Wednesday, January 07, 2009

The Budget of Bailoutistan: Just Spend Baby!

So, we’re now told to expect trillion dollar deficits for “years to come”, combined with some pie-in-the-sky promises of fiscal disciple later.

Unfortunately, it’s almost impossible to kill of federal agencies or spending programs – they come with a built in constituency, as well as playing straight to Congress’ weaknesses. And Obama’s proposal to add or “save” 600,000 government jobs doesn’t auger well for the long run.

Assuming that the 600,000 government jobs in the Obama plan are mostly in the states, and represent layoff prevention rather than additional jobs*, essentially all he’s doing is preventing a needed reduction in bloated local government payrolls, benefiting the states that have been the most reckless at the expense of the prudent.

But that’s the rule of Bailoutistan – work hard, save your money, manage your finances prudently, and you’re a sucker and a rube. Borrow to the hilt, play flip that house, sign up for mortgages without reading the fine or not so fine print, or cook the books at Fannie Mae, and the US Treasury puts out the welcome mat and invites you to help your self.

The upshot is that federal spending never declines – almost all of the headlines proclaiming “Budget Cuts” or “Spending to be Slashed” merely refer to some reduction in the rate of increase.

Agency X or Congress wants a spending increase for program Y of 5%. President’s budget suggests in increase of 4.5%. The bugdget is then considered “slashed”, especially if it’s for programs that liberals like. Widows, orphans, poor children hardest hit, etc. Doesn’t matter if actual spending is still increasing. It's still a 'cut to the bone'.

* Yes, it’s hard to get a more far-fetched assumption than this.