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June 14, 2010

The Closed-Mindedness of the Deficit Commission

One member of the National Commission on Fiscal Responsibility and Reform made comments that show members of the commission aren’t worried about costs.
Earlier this year, the President announced the formation of the National Commission on Fiscal Responsibility and Reform.  This committee, co-chaired by a former Republican senator and former Clinton chief of staff was commissioned to reduce the long term structural deficits that the country faces. 
In the May 25th edition of the Wall Street Journal, Paul C. Light wrote a good article about the opportunities for this commission to reduce costs by hundreds of billions of dollars.  He noted that the federal government has a bloated organizational chart, multiple duplicated (and in many cases triplicated) government programs and functions, as well as “antiquated systems” (can anyone say US Postal Service?).
Light goes on to write that savings can be found in eliminating needless management layers ($100 billion), cutting the number of Presidential appointees ($1 billion), eliminating federal jobs that are going to be vacated by retiring baby boomers ($200 billion), cutting contractor positions ($200 billion), increasing productivity ($100 billion), merging duplicative programs ($300 billion), and eliminating worthless programs ($200 billion).  This totals $1.1 trillion in savings over the next 10 years.
While this may seem obvious, the idea of doing the above is going to come to major resistance from the D.C. Kool-Aid crowd.  Eliminating appointees, duplication, worthless programs, and contractor positions means the reduction in federal government employment and mass layoffs.  Doing this (along with increasing productivity) with an absurdly unionized federal government is next to impossible.  The mere threat of job losses will cause thousands of worthless government employees to take to the streets and strike like they did in Greece and are threatening to do in Spain.
On top of that, we are ignoring the fact that Medicare, Medicaid, Social Security, and Obamacaid are racking up trillions in liabilities with no source of funding (hence unfunded liabilities) over the next few decades.  If the commission successfully does the above, but fails to commit to entitlement reform, the trillion saved in ten years will pale in comparison to the massive entitlement costs.
As a part of today’s video, Alice Rivlin, a member of this committee is asked about reforming Social Security.  She is asked if she would consider privatizing Social Security as part of the solution.  Not only does she state her total opposition to privatization, she adds that the likely solutions will be to raise Social Security taxes and increase the benefit age.
So, let’s get this straight; the solution to Social Security is to charge people more and pay out less over the course of their lifetimes?  On top of that, people are going to have to work and pay into the program longer in order to get their money back.  Anyone who thinks that a person can retire before their Social Security pays out has to acknowledge that the private market can succeed at providing a fixed income to senior citizens.
By not considering privatization, the committee fails to acknowledge that when Social Security was created, there were no IRAs, 401 (k)s, 529s, or other private retirement options.  While I’m not advocating the government forcing employers to do anything, if the government eliminated Social Security, and passed a law requiring a minimum contribution to a private retirement account by employers, the need of Social Security would be mostly eliminated.
The pain caused by these massive fixed costs requires outside of the box thinking, not inside the belt-way behavior.

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