"They're pretty representative" came from Paul Vail, Professor of Economics at Miami University in Oxford, Ohio. He was commenting on why the public shouldn't be so dismissive of Congress for its overall perceived incompetence, because representatives actually mirror their constituents — and that was in 1976! While he wasn't specifically addressing the federal budget then, his statement about us is still accurate today.
Looking at our federal budget deficit, we wonder incredulously: how did we manage to get into this mess?! A large part of the problem centers on the misuse of the word "entitlement," which was discussed in my last article. [READ "'Entitlements' vs. 'Unearned Outlays' and Their Impact on the Federal Budget."] The inability to separate what is truly "entitled" (payments to those who have contributed to the system for years) from "unearned outlays" (payments to help those in need who may not have contributed) cripples the budget negotiation process.
This part of our budget problem can be described as structural. It's like a house which has a second story way too big for the first floor – and no stairs to connect them. It's unwieldy and doomed. Such a dilemma should be obvious to all who see. We can continue to dance around the issue by putting up exterior ladders or landing helicopters on the roof to deliver necessities, etc. Deep down, however, we know it's not sustainable.
The other problems hitting the budget process are like termites. They won't bring the house down immediately, but they eat away at the structure over time. When they're discovered, a lot of damage has occurred. But just like a homeowner with a termite problem, the federal budget can be fixed if we are willing to overcome the embarrassment of unrealistic promises and remedy it promptly.
So, what exactly are these budget termites?
Therein lies a source of our predicament. For some of the Baby Boomers and many born later, we have to start with explaining what "your virtue" means. The outfall of the "liberated 1960s" has embedded the belief that "we can have our cake and eat it, too" in society. While some of the moral consequences of altered social mores may not have been immediately obvious, the financial penalties aren't waiting.
#22- Parity for exclusion from income for employer-provided mass transit and parking benefits.
This is a good illustration of the federal government trying to fix the injury of injustice, but the culprit escapes. In 2013, mass-transit riders going to work could set aside up to $245 per month of pre-tax income and drivers the same to offset parking fees. With this expiration, mass-transit riders' pre-tax allowance falls back to $130 per month while the drivers', tied to inflation, rises to $250. This also covers those employers who issue prepaid transit cards to employees.
Of course, mass-transit users became unhappy and others said it unfairly promoted driving to work and promoting pollution. Sen. Charles Schumer (D-NY) said that "mass transit is the lifeblood of New York and this provision (the $245) keeps it flowing and affordable."6 Why isn't it occurring to anyone that the problem is not with unfair tax breaks, but either the NYC employers aren't paying employees enough, that mass-transit charges are excessive or simply employees have designated this as an entitlement, I mean, unearned payout?
#26- Three-year depreciation for race horses two years old or younger and #28- Seven-year recovery period for motorsports entertainment complexes.
Before we frown on these two racing industries, it must be remembered that theme and amusement parks also have a special seven-year recovery period. These three contrast with the usual 15-year recovery for land improvements.5 Now we can frown on all three… Incidentally, are horses suddenly experiencing shorter life expectancies?
The objection is not that teachers are being reimbursed, but that they should be able to be reimbursed by their school or district, or by their state in a worst case scenario. Why is the fed being invited to participate in what must be a local issue (the intrusive Obamacore notwithstanding)?
So, cost savings aren't sufficient to provide incentive for buying them?
Then the clincher: "the banks that got TARP not only didn't use the money to boost lending, they actually cut their lending, at least when it came to small businesses, and that drop was larger than at banks that didn't get TARP."10 Fan-tas-tic.
4) The federal flood insurance program is a nice warm and fuzzy group of expenditures which needs to be overhauled if it is to survive. It is currently looking at a debt of $27 billion. While just "1 percent of the properties for which claims are filed have repeat claims," they make up "more than 40 percent of the money spent by the insurance program to repair or rebuild structures." In addition, "In many cases, the property owners filing multiple claims have been paying lower, subsidized insurance rates because they live in older homes grandfathered into the program."12 We just cannot maintain the old ways.
5) Immigration. No, it's not in the way many would jump to a conclusion. In fact, those undocumenteds working with fake I.D.'s are actually helping the federal budget. They are contributing to a retirement system for which they will never be able to collect under that identity!
Rather, the eleven million who are here, but not officially, are not part of the tax base. Now this is not to suggest a sudden, blanket amnesty. That would be discouraging to those who entered legally but, more importantly, undermine respect for law overall. There's enough of that emanating from the White House already. We need a fair and just path to citizenship. It should include penalties, but making this 3+% of our population become a real part of our economy is both moral and beneficial to all.
Conclusion: It's not about spending more and more money, but spending it wisely.
Now, Cosmo's solution was along the lines of becoming a self-appointed Big Brother, again, not unlike the current Administration. However, we don't need to debase the dignity of human life to fix things. A willingness to look at the whole of the United States, not just our own little corner, will go a long way toward fiscal solvency.
12 – from "Repeated claims imperil fed budgets," by James Pilcher, Cincinnati Enquirer, 2/9/2014.