Top College News Subscribe to the Newsletter

Mitrakos: Spending cuts should have happened sooner

Published: Wednesday, April 13, 2011

Updated: Thursday, April 14, 2011 00:04

vasiliki

The threat of a government shutdown last week forced government officials to scramble for consensus in the budget plan on the April 8 deadline. Talk about procrastination. At the stroke of midnight, the government had finally decided on a budget that would trim a mere $38 billion for the rest of the year. Both parties are unhappy with the extent of cuts, and the over-dramatized consensus has not amounted to significant success. Shaving $38 billion dollars from small government programs is pocket change compared to our $14 trillion dollar debt and $600 billion in stimulus money printed in the last two years. The budget cuts are like trying to shovel the U.S. out of a debt avalanche with a spoon.

The government should have pursued larger budget cuts back in 2009, and among the cutbacks, lawmakers should have cut their own salaries. Also, instead of pumping money into the stock market and banks, the government should have prosecuting the banks and investors responsible for billions in frauds and embezzlement. Why should some sectors of the workforce, like government officials and prominent bankers, enjoy pay raises every year while some unionized workers and most privately employed citizens are losing their jobs and struggling to keep their businesses open? Suddenly, now that Republicans are back in business, we realize that the U.S. can no longer support its debt from tax revenue and other people's money through foreign debt. Suddenly, the solution to our problems is attacking small government programs and cutting back on education, public parks and state funding. Why can't the government come to a consensus that the real cuts in spending should focus on trimming the costs of healthcare, defense and even the interest on our massive deficit?

Instead of tackling the issue of debt by cutting costs in 2009, the Obama administration has waited until deficit spending has pushed the federal debt to the legal limit. The Federal Reserve should have never become a printing press for U.S. bills that are now devaluing the dollar and causing gas prices to rise, among other things. Throwing more than $600 billion at big banks and random public projects through a "stimulus bill" is neither stimulating nor productive. If anything, the stimulus packages have massively increased our debt and reduced the value of the dollar. Aside from dealing with healthcare and military costs, the Obama administration should have immediately reduced government costs, including cutting government salaries for high paid officials. Even if cutting salaries doesn't amount to large savings, it is a gesture toward more government responsibility and control over spending, which could boost public support.

The government finally agreed on a budget minutes before the deadline, but this fairytale-like drama does not end happily ever after. Our debt cap is currently at $14.25 trillion, and within the next month, we will have reached that benchmark. In the next five weeks, the government must make the tough decision whether to increase or maintain that cap.  Once the debt hits that mark, the government is restricted from borrowing more money, pressuring the U.S. to default on foreign and public loans. What will happen if the government does not agree to raise that cap or figure out a more effective way to reduce the debt? Under pressure from both parties, Obama has finally decided to cut $4 trillion over the next 12 years. While this is a strong step toward reducing our debt, the government should continue focusing on reducing the debt in the long run and shouldn't simply continue spending beyond its means until foreign debtors pull the plug and decide they no longer want to pay for U.S. debt.

The U.S. has practically reached a tipping point, and if the government does not stop lying about progress and start working cohesively to tackle the problem, the massive debt can quickly push us back into a recession or, worse, a long depression. If it was not already evident in the multitude of economic crises since the 1970s, it is clear now, the U.S. cannot continue living beyond its means.

Vasiliki Mitrakos is a Weinberg sophomore. She can be reached at mitrakosvasiliki@yahoo.com.

Recommended: Articles that may interest you

6 comments

Dagny
Fri Apr 15 2011 12:18
According to wikipedia's easy to read pie graph defense spending accounts for $689 billion, which would be less than half of the 1.5 trillion dollar deficit. Although i know realize the 689 was 2010 spending and the 1.5 is a forecast 2011 deficit. There may also be some hidden expenses as anonymous suggested pushing defense spending up a 100 billion or so (i didn't read through the details of wikipedia, just the pie graph,) but even so my point remains the same, we won't get were we need to just by cutting the military. That's any easy target because a lot of people are against the wars anyway, and it's very difficult to feel any tangible benefit from military spending.

I just want to make the point that if we are really going to cut deficits, which we really need to do, it will involve cutting things that people don't want to cut, and refuse to even discuss cutting, and put their fingers in their ears and go blah, blah, blah, i can't hear you when you bring up cutting them. Politicians are all loathe to cut social security or medicare because senior citizens all vote, but they can't keep growing at this pace. If nothing is done Social Security, Medicare, and Medicaid will consume the entire federal budget. Everyone knows this. There are various projections about when it will happen depending on what assumptions you make, but it will happen. Serious discussions about cutting these popular programs needs to take place, and the sooner the better. Things that can't go on forever won't, and this level of spending can't go on forever. The only question is will we change our spending ourselves like responsible adults, or will it be forced upon us like Greece/Ireland/soon Portugal and Spain.

Privatizing
Fri Apr 15 2011 08:11
Tell you what, buttercup - turn the Gov't into a private corporation - and watch how fast costs get cut.
Anonymous
Fri Apr 15 2011 02:43
this article is shocking and totally unexpected for how dumb it is. Dagny makes some good points, but is wrong on how much the military costs because a lot of military expenditures are funded through supplemental bills. You can check out Wikipedia on military budget of the United States (or a plethora of anti-war sites) on how much we really spend on defense. Also, the US, and any advanced economy, can run (reasonably small) deficits forever as long as their promises to pay off each debt obligation are credible (which they are if the deficits are reasonably small, a trillion a year is obviously unsustainable).
Anonymous
Thu Apr 14 2011 19:07
This article is shocking and totally unexpected and I love it.
Dagny
Thu Apr 14 2011 16:10
I agree with this article in general, but it seems a little scatter shot. A little overly broad without really getting into any specifics. What exactly needs to be cut? That's always the hard part. Everyone agrees that something needs to be cut, as long as you don't cut the thing that they want. Agreed that the 38 billion cut is virtually meaningless. It's like a family that is $15,000 in debt for the year and they debate and argue and finally agree that they will spend $380 less.

So what to cut? Healthcare, defense, and even the interest on our deficit? First off it is impossible to cut the interest payments on our deficit, unless the author is suggesting defaulting on the government's loans. Cutting defense spending to 0 wouldn't even cut the yearly deficit in half. I'm not saying that wouldn't help, but it's easy to say cut the military, the benefits from the military are very hard to feel in day to day life. Realistically there need to be cuts that hit much closer to home for people. Healthcare is a big part, but the author leaves it to the imagination what exactly she wants to cut. Is it healthcare benefits for current government workers, is it medicare, or medicaid? The author also mentions government officials, but i'm not clear on who that is, is that government workers in general like post office workers, or is that some subset of bad government people like politicians and their staffs who don't deserve their salaries. De-unionizing federal workers and abandoning pensions programs for 401K would help the government (although it would be a bigger boost to state governments to do the same for their workforce) but ultimately balancing the budget comes down to medicare, medicaid and social security. In 2010 the government collected a little less than 2.2 trillion dollars and spent 1.5 trillion on medicare medicaid and social security which comes out to almost 70% of revenue. The government simply cannot function when 70% of the revenue goes to those three programs, which are only projected to continue to skyrocket as more baby boomers retire. Revenue will increase if/when we get out of this recession, but any serious discussion of deficit reduction needs to including large cuts from some, or all of these programs.

Also as a final point both Obama, and republicans are claiming their plans will reduce the debt by 4 trillion over 12 years and 5 trillion over 10 years respectively. The author fails to challenge these statements which are completely false in any normal understanding of the debt reduction. If i told you I had $100,000 in student loans, but planned to reduce my debt by $50,000 in the next 10 years, a normal person would understand that to mean that 10 years from now my debt would bet $50,000. That is not what politicians mean though. What they mean is that 10 years my debt will be $200,000. Because i had a plan to increase my debt to $250,000, and i have reduced my planned debt increase by $50,000. Even under the larger republican cuts debt will increase from 14 trillion to 23 trillion in 10 years. So the republican plan is to cut the debt incurred during the next 10 years from 14 to 9, and Obama would cut even less. These are not serious discussions because american's fail to realize just how big all these numbers are, and what a giant hole the country is digging right now. If the government keeps printing money, we will turn into greece sooner than people realize. (greece if we're lucky, argentina or post WWI germany if we're not.

unemployed
Thu Apr 14 2011 07:42
When they "cut the budget" - they will automatically throw quite a few people out of work; thus, raising the unemplyment figures (your next column I'm sure).






log out