StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



What Warner Did in Virginia Could Point The Way in Washington

10 May 2011
Posted by Stan Collender

Mark Warner had the right idea about how to deal with budget problems when he was Virginia's governor.  My column from today's Roll Call says he should think about recommending them again.

Congress Should Adopt Mark Warner Budget Strategy
Sen. Mark Warner is best known at the moment for being one of the “gang of six” — the three Democrats and three Republicans who have been trying to come up with a bipartisan deficit reduction plan in the Senate. But long before the Virginia Democrat helped start the group, he was known as a fiscally conservative governor who received high marks for turning the state deficit that he inherited into a surplus.
 
Warner once told me that he was able to make budget changes in the state because Virginians saw his efforts as serious attempts to make the government less costly. Some changes, such as greatly reducing hours at the Department of Motor Vehicles and requiring that many transactions be conducted online, got big headlines when they forced people to deal differently with the DMV.
 
But voters respected the cuts when it became clear that they could still do what they needed and that the reductions were having the desired effect on the state’s bottom line. It also set the stage for less popular changes, such as revenue increases, because there was a general recognition that the cuts had gone far enough.
 
As the debate in Washington, D.C., on a long-term federal deficit reduction plan continues to stall, the strategy that Warner used as governor — put in place cost savings that change how government does its work, rather than what it does — may be one of the best, and perhaps only, options available to Congress and the White House this year.
 
This will disappoint some who want to immediately enact a big fix — a combination of spending and revenue changes needed to eliminate the deficit. In particular, tea partyers in the House and Senate are likely to criticize Warner’s strategy as a trifling effort that kicks the budget can down the road and isn’t worth the time or energy needed to do it.
 
First, that’s not necessarily true; significant savings (although not enough to eliminate the deficit) can be adopted this way. And given the lack of support for the sweeping budget plans that have already been proposed, this may well be the only option that can get done this year.
 
If you doubt that’s true, think about what has been put on the table so far. The plan that the Bowles-Simpson debt reduction commission came up with last December has all but been forgotten. Neither chamber of Congress has been able to produce a comprehensive budget that is anything other than symbolic. There has been tepid interest in President Barack Obama’s initial budget request, and the deficit reduction outline that the White House announced last month hasn’t gained any traction. The gang of six has yet to come up with anything, and there is a great deal of uncertainty about how many others will support it even if it does. And there are tremendous uncertainties about whether the budget talks begun last week by Vice President Joseph Biden will succeed.
 
That’s why it makes sense to think of smaller but still significant alternatives such as the strategy that Warner used when he was governor. It also makes sense because polls show Americans are still focused on cutting waste, fraud and abuse, and they won’t support a broader strategy until they’re convinced that has been done. Polls show convincingly and consistently that the typical American is willing to cut foreign aid spending but otherwise wants government that costs less, not less government.
 
If the Warner strategy were applied at the federal level, every agency that gets an appropriation would be required to reduce its spending by some percentage in 2012. An agency couldn’t propose the equivalent of closing the Washington Monument to the public, but like the Virginia DMV, it could reduce the hours or days it’s open. This would apply to both domestic and military agencies.
 
Mandatory programs wouldn’t be trimmed by cutting benefits or changing eligibility rules because there’s absolutely no support for making those types of massive changes in these programs. Agencies that manage these programs would instead cut spending by reducing overpayments to providers, dealing with fraud, stopping benefits to those who don’t qualify and finding other similar savings.
 
Revenues could also be included in this effort. The goal would be for the IRS to collect more money from those who owe taxes under current law but are evading the rules in some way.
 
Just like the changes made at the Virginia DMV, this process will not be painless. But as Warner demonstrated, they can have a material effect on both the government’s bottom line and, at least as important, on the politics of deficit reduction. If waste, fraud and abuse can be eliminated or minimized as a budget cause célèbre, the big fixes that many are seeking will become more likely.
 
And, in the meantime, the deficit will be substantially lower than it otherwise would be.

No, it couldn't

First, even if all non-defense discretionary spending was cut by, say, 10%, that would amount to about 1/15th of the deficit. So the deficit wouldn't be substantially lower after this exercise. Second, a lot of what counts as federal spending is programmatic transfers to the states and municipalities. The federal government itself doesn't do that much retail-level work for the general public, except parks (which are already chronically underfunded) and SS/Medicare, which wouldn't be affected. So people wouldn't see much in their daily lives getting worse that could be directly linked to cuts at the federal level. Third, so what if Americans are focused on "waste, fraud, and abuse"? Americans are just hoping there's an easy fix. They have no idea how much WFAA there is, and politicians who campaign saying that budgets can be fixed by eliminating it never end up finding all that much. Finally, at the federal level, voters just don't reward goo-goo efforts. The Clinton administration, under the supervision of Al Gore, actually did put some effort into working on the finer details, and the public responded by electing George Bush.

Like it or not, getting the deficit down to a level where debt-to-GDP starts falling requires three things: cutting defense, raising taxes, and controlling health care costs. Even if all domestic discretionary spending was eliminated - which would make a lot of conservatives happy - the deficit wouldn't be closed. Until Republicans get realistic (and not "serious," which is what they are now) the federal deficit will remain huge.


Just Look to Nunn Mc Curdy

Two things needed to get war spending under control.

There are many war contingencies and weapons that are not worth running up the deficit, much less diverting national treasure from better uses.

First, do Nunn Mc Curdy to kill projects which do not perform and that show cost increases.

GAO tracks about $1.6T commitments for the most expensive 30% of DoD weapons systems acquisition in a report each year. These acquuisitions are suffering and shoulds be killed. The High Risk audit, another annual report, identifed $300B of spending from 2010 to 2014 on these programs which is exposed to high risk of waste and fraud. Just kill programs that do not perform. Also these acquisitions send a bow wave of future support costs.

Even more useful than doing Nunn MC Curdy is changing the bidding between congress and the pentagon and draw the line on unlikley contingencies to only real threats and economical ways to deal with the theats.

Defense must be brought under control.


Also a Mark Warner Fan

Mark Warner is tremendous, and a truly dedicated, thoughtful public servant, unlike a lot of folks in either party. He certainly doesn't do it for the money, he doesn't need it. I would have voted for him in 2008 in a heartberat, and would unquestionably prefer him to Obama. I do think that seeking greater effeciencies [my husband works as a contract manager at the Pentagon and he can go chapter and verse, ditto my brother who's a salaried MD working with Medicaid patients] is an excellent place to start. Also, at this point government wages and benefits are better on average than the average private workers [except of course CEOs] - who works for who?. Tort reform for examle, would not only have been a bone to throw to the Republicans, it's also estimated to lead to $50 billion in Senate savings. There are a lot of cuts that could readily be made, with no impact on outcomes - not infrequently. interest groups and money stand in teh way, sometimes it's bureaucracy or lack of knowledge.


"It also makes sense because

"It also makes sense because polls show Americans are still focused on cutting waste, fraud and abuse"

If only! Since far more waste, fraud and abuse happens in business rather than government (finance and insurance are glowing examples) and people continue to do business as usual with those industries, I don't think you can make a case for such a focus.


"Also, at this point

"Also, at this point government wages and benefits are better on average than the average private workers [except of course CEOs] - who works for who?."

A true apples to apples comparison reveals that this is false. For example, a PhD scientist working at the NIH makes significantly less than a PhD scientist working at a pharmaceutical company. As a whole, government workers are more educated than non-government, private sector employees because when you talk about private sector employees you add in fast food cashiers, retail clerks, etc. There are a ton more unskilled jobs in the private sector than the public sector. This drives down the average private sector salary.

Tort reform resulting is $50 billion in federal budget savings? Where does that come from? The state of Texas has some of the most stringent tort laws in the country and they are $25 billion in the hole this year.

There is no question that taxes need to be raised. Tax revenues are at historic lows. The supposed thirst for spending cuts is a fantasy. Nobody wants the cuts to affect them. Reduce tax ependitures - american economy will collapse. Privatize Medicare - who wants to kill grandma. Reduce military spending - what will happen to the jobs of the military industrial complex and you're not tough enough.




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