The Agenda

Step Away From the Fiscal Cliff


Step Away From the Fiscal Cliff

Photo illustration by 731; Obama: Ron Sachs/Getty Images; Treasury: Andrew Harrer/Bloomberg

In the coming months the same president and largely the same Congress will try to fix the same problem: How to bring the $1.1 trillion federal deficit and $11.3 trillion public debt under control. More immediately, they need to avoid the brutal automatic cuts and tax hikes that will take place in January unless President Obama and congressional Republicans can reach some sort of deal. Although Republicans and Democrats persist in making it seem like bringing spending in line with revenue is some form of particle physics, there’s actually no mystery to the calculations. The money will come out of the nation’s $2 trillion entitlement programs. It will come out of the Pentagon’s $680 billion budget. And it will come from tax increases. There will be plenty of arguing over what to cut. There’s no arguing where the money is.

Except, of course, in Washington. Even after the failed 2011 debt negotiations set the country on course to this fiscal cliff, Republicans insist that the savings can be found elsewhere, no military cuts or tax hikes necessary. Paul Ryan, still the chair of the House Budget Committee—he lost the vice presidency but won an eighth congressional term with 55 percent of the vote in his district—has proposed, over the next 10 years, to cut in half the “nonsecurity discretionary spending” that makes up the rest of the federal budget. “That sounds OK until you start to look at what’s there,” says Philip Joyce, a professor at the University of Maryland School of Public Policy who spent five years with the Congressional Budget Office. “You’re talking Commerce, you’re talking NOAA, the weather service, the Economic Development Administration … they do real things.”

Outside the Capitol, nonsecurity discretionary spending is what people think of as “the government.” It includes the Treasury Department, the Department of Justice, the EPA, the FBI, and FEMA. These are services that are mostly necessary and desirable even by the standards of many small-government Republicans. They’re cheap, too. In 2011 this spending cost $371 billion, 10 percent of the total federal budget.

In a primary debate last November, Texas Governor Rick Perry remembered two departments he’d eliminate as president: Commerce and Education. Together last year, that duo cost $74 billion—2 percent of federal outlays, and 6 percent of the deficit. The Corporation for Public Broadcasting, which Mitt Romney said he’d cut out of the budget, requested less than $500 million this year, a comically small slice of the problem. But let’s make the calculation easy, and cut it all—the whole federal government aside from the Pentagon and entitlements. Fire every one of the 2.8 million federal employees, close the buildings they work in, and eliminate the government services they provide and … you wouldn’t even get the budget-cutters a third of the way toward eliminating the annual federal deficit. What’s more, since the projected growth in costs over the next decades comes almost entirely from entitlements, the amount that goes to the rest of government will become an even smaller part of the problem in the future.

Yes, there’s maddening inefficiency in government agencies. Getting rid of it is hard. “There is no line item in these departments that reads ‘waste, fraud and abuse,’” says Joyce. Almost all 20th century presidents have attempted to reorganize agencies or make them more efficient; but entropy keeps winning. That isn’t to say it’s not worth doing. It’s just a matter of priorities—and of recognizing that the conversation we can have about whether to shrink the Department of Education is not the same as the one we must have about how to shrink the federal debt.

The bottom line: Eliminating all government spending except military and entitlements will only save $371 billion—a third of the federal budget deficit.

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Greeley is a staff writer for Bloomberg Businessweek in New York.

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