Sunday, October 31, 2010

Simplistic Slogans Don't Solve Complex Problems

Previously published in the Terre Haute Tribune Star, Halloween 2010

TERRE HAUTE — All indications point to another power shift Tuesday, with Republicans, with intense and enthusiastic Tea Party support, gaining power in all sectors of government. Whether they gain control of Congress or the Indiana House of Representatives remains to be seen.

The Tea Party stands for smaller government and cutting taxes. There isn’t much to their specifics, but some candidates trying to ride the movement’s intense emotions have put out some specific plans. But it is the button-down Cato Institute which has, from what I can find, provided the most specific plan to cut government spending, downsize government, and, hence, cut taxes.

Of course, many angry Tea Partiers no doubt distrust the scholarly Cato Institute. It is, after all, a policy think tank. One of those organizations full of pointy-headed intellectual types who rely more on dispassionate analysis and data than over-the-top rhetoric and promises that cannot be fulfilled — as one candidate for Congress promises (“I will repeal Obamacare”).

The Tea Party and, from what I can tell, every Republican candidate, promises to cut taxes and reduce spending. Let’s examine the Cato Institute’s “downsizing the federal government” plan ( To be fair, CI’s overall plan is not finished. It has not addressed defense spending, homeland security, justice, veterans affairs and a couple of others.

Americans want immediate gratification, not plans that fix things down the road. Let’s not look at promises and impacts down the road. Let’s examine the immediate effects, beginning with the Department of Agriculture. According to CI, Agriculture spends $142 billion a year and employs 96,000. CI suggests cutting Agriculture by $108 billion, or 76 percent. CI details the programmatic cuts and discusses the good this will do later (“lower food prices for everyone”). CI doesn’t talk about what a 76-percent cut to spending would do to employment at Agriculture. Here, I’ll just use a proportionate cut: 73,014 added to the ranks of the unemployed.

The Department of Commerce spends $17 billion a year and employs 53,000 workers. CI proposes a 12-percent cut; adding 6,235 more people to the unemployment lines.

The Department of Energy will spend $38 billion in 2010 and employs 16,000 workers and oversees 100,000 contract workers in 21 national labs and other facilities across the nation. CI proposes cutting it by 29 percent translating, using 116,000 as the base, to 33,578 more unemployed.

The Department of Education will spend $107 billion this year and employs 4,100.  I’m surprised its total elimination was not called for as so many among the Tea Party do. Nevertheless, it survives with a 78-percent cut, but 2,988 workers don’t. 

The Department of Health and Human Services will spend $869 billion this year and employs 65,000. Cut it by just 9 percent and only 6,058 lose their jobs.

Housing and Urban Development will spend $63 billion this year and employs 9,500. Cut it all, says CI, a 100-percent cut and 9,500 more to the ranks of those who don’t pay taxes.

This year, $91 billion is the Department of Transportation’s budget. And 58,000 folks are on its payroll. I’m not sure why it gets to survive, but a 93-percent spending cut will leave only 5, 825 workers with a job there.

In summary, CI proposes cutting $429 billion — an overall cut of a third.  To be fair, they don’t discuss the loss of employment in a recession with weak job growth that would result from these cuts. They don’t discuss the loss of employment at all in the plan. Those are my estimates. A $429 billion dollar cut as CI outlines, I estimate, would add 177,548 more people to the unemployed or, at current rates, a 0.1-point increase in the unemployment rate.

Keep in mind, this is not the full plan, CI stills needs to detail cuts to Defense, Justice, Homeland Security, Interior, Labor, State, Treasury and Veterans Affairs. The total spending these departments account for is $1.2 trillion. Assuming a 33-percent reduction holds throughout the rest of the cutting, that is an additional $396 billion in cuts in spending and an estimated 163,890 increase in the ranks of the unemployed. Assuming no tax cuts, these outlined and estimated cuts would reduce the current budget deficit by 63 percent.

Conventional wisdom holds that raising taxes in a weak economy will further weaken it. What will cutting $825 billion in spending and laying off 341,438 people do to a weak economy? Simplistic slogans do not turn complex realities into simple ones.

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