fiscal responsibility

President Obama "will order members to identify a combined $100 million in budget cuts over the next 90 days...".  Granted, as Greg Mankiw says, this is the government equivalent of a cup of coffee, but it does signal that the Obama administration recognizes the public outrage over spending. [UPDATE: I think Heritage gives this budget cut entirely too much credit; in fairness, they probably just don't have a smaller dot]

Is this the first sign that the Tea Party protests are having an impact?  Maybe.  But politicians cannot be allowed to get credit for fiscal responsibility by making trivial noises about spending cuts.  This is a very easy thing to measure.

So, how can we measure how serious Obama is about long term fiscal responsibility and deficit reduction?  Watch how Obama funds programs that are not successful, or that do not have clear metrics for success/failure.  Recall a point that Obama made in his inaugural address.

The question we ask today is not whether our government is too big or too small, but whether it works ... Where the answer is yes, we intend to move forward. Where the answer is no, programs will end.

Here's my prediction: programs that Democratic groups are inclined to like will almost never end.  They will be given additional funding.  For those programs, the answer will almost never be "no".

If Democrats cannot make serious sacrifices (actual, significant cuts) in the spending their coalition groups want, then you can be pretty certain that politicians are unwilling to share in the sacrifices they say we all need to make. This is a very measurable thing.  They need to be held accountable, both by the media and by voters.

The same thing goes for Republicans, too.  We can't dig our way out of this fiscal hole by "cutting waste".   We certainly can't afford any significant tax cuts at this point.  Proposals that are not politically viable are not "serious"; they are grandstanding for the base.  If Republicans want to be taken seriously, they need to start talking much more seriously about the trade-offs and innovative approaches necessary to address the long term deficit and tax system.  For starters, that probably involves means-testing entitlements.

Back in the Contract with America days, a Balanced Budget Amendment was a major tenet of Republican policy, and a couple of times, it came close enough to passing Congress to inspire furious lobbying and vitriolic sky-is-falling claims from the Democrats. 

A balanced budget requirement isn't some radical pie-in-the-sky idea. 49 out of 50 states have it. The good news is that it works -- those states are actually forced to balance their budget. The bad news is that it's often ugly, with drastic spending cuts and tax increases in many states in the current budget year. 

Albeit more responsible than rampant deficit spending at the federal level, the states aren't any less short term in their thinking than the feds. In good years, state governments rush to spend the surplus only to abruptly cancel programs in a recession -- because there's no real incentive to bank surpluses against a downturn or use state rainy day funds. A budget $5 billion in surplus is just as balanced as one with $0 in surplus, so the politicians might as well spend the money currying favor with voters.  

The only way I can think of to stop this problem is to extend the horizon of the balanced budget from one year to five years. Essentially, the budget would have to be in balance over the course of 5 years, covering most recessions with 2 or 3 years of recovery. 

In bad times, states could deficit spend -- by no more than the surpluses of the previous four years. In good times, states would be forced to bank surpluses -- particularly if the past few years were economically tough. 

One downside is that politicians use it to recreate the present, with budgets just barely in balance across the board, but more likely than not, the politically convenient thing to do would be to slip into a deficit for one or two years, thus kicking off a virtuous circle where subsequent years' budgets would not only have to be in balance, but the extra debt accumulated during a recession would have to be paid off. This could head off irresponsible spending binges in good times and keep state budgets on more of an even keel. 

It's true that budgets wouldn't have to be balanced every year -- though the overall fiscal impact is the same -- but it sure beats the farce of Washington needing to bail out the states when they run off the rails. 

Liberal  Simsbury First Selectwoman (i.e.Mayor) Mary M. Glassman had a startling revelation today over Connecticut's economic crisis. Doing a state capitol presser today, she revealed

 “We can’t come up here and ask the state for more money and we can’t go back to our communities and ask our taxpayers for more money.”

Funny how she was more adamant about tax and spend policies when she ran for Lt. Governor in 2006, .supporting the "millionaire's tax"

Government should live within its means. What a novel concept. Of course, in Connecticut Democrats sound positively disgusted that the economy and those cranky voters have put an end to the usual ping-pong of raising state taxes one year, local taxes the next.  

The Democrats "own" government now. Let's see how they pay for and/or break their promises.

John McCain's campaign slogan was "Country first", a great slogan, but there was not much meat attached to those bones. Here is how we correct that. We need a national vision, a great cause, to motivate the base. One that will entail sacrifice and fortitude and courage and honesty. Here is the problem: Our nation's current fiscal trajectory is such that massive deficits, debt repayments, and unfunded liabilities will turn the US into the next UK, a former world hegemonic power now so beholden to those holding our debt and producing what we consume that we will no longer be in the first tier of superpowers. We need to move beyond simple tax cuts to major reform of how we fund our government, to both broaden the tax base while simultaneously lessening the burden on our producers and entrepreneurs (I favor the Fair Tax). And we need to reform our spending habits and entitlements before they eat us alive. This could be a national crusade that gets people thinking about country first, about the America their children will inherit, and about real change that is so desperately needed. This needs to come from both the grassroots and from our intellectual entrepreneurs to be effective. Let's roll!