06/09/2010 05:42 pm ET Updated May 25, 2011

Spending, Spending Everywhere but not a Dollar to Cut

Our country has a crippling addiction - public spending. Earlier this week, the President announced that he was going to ask each government agency to find reductions of 5% in their spending. He then wanted Congress to allow each agency to keep 2.5% of the savings as an incentive for finding funding cuts. I have to admit this sounds hokey for a number of reasons:


  • 2.5% of the discretionary, non-defense budget is about $10 Billion - not much in this realm of government spending (see graph).
  • Are the 2.5% cuts in Washington, DC, or across the country? Are these cuts for contractors or civil servants?
  • Why ask the Departments? Shouldn't the President assign someone to look at management and budget? Oh, don't we have an Office of Management and Budget as the mechanism for finding cuts regardless of what the individual agencies might "want" to keep? If OMB did the cutting, then there doesn't seem to be a need for the 2.5% incentive kickback.
  • Why have any cutbacks? The country is in a recession. Underemployment is near 20%. This is exactly when a country should be creating jobs, not cutting them.
  • Why now? Politics? The Tea Party and the primaries are making the White House lose sight of why they won the election. Given the White House's call on Blanche Lincoln, they should think long and hard about trying to use politics as a criterion.

2.5% just seems contrived.

There is an urban legend (which may be true) that Jack Welch, the then CEO of GE, kept looking at the company's warehouse costs and thinking they were too high. He would keep asking his group heads to cut warehouse costs, but nothing seemed to happen. Then one day, Jack Welch closed a number of warehouses. He solved the problem. GE got along just fine with fewer warehouses. "Necessity is the mother of invention," not just a colloquial phrase, but the truth.

When the now vilified, Richard Nixon was President, he decided that he didn't want to spend the monies Congress had allocated. He just impounded the funds and kept them in the Treasury. Congress didn't like this much and passed a law to establish a rescission process and a separate deferral process by which the President could try to withhold funds. Seems to me that President Obama could probably find some funds to impound! While historically, such budget cut proposals have fallen on deaf ears, this may be the very year that Congress will get the message.