Of Spending and Freezes

All Presidents Are Vexed About Spending

"We shouldn't just give our people a government that's more affordable. We should give them a government that's more competent and more efficient. We can't win the future with a government of the past," the president said, “We live and do business in the Information Age, but the last major reorganization of the government happened in the age of black-and-white TV. There are 12 different agencies that deal with exports. There are at least five different agencies that deal with housing policy. Then there's my favorite example: The Interior Department is in charge of salmon while they're in freshwater, but the Commerce Department handles them when they're in saltwater. I hear it gets even more complicated once they're smoked."

The above quote is President Barack Obama, in his State of the Union speech 12 years ago, expressing frustration with the unwieldy inefficiencies and bloated costs of the Federal Government. President Obama, like most presidents, struggled with delivering a responsive, efficient and affordable Federal government. Indeed, the Simpson-Bowles, report of December 1, 2010, was a bipartisan road map to a revamped government. Despite his administration commissioning the study, Obama could not persuade Congress to make it law.

Many presidents fought the battle over wasteful spending. President Harry S. Truman rose to prominence and ultimately the oval office with this dogged pursuit of wasteful spending in World War II. NPR’s Steve Drummond, author (and Common Bridge guest Episode 212) wrote about needing moral stewardship over tax money during a global conflict in his book in his book “The Watchdog – How the Truman Committee Battled Corruption and Helped Win World War II”

When Jimmy Carter took office in 1977, he understood the need to get budget discipline. Carter invoked his “zero-base” budget program. Zero-based budgeting assumes that no spend is necessary, a departure from standard bureaucratic budgeting where a division, department or agency starts with all the spend from the prior year’s budget and then seeks to justify that spend and add to it.

Ronald Reagan implemented tax rate cuts. Contrary to popular myth, President Reagan did not invoke tax cuts, which are different than tax rate cuts. A simple review of treasury receipts showed a 22% increase (adjusted for inflation) in Federal tax receipts during Reagan’s tenure. Revenue from taxes soared $392 billion, from a pre-tax rate cut level of $599 billion to $991 billion when Reagan left office. Equally important, our 40th president indexed tax brackets to inflation, eliminating the hidden taxation known as “bracket creep.”

As for spending, even “The Great Communicator” could not conquer the unwieldy spending machine. As eight of his 78 vetoes were overridden with super majorities in the US House and Senate, Reagan quipped, “The closest thing to eternal life on Earth is a government program.”

President Bill Clinton famously slashed the Federal Work Force by some 377,000 personnel, reaching three levels deep into the management ranks with his “Reinventing Government Initiative.” Federal payroll fell from 2.15 million to 1.79 million people. Today there exists a little more than 3 million Federal employees, the highest number since 1994. Critics of President Clinton will point to the unprecedented concurrent expansion of Federal Contractors, with the Project on Government Oversight claiming an increase to 9.1 million employees outside of the constraints of Federal employment.

President Obama was forced to implement sequestration to get needed support for a debt ceiling deal. With an across-the-board target of some $85 billion in mandated cuts, approximately 5% came from nonmilitary spending and 8% from the Department of Defense (DOD). Recall that the slashing of the budget occurred where one might expect it-- personnel reductions.

Spending and the Economy

Of course, with large numbers, comparisons are always difficult. Variance in compilation methods and interpretation of figures are the basis for legitimate controversy. So, the blunt instrument of comparing the percentage of Gross Domestic Product (GDP) with Federal Tax Income and with outlays is subject to debate, but the numbers do tell a story.

President Obama, during his two terms, saw Federal Revenue range from 14.6% to 17.2% of GDP, with spending from a high of 23.3% to a low of 20.6%.

Clinton working with a Republican Congress restrained spending while the internet economy boomed. Clinton contained non-defense spending at 12.6% of GDP. Had future presidents and Congress kept that same level of frugality, the US would have saved $1.6 trillion this year.

President Trump, in his first term, saw tax income steady at 16.3% of GDP. However, COVID-driven spending soared from 20.2% to 32.9% of GDP, the source of record non-wartime deficits. President Joe Biden rang up spending to 25% of GDP, with tax revenue climbing from 17.8% to an estimated 19.4% during his term.

The numbers tell a compelling central theme – that those we elect have tried but could not contain the spending that will imperil our children and grandchildren. Spending is outstripping revenue consistently. (Tune in to The Common Bridge upcoming Episode 264 to hear an economic update from Kerry Killinger about the effect of interest on the ballooning deficit.)

Some Federal Spending is Good.

The nation hasn’t witnessed a relentless release of examples of questionable government spending since the days of Senator William Proxmire and his “Golden Fleece” award. America is united on wanting smart, compassionate spending.

Why is DOGE – A “whole of government” look, not unlike President Obama’s wise move of attempting to deny Federal gun purchase clearance to those on government medical care for certain mental conditions – running into such heated opposition?

Part of the problem of course is the current occupant of the oval office. Mr. Trump’s aggressive and outwardly undisciplined style is not the calm hand on the tiller many would like to see. Even thoughtful people who recognize the need for spending discipline cringe – or are terrified – at the approach of this president. The cringing and fear are understandable, because change may be coming and there is no telling what the contour of that change is going to be.

The biggest objections to spending reform center around the reaction that it is Trump doing the reforming. No one is making the case that the Federal Government operates efficiently and without waste.

Why not Musk?

This morning at the gym, a man was parking his Tesla. I asked him if he liked the vehicle. “Love the car,” he said, “But I do not like the guy (Musk) who runs the company”. Ever a curious type, I asked, “Why not?” The other fellow said it wasn’t personal, he just hated Elon Musk and “didn’t like him running the government.” I didn’t pursue the matter, but administrations back to FDR have utilized Special Advisors for specific purposes. And Musk’s access to the deep secrets inside Federal offices is not without precedent.

Which got me to thinking – one can be of a political persuasion where you are willing to enthusiastically endorse Elon Musk’s work, while simultaneously despising Musk himself.

Musk’s status as a billionaire has become a pejorative in some places. There are different ways to become a billionaire. Like getting a popular electric vehicle to market and having reliable space travel to rescue astronauts stranded in space. In some quarters, Musk is the kind of billionaire that must be resisted, despite backing some Thomas Edison-like inventions. In those same circles, a “good billionaire” is the rotund trust fund baby JB Pritzker of Illinois.

Call me simplistic but it seems when there is innovation needed to fix a big problem, that maybe the guy who has proven how to design and engineer might be better than a guy whose core talent is counting the windfall of his inheritance.

Turnarounds are painful. The DOGE team seems to be doing what any turnaround group would do. First, get the data. Specifically, where is the money going and how is it getting there? I do not know this for a fact, but I would suspect that the hysteria over the DOGE team being able to see Social Security Numbers – if that assertion is true – might mean that they are searching for spending by EIN (Taxpayer identification number).

Looking into the USAID office and discovering how money is being channeled is another smart move. Getting data from the place printing checks is essential. And it isn’t easy.

We do need guardrails and compliance with laws, and especially with the disclosure of confidential information. There is a line between asking for accountability and losing your composure.

Everyone handling confidential information needs to practice the best in physical and electronic security for confidential information. That includes DOGE. While protecting one’s social security number is essential, recall that the same identifier is used to track any transactions over $600 (Biden era rule), and you must give it to Ticketmaster if you want to sell any of your tickets.

So, it seems to me the answer is that it can be acceptable to support the work of DOGE and Musk, even if you don’t like Musk. DOGE could be the Tesla of government spending controls. And just as no one wants their Tesla to be unsafe, or non-compliant with regulations, the work of DOGE needs to be safe and in compliance with regulations.

As a non-partisan I don’t care what you think about any politician or policy. As a taxpayer and someone concerned about our society in the future, I care about spending. So, let’s unite in getting this thing under control.

President John F. Kennedy Said it Best

A dozen presidents and 63 years ago, President John F. Kennedy challenged Americans to be contributors. In his inaugural address in 1961, he posed this invitation for citizen participation.

“Ask not what your country can do for you. Ask instead what you can do for your country.”

Every dollar borrowed and spent or printed and spent must reflect common sense and the national interest.

Suppose in your own household that you wanted to support worthy causes, live in your desired fashion and perhaps lavish some largesse on favored friends. Now imagine you don’t have enough money to be as generous as you’d like or live the life you dream.

Would you follow the example of our Federal Government? Instead of cutting some expenses, and making every dollar count, just borrow from your children and grandchildren. With the last 60-plus years of Federal Government spending as a model, you don’t even need to have a plan to repay your heirs. You don’t even need to tell them you borrowed from them.

Their poverty will let them know, perhaps after you’ve departed this earth.

We can and must do better for future generations. For concerns about unmet needs, let’s all embrace President Kennedy’s call to be a contributor. Organizations like Food for the Poor (https://foodforthepoor.org) is an amazing, focused service. The Salvation Army serves worldwide (https://www.salvationarmy.org). Worried about affordable housing? Consider (https://www.habitat.org) where the focus is to help families build and improve places to call home. There are places to contribute to housing, addiction recovery, disaster relief, medical bills, the arts and even transgender theater if that is where you want to spend your money.

Onward