Large numbers of Americans rely upon comedians such as Jay Leno and John Stewart to stay apprised of national affairs. For anyone who is interested in a solution to America's fiscal policy woes, the person to watch is Jerry Seinfeld.
Although not widely recognized as a fiscal policy expert, Seinfeld's advice to George Costanza in the final episode of season five is pure genius.
What was that advice? "If every instinct you have is wrong, then the opposite would have to be right." Congress should take this advice to heart.
Congress' natural instinct is to spend, spend, and spend. Consider discretionary spending: Over the past ten years, federal discretionary spending has virtually doubled. This year alone, discretionary spending is slated to jump $50 billion—an expenditure larger than the entire economic output of all but a few nations in Africa, Asia, South America and the Middle East. Although circumstances have led to more spending on national defense and homeland security, over this timeframe the non-defense, non-homeland security portion of the discretionary budget has also increased roughly 80%.
Since the late 1960s, discretionary spending has fallen exactly TWICE: in fiscal years 1969 (-0.6%) and 1996 (-2.2%). If Congress would disregard its spending instincts and follow Seinfeld's advice, even small spending cuts could translate into tremendous savings over time. For example, a three percent cut in discretionary spending for three consecutive years would trim $1.7 trillion from federal spending over ten years relative to current projections.
Congress also instinctively avoids doing anything to confront the federal government's long-term budget imbalances. Those imbalances are real ... and they're spectacularly daunting. As the director of the Congressional Budget Office (CBO) testified earlier this month before the Senate Finance Committee, "under any plausible scenario, the federal budget is on an unsustainable path."
CBO has identified the three overarching factors driving federal entitlement growth. The number of people eligible to receive benefits accounts for 31% of projected growth. Cost-of-living and other automatic adjustments account for another 29%.
The remaining 40% is a product of what CBO calls "factors that contribute to rising benefits." These additional costs originate largely from federal health care programs. For example, according to CBO, federal "health programs have faced steadily escalating costs per participant beyond the effects of inflation; that trend, which is often termed an increase in 'intensity,' reflects the consumption of more health services per participant and the growing use of more costly procedures."
Restraining the growth rate of these additional costs is the key to regaining control over entitlement spending. Even without touching eligibility or cost-of-living adjustments, Congress could reduce federal spending $1.25 trillion over the next ten years relative to current projections by halving the growth rate of real benefits above what is now provided.
Even if Congress were to tackle discretionary spending and restrain entitlements as outlined above, total federal spending would still increase each and every year, only at a slower rate of growth than projected. However, the ten-year savings, not including the savings that would accrue from servicing a smaller federal debt, would amount to nearly $3 trillion.
If taken, these actions would dramatically reduce the budget deficit and put the United States well on its way toward tackling the looming entitlement crisis.
Getting back to Seinfeld: "Yes," replied George, "I will do the opposite. I used to sit here and do nothing, and regret it for the rest of the day, so now I will do the opposite, and I will do something!" It is time for Congress to do something!
Tim Penny represented the state's First Congressional District from 1982 through 1994, serving on the U.S. House Agriculture and Veterans Affairs Committees. He was the Independence Party Candidate for Governor in 2002. Currently, he is the President/CEO of the Southern Minnesota Initiative Foundation Penny has authored several books on public policy and the American political process, including THE 15 BIGGEST LIES IN POLITICS, PAYMENT DUE, and COMMON CENTS: A RETIRING SIX-TERM CONGRESSMAN REVEALS HOW CONGRESS REALLY WORKS—AND WHAT WE MUST DO TO FIX IT.
James Carter was the Deputy Assistant Secretary for Policy Coordination in the Office of Economic Policy at the U.S. Department of the Treasury from 2002-200X. He served as an Associate Director for the National Economic Council. He also served as a senior economist on the staff of Congress' Joint Economic Committee.
