A Pragmatic Approach to Reducing Federal Spending

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A Pragmatic Approach to Reducing Federal Spending​

The contentious political debate about deficit and debate reduction is on hiatus. Our Senators and Representatives have returned home to tell us what a great job they are doing, and how they fought their evil counter parts on the other side of the aisle with everything they had at their disposal. There was no victor, because both sides agreed to send the issue to arbitration. They appointed a “super committee” that will either give us a real plan by Thanksgiving or will switch to auto pilot and cuts will be mandated across the board. What an example of leadership! NOT. Worse still this “solution” demonstrates either a complete lack of knowledge and experience in managing a budget, or once again shows their individual political survival has been put ahead of the nation’s needs.

I spent a few years working for a very large international reinsurance company reporting directly to the Comptroller (CFO) of the company. One of my duties was coordinating the production of the annual budget for the enterprise. In this role I learned the nuts and bolts of developing a complex budget, and the proper role for each participant in the process. Congress it seems never learned these lessons, or prefers to use the budget process for political purposes rather than the pragmatic purposes that this process should serve. Our elected “leadership” likes nothing better than focusing on vote getting sound bites. “The other guy wants to throw grandma off a cliff.” “Those guys want to destroy private enterprise.” “They don’t care about our children.” “Spend, Spend, Spend – that’s all they know how to do.” “The rich need to pay more.” “Half the population doesn’t pay taxes.” Is this actually getting us any closer to closing our deficit or reducing our debt? Will it ever? It is time to take a pragmatic approach to reduce federal spending.

Setting Direction, Goals and Guidelines
In my experience a CFO (Chief Financial Officer) of a corporation is charged with setting the direction, goals and guidelines for developing a budget. The CFO does not attempt to write a budget line by line all alone. The CFO limits their role to setting the direction of spending both in general (up or down) and in specific areas as dictated by market forces (for example upgrading technology, or retreating from an unprofitable or untenable product line). The CFO does not get bogged down in the specific cuts or allocations when a budget is developed – that is left to his management team.

Under the U.S. Constitution Congress is our national CFO. They need to start acting like a CFO and issue specific direction, specific goals, and provide decision making guidelines to the government’s management team – Executive Branch Departments and Agencies (Defense, Education, Social Security, Health and Human Services and so on.) regarding spending.

Setting Direction
Clearly the nation needs to reduce spending. Members on both sides of the aisle have really not disagreed on this point. They do however get all bogged down in defining how to make these cuts. And that is the problem. Congress is acting like they are management staff and not the CFO.

Congress should direct all Executive Departments to examine their current year actual spending and identify ways to reduce the actual spending for the next year by X%, and to develop a long term plan to continue reductions until actual spending is returned to spending levels of a targeted year (for example 2008 actual spending). The reductions are to be to actual spending, not budgeted amounts.

Defined Goals
Ken Blanchard and Dr. Spencer Johnson, M.D. in their book “The One Minute Manager” define a goal as “a dream with a deadline”. Congress needs to define the end goal and the deadline for delivering that goal when they provide direction to the Executive Departments of our government.

Congress might for example provide the following goal:

Within 60 days from the date of this directive, each Executive Department must submit to the appointed Congressional Committee their completed spending reduction plan. That plan must include the following sections (a template for your report is provided):

1. Plan overview concisely summarizing the dollar amount of spending to be reduced and percentage of reduction from the current year for each of the next five years.
   
2. Detail presentation of each spending line item and sub-line item within their plan showing dollar and percentage of reduction per line item. (for example, travel, salaries, programs funded)
   
3. Implementation timeline for achieving these reductions.
   
4. Identification of and quantification of one time and on-going spending reductions.
   
5. The entire plan is not to exceed 100 double spaced pages.
   
6. Each Department Secretary will personally present the plan to the Congressional Committee assigned to review the plan.
7. …

There should be no confusion as to what the expectations of Congress are regarding the goals of this process.

Guidelines
The purpose of guidelines is to provide “the philosophy” behind the process and establish some guidance on how to achieve the stated goals.

Congress should determine what specific guidelines they wish to provide with their directive. For example Congress could provide the following:

While developing spending reductions involving staff reductions each department must/should place an emphasis on attaining reductions first through attrition and utilizing terminations only as necessary to achieve the desired reduced staffing levels.

Any spending reductions to be achieved through changes to current “entitlement programs” must not include changes to current recipient’s benefits. They must be phased in over time and apply only to future beneficiaries. It is the intent of The Congress to honor all our legal and moral commitments to the citizens of the US.

When examining reductions to spending on salaries and benefits, each Executive Department should consider the potential reduction in future and long term obligations that may be achieved by revising retirement plans.

Congress must provide such guidelines in a clear and concise manner and these guidelines must reflect the long term needs and health of our nation’s finances.

Conclusion
Much has been reported regarding the political debate regarding the source of our financial difficulties. One camp argues “We have a spending problem”. The other camp counters that “We have a revenue problem”. The truth is we have problems in both areas, and we will continue to have such problems unless we move from a political debate to a pragmatic process based solution with a clear direction, defined goals, and guidelines for achieving those goals that reflect our national character and obligations.

 

[Deuce]

There are hundreds of members of congress, but you seem to be suggesting that they should act like a single-minded entity. Michelle Bachmann does want to "set a direction" for spending, it's just in a radically different direction than what Bernie Sanders would pick.