New York Times: Interesting article on fiscal policy…and a possible reaction from DoD

I recently heard about an opinion piece published 10 days ago in The New York Times by David Stockman the Director of the Office of Management and Budget (OMB) under President Reagan.  One of the most interesting aspects of the article is the line in the sand that Stockman appears to be drawing between today’s Republicans and Stockman’s party over 20 years ago.

For example:

“By fiscal year 2009, the tax-cutters had reduced federal revenues to 15 percent of gross domestic product, lower than they had been since the 1940s. Then, after rarely vetoing a budget bill and engaging in two unfinanced foreign military adventures, George W. Bush surrendered on domestic spending cuts, too — signing into law $420 billion in non-defense appropriations, a 65 percent gain from the $260 billion he had inherited eight years earlier. Republicans thus joined the Democrats in a shameless embrace of a free-lunch fiscal policy.” (emphasis added)

When writing about the growing gap between the wealthy and lower classes (and at this point even the working/middle classes), Stockman writes, “This growing wealth gap is not the market’s fault. It’s the decaying fruit of bad economic policy.”  Not something you want to read from a man of his status and experience.

My response?

Is there any politician brave enough to stand up and admit to the American people that the current policies cannot last?  I’m not talking about stimulus packages, financial reform on Wall Street or  the newly formed Consumer Financial Protection Agency (CFPA).  While those are all measures to address parts of the problem, they are not the level of attention that I think this issue requires.  We have to decide what we’re spending money on, why we’re spending money on it and how it’s going to continue.  We cannot rely on another technology boom, like the one that occurred with the development of the Internet, to dramatically increase tax revenue and give us a budget surplus.  We must decide how we’re going to move forward- funding the programs we need to, cutting those we can do without and how we’re going to be more responsible moving forward.

Related to this topic, Defense Secretary Robert Gates announced major “cuts” or “savings” (depending on how you look at it) that will have a significant impact on the military culture in and around Washington D.C.  Gates’ plan will most immediately be felt in Norfolk, VA where he plans to eliminate Joint Forces Command estimated to be around 5,000 jobs.  Beyond that, Gates is attacking the government contractor culture nationwide even though it is most concentrated in the Virginia and Maryland suburbs around Washington D.C.  He’s likely to feel some push back from the billion dollar companies and the politicians they support.  But it’s the right thing to do.  We spend borderline irresponsible amounts of money on our larger, military complex and, unfortunately, not enough on the actual men and women who are fighting abroad.  Even if this doesn’t end up saving the $100 billion dollars that Gates promised, it will be worthwhile if he can reallocate resources to put them where they need to go rather than allowing the “we’ve always done it this way” culture to continue.

The topic is a fascinating one for me because I’m curious if we’ll see the standard reactions from the two major parties.  Republicans will be against any plan to cut military spending in any way.  Democrats will applaud defense cuts as a sign that more money can be spent on other government services.  Already we’ve seen a different reaction from Virginia’s two senators who no doubt need to protect businesses that do a majority of their business in the state, those VA citizens who will lose their jobs and companies with who they no doubt have close relationships.

In the end, I’m hoping he’s successful.  If for no other reason that to try to get us back on a responsible track.  I’m not implying that budget reductions just for the sake of cutting spending are necessarily good but rather that it is always important to reevaluate how much we’re spending and on what.

Similarly, I don’t think Republicans have reevaluated their fiscal policy in a long time.  It’s the Bush-Rove era strategy of hold tough to a simple message – “tax cuts” – regardless of whether the rest of the strategy supports tax cuts or not.  Republicans only know to proclaim tax cuts and have forgotten how to balance tax cuts in other areas.  As a result, saying “tax cuts” is sometimes the only difference between Democrats and Republicans.  That is not a successful formula for the American people in any class.  Hopefully Gates is smart, efficient and successful and other politicians are paying attention (I’m looking at you, President Obama).

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