Spending reform: ‘The longer you wait, the worse it gets’

September 24, 2012 by • Blog Posts, Fiscal Cliff • Tags: , , , , , , , , , • 6 Comments

I’ve warned repeatedly about the risk of planned cuts to the defense budget under “sequestration,” slated to begin in January. While defense spending needs reform to wring out inefficiencies, duplication and waste, that challenge must be approached as a matter of considered strategy—not by blindly chopping away at our force readiness.

This week, Time Magazine is publishing a detailed analysis of sequestration threat. Peter Singer of the Brookings Institution offers up a five-part examination of the reality of sequestration to determine what the effects would be.

Singer underscores the fact that, with a $16 trillion debt, defense cuts are going to have to be on the table. He writes:

 The essential point here is that the U.S. defense budget is most likely headed for cuts of significant scale. This likelihood is not just a matter of sequestration, but again reflects the overall debt problem (indeed, sequestration will only reach a fraction of the debt reduction needed, another reason to avoid it, as it doesn’t solve the problem and instead would have to be returned to again and again).

The key question is this: Will spending reforms in the nation’s bloated entitlement programs be on the table, too? After all, it’s the explosion of spending under Medicare, Medicaid and Social Security, which combined account for more than 40 percent of the federal budget, that is the biggest driver behind our $16 trillion national debt. Here’s hoping Singer gets to that in the coming installments.

The Time study of defense budget cuts should be read in conjunction with this column by Mary Anastasia O’Grady in Monday’s Wall Street Journal, where she looks at how our neighbors to the north in Canada dealt with spending problems in the 1990s.

In 1993, O’Grady explains, the newly installed Canadian Finance Minister took action to save the nation from “a fiscal death spiral” through significant spending cuts—which even hit some supposedly “untouchable” spending programs:

 Nothing was spared. Even federal transfers to the provinces to fund Canada’s sacred national health-care system got hit. The federal government also cut and block-granted money for welfare programs to the provinces, giving them almost full control over how the money would be spent.

In the 1997 election, the Liberals increased their majority in parliament. The Chrétien government followed with tax cuts starting in 1998 and one of the largest tax cuts—both corporate and personal—in the history of the country in 2000. The Liberals won again in 2000.

What drove the left-of-center Liberals to shoulder the burden of downsizing government in the 1994 and 1995 budgets—Mr. Martin takes great pains to point out—was not ideology but “arithmetic.” That is to say that everyone recognized that the magnitude of the debt, and the cost of servicing it, was unsustainable.

O’Grady’s column also quotes Canadian officials who advise U.S. leaders that they need to make the tough choices to tackle runaway spending today, because delay will not make things any easier: “The longer you wait, the worse it gets,” says one former official.

Does anyone in Washington understand that essential point?