Thursday, August 13, 2009

Budget Cutting Myths, Part One

By Marc Korman.

A few weeks ago, Lieutenant Governor Anthony Brown told a blogger roundtable that the O’Malley/Brown Administration has been driven by the budget, which has required extensive cuts and cost containment. At the County level, the spiral of budget deficits appears set to continue with an estimated $370 million shortfall next year. Nationally, after years of inattentiveness to President Bush’s freewheeling spending, politicians suddenly seem interested in the federal deficit. Given all the attention, here are five myths of budget cutting that should be kept in mind as budget deficits are tackled.

Myth#1: A Cut is Too Small

When I worked on Capitol Hill, identifying a budget cut or increase as too small to matter was a popular tactic of advocates for specific programs. If a program was expected to receive a $4 million cut, advocates for the program would point out that $4 million out of a $3 trillion federal budget or $454 billion budget deficit, the federal deficit in 2008, was not going to make much difference.

They were right of course, the $4 million reduction would not plug the budget deficit. But there is no single cut that would fill a deficit of any meaningful size. $454 billion is larger than the budget of most Cabinet agencies and accounts for almost the entirety of non-defense discretionary spending, meaning spending appropriated by Congress annually and not subject to formula funding (see Myth#4 below). When deficits are the proportional size they are at each level of government, only a combination of many small cuts will equal a meaningful reduction. Dismissing a cut as too small is just an excuse to do nothing.

Myth#2: Across the Board Cuts Are a Good Idea

Essentially, this is where a politician says they are calling for a 1% or 2% cut across every agency of the government, at any level. Calling for an across the board budget cut is an easy way to give the appearance of being concerned about the budget while dismissing serious policy considerations. On Capitol Hill, House Republicans in particular have used proposed across the board cuts to fund bill proposals that would cost money, arguing for example that a massive tax cut would not increase the deficit because it is paid for by an across the board budget cut. What exactly would be cut is left to the imagination. Unfortunately, at least one local Democrat proposed this as well. An across the board budget cut is not the same as asking each agency in the government to find savings that equal 2% of their budget and then picking and choosing from those options.

The problem, as many elected officials have said, is that an across the board cut uses a hatchet where a scalpel is needed. A government-wide cut of equal size assumes programs have equal merit, which they do not. In Maryland and Montgomery County, education is a major priority that I suspect most politicians would choose to protect while cutting more deeply from other programs.

We will take a look at three more budget cutting myths next time.