more effectively equip and support our military personnel.
Debt incurred to fund programs designed “to provide for the… general Welfare… of the United States” represents a more nebulous challenge in auditing. However, the litmus test is whether a particular program inures to the benefit of the general population of the United States as opposed to a narrower constituency that might serve political purposes rather than public ones (i.e., programs crafted to benefit particular lobbies or demographic groups that traditionally support one of the major Parties either with money, votes, or both). This analysis has the potential to eliminate a myriad of federal programs that currently absorb tens of billions of taxpayer dollars that are not constitutionally supportable.
This does not mean that benevolent programs would disappear from the landscape. It simply means that they would need to be addressed within the private sector or at the State and local levels (as per the Ninth and Tenth Amendments, respectively).
This decentralized approach provides an opportunity to tailor programs to meet the needs of citizens within a particular geographic area rather than apply the “one size fits all” solutions that federal programs require. Correspondingly, residents are likely to have a much greater “say” in how the programs are structured if they are administered at a State or local level, which should produce more efficient and effective operations.
These two fundamental changes (with regard to Defense and general Welfare) significantly decrease the federal government’s funding requirements, which should translate into an ability to reduce the national debt and lower taxes. Lowering the debt has the added benefit of reducing interest payments that otherwise represent an inefficient use of federal tax dollars. Similarly, cutting federal taxes frees capital for private sector reinvestment or to be recaptured by State or local taxing authorities to underwrite programs that are custom designed for their residents.
Next: The federal government needs to intelligently address its controllable expenses. It needs to recognize the fiduciary duty it has to exercise fiscal responsibility.
For example: Congressional and Presidential travel should be closely scrutinized. Currently, Congressional junkets to foreign countries generally have little direct connection to the defined responsibilities of our Senators and Representatives. Too often, these serve as little more than perks. An efficient Department of State should be able to establish foreign relations and gather whatever information might be necessary to provide Congressional leadership with the data upon which effective legislative decision can be made.
Absent a “show of cause,” why not limit Congressional travel to that which is required to journey between Washington, D.C., and each Senator’s State and Representative’s District?
Similarly, the President is paraded around the country at considerable taxpayer expense ($181,000 per hour for the operation of Air Force One alone) to fundraise for his Party and campaign on behalf of other Party candidates (although the latter has diminished in alignment with his ratings). These trips have absolutely nothing to do with the President’s responsibilities, and on those occasions when the law requires the Parties to reimburse the People for such excursions, reimbursement is ridiculously limited to the ordinary cost of a first class ticket. If the Parties were required to fully reimburse the People, the Parties would necessarily find some other way to raise money and promote their candidates rather than diverting our President’s time.
There are a plethora of other areas in which the Legislative and Executive waste can be eliminated at the individual level. However, the really big savings lie within the departments and agencies that no longer function with clarity.
In 2010, retiring Sen. Tom Coburn (R-OK) sponsored two pieces of legislation to address this issue. One bill requires the Government Accountability Office (GAO) to identify areas of fragmentation, redundancy and duplication within federal programs. The second bill requires the Office of Management and Budget (OMB) to publish an inventory of all federal programs on the Internet.
The GAO has done its job every year by pinpointing hundreds of billions of dollars of potential savings and revenue enhancement initiatives that have largely been ignored by the Administration. At a minimum, these recommendations should be the starting point for building a more efficient and effective federal government, and they should be implemented before any new non-emergency programs can be launched or any tax increases or other new revenue alternatives can be considered.
Conversely, the OMB cannot even name its federal programs. Rather than applying a uniform definition as to what constitutes a program, the OMB left the definition to the discretion of each agency. As a result, in one segment of agencies, the OMB listed less than half of the federal programs that the GAO was able to find (using a consistent definition).
Perhaps this reflects upon a greater issue: Allowing various groups within the Government to apply inconsistent definitions or amend them to generate the results that better serve their purpose. Until every department, agency and branch of government conforms to the same rules, we will continue to receive relatively useless reports (e.g., inflation, job numbers, unemployment, etc.) and the Government will continue to squander taxpayer dollars.
For the sake of brevity, let’s just list a few other obvious steps the Government can take to reduce waste, produce jobs, improve skills, and expand the economy. Specifically:
- Consolidate departments and agencies to the degree possible to reduce costs and improve operating efficiencies;
- Institute a freeze on all non-critical federal hiring (including contract workers) as the Government orchestrates a reduction in forces through managed attrition and performance evaluations (driven by an adherence to Article I, Section 8);
- Redeploy unused federal buildings to stimulate economic expansion and job growth by making such facilities available rent free (to create more operating capital or improve accessibility) for the following tenants: Entrepreneurial start-ups (available for a period of five years or until they achieve two consecutive years of profitability); charitable 501(c)3 organizations (to increase the private sector’s ability to address special interests in lieu of Government intervention and expense); and community colleges and trade schools that teach marketable job skills particularly (see the related article President: You’d sell 14,000 buildings; I’d use them, February 15, 2012);
- Provide public sector jobs and/or training opportunities (in lieu of work assignments) for all current recipients of Government assistance who are of able mind and body to restore hope and reinforce pride in an effort to break the cycle of dependence as well as to supplement federal staffing at little to no incremental cost (note that ongoing assistance would be contingent upon participation);
- Deploy this above mentioned workforce to repair, maintain and update federal infrastructure such as interstate highways, railways, airport facilities, and military bases prioritized on a basis of their impact on safety, military readiness, and commerce
- Further deploy such workforce to improve healthcare delivery by providing public sector employees to supplement the sanitary maintenance of healthcare facilities in an effort to reduce morbidity and mortality caused by healthcare-associated illness (g., CDF, MRSA, VRE, etc.)
- Design a tax incentive for businesses that create and maintain new jobs in the United States (e., by providing businesses with a tax credit equal to a 10 percent reduction in their current tax rate for every 10 percent increase in U.S.-based jobs they create year-over-year);
- Provide a tax incentive to businesses that hire individuals who are currently receiving unemployment compensation equal to the lesser of one year’s unemployment compensation or the remainder of such individuals’ unemployment compensation coverage;
- Share declassified, taxpayer-funded, Intellectual Property (IP), without charge, with United States businesses that use such IP to reduce R&D costs and time to market for products manufactured within the United States while permitting such IP to also be used by such companies off-shore subject to a licensing fee designed to recapture taxpayer investment and fund additional IP development;
- Replace the 70,000+ page tax code with an equitable flat income tax rate indexed to GDP (as described in Part 1) and adjusted to apply only above recommended thresholds associated with the poverty level;
- Establish a uniform corporate tax rate based upon the average of the lowest quartile of the G20 countries to firmly establish our Nation’s global competitiveness;
- Audit the Federal Reserve; and
- Audit the mission and impact of critical legislation of economic significance to determine whether it should stand, be revised, or be repealed, including but not limited to: Glass-Steagall, The Public Company Accounting Reform and Investor Protection Act (Sarbanes-Oxley), The Troubled Assets Relief Program (TARP), The American Recovery and Reinvestment Plan (Stimulus), The Patient Protection and Affordable Care Act (ACA), and The Wall Street Reform and Consumer Protection Act (Dodd-Frank).
These suggestions represent some of the “low hanging fruit” that could be explored to restructure our Government’s focus and expenditures.
If, in an effort to avoid withdrawal symptoms, the Government has to identify a new program that complies with the concept of providing for the general Welfare of the United States, perhaps it should consider funding a campaign that educates the People in how they can take action without Government intervention to help close the growing income gap that exists between the dwindling middle class and the uber-rich.
“We the People” can cast our “dollar votes” every day in a free market system. We are not restricted to taking action on a single day every other year as is the case in the world of politics.
Shareholder pressure can be used to narrow the sometimes extreme compensation gap that exists between workers and senior executives in publicly-traded companies. It is a matter of educating shareholders to understand how a private sector “redistribution” of exorbitant executive salaries inures to their benefit.
It is difficult to rationalize executive compensation packages that strip tens of millions of dollars from a corporation to compensate a select few. As soon as shareholders recognize that those same funds could have been used for other purposes that offer a higher return on investment, they may be inclined to pressure their Boards to take action accordingly.
For example, which of the following scenarios offers the greatest return on investment: Paying a CEO $55 million or finding a competent CEO who is willing to perform the role for $5 million (still a princely sum) and redeploying the recaptured capital ($50 million dollars) either by significantly expanding the workforce, investing in productivity enhancements, or distributing it in the form of dividends?
The first of the alternative investments creates jobs and expands the economy through the company’s added capacity. The second alternative also creates jobs and expands the economy (both directly through the company and indirectly through the vendor network) as does the third. Note that with respect to dividend distribution, the job creation and economic expansion come from the spending of such dividends, the saving of such dividends (which expands the banking industry’s ability to fund businesses), or through the impact of its reinvestment in the same or other stocks.
If the Government feels compelled to launch a fresh program, let it be one that actually can close the income gap through private sector initiatives that do not layer regulatory costs on businesses. Educate the People and let them exercise the real power of the purse.
Of course, there is a risk associated with educating the People. They may become more informed voters as well.
What solutions can you offer? Would you rather be in control of your future, or would you rather delegate it to your elected officials to dictate? Think about it.
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TJ O’Hara provides nonpartisan political commentary every other Monday on The Daily Ledger, one of One America News Network’s featured shows (check local cable listings for the channel in your area or watch online at 8:00 PM and Midnight PM Eastern / 5:00 and 9:00 PM Pacific.