These are some good posts. To some extent more to do with policy than budgetary processes but they do connect and Randy and Meghan have done a nice job laying out some issues.

The defense spending issue is usually a surprise to many. Given the size of some of our weapons programs you would think it would be much higher. Part of this is due to the fact that our standing army is not as large as it once was. Weapons systems are expensive, but personnel is even more pricey. I also think that some of the complicated nature of defense budgets is due to the procurement process and the length of time for building weapons. But you do bring up a good point, if the slice of the pie keeps getting smaller, why such and involved process.

Meghan's issues on entitlements also bring up a variety issues that have long been debated. A few points that might help. First, the level of corruption by beneficiaries in entitlement programs is actually pretty low, I don't have the research in front of me but the numbers are much smaller than we think. The problem is that when someone violates the public trust, we are rightfully more outraged than in private corruption. As you pointed out, entitlements often benefit the least well-off in our society (for whatever reason, whether a person has had a "difficult life" or they just did not act responsibly). In your scenario of the two people going into a skilled nursing facility you don't find the person who to private pay as often as one would think -- there is a whole industry of attorneys and accountants who specialize in "spending down" -- that is legally moving your resources to family members and to others sheltered accounts. It doesn't mean that it doesn't happen, but it can be controlled. But you are right, entitlements continue to grow and the health of many of these systems is on the verge of failure. What is it about our political system that makes it difficult to find the will to confront these issues? Do they simply need to collapse? Good job everyone.

Local impact of Federal Stimulus

This isn't related to our discussion this week on Defense spending, but an article in the Public Opinion ran today about local projects resulting from the stimulus package. I thought it was interesting to see how money was distributed locally and the impact it has had on local businesses. The Chambersburg Area School District superintendent expressed frustation over the restrictions on funds granted from the IDEA program.

Defense Spending

After reading Wildavsky's chapter on defense it becomes clear that budgeting for defense is a separate entity that takes on a life of its own. I feel that national defense is the most important thing the federal government does and I have no problem spending money on this. I was shocked when I looked at Table 8.1 on page 155. In 1953 defense accounted for 69% of the budget. It has since dropped to about 17%. When adjusted for inflation there is only about a $50 billion difference. These numbers are really an eye opener for me. We are spending about the same on defense as we were fifty years ago but it accounts for so much less of the budget. I find myself wondering if the intricate and drawn out process Wildavsky discusses is necessary for something that seems to have a decreasing slice of the pie. Secondly, it seems interesting that the budget continually grows funding programs that did not exist fifty years ago. It seems that we have so much more that the federal government needs to pay for, but apparently not so much more to defend. On a final note it seems to me that spending on defense should be above the fray. Increases usually only take place after the need arises, such as 9/11. Honestly, who wants to be the guy arguing to cut spending on defense and then have things like that happen. Is there nothing sacred in politics?

Entitlements

This weeks topic is entitlements. According to Wildavsky spending for entitlements and other mandatory programs has doubled since 1988. Most of this money set aside for entitlements goes to social security about one-fourth. However as many of us are aware social security might not be available when our generation is set to retire, even though we have paid in and will continue for years to come. There are many reasons that social security is set to go bankrupt including: the large baby boomer population who are set to retire in the next 10 years, people are living longer, and the cost of living keeps escalating.

Medicaid is also quickly exhausting its resources. We are all aware of the cost of health care and when people get to a certain age and income level they are eligible for this type of health coverage. But with the rising cost of health care and the fact that more people are living longer and exhausting their own resources quickly, medicaid is having to pick up the tab. I recently experienced something interesting and I am not sure how I feel about it. The scenario goes like this:
Two people enter a nursing home
Person A has saved money for years and has built up a $500,000 savings account
Person B enters the nursing home with little to no money

Person A now has to pay $6000 a month or $72000 a year out of their savings account to stay in the nursing home, while Person B who had no money gets to stay for free or on the governments dime (entitlement).
Should the government reward people like Person B? Should the government take all the money from Person A?

In my personal opinion I think something needs to be done with entitlement spending. For the most part I believe this is where people take advantage of the federal government. I personally have seen people abuse the welfare system. I feel that social security, medicaid, and welfare are all worth while programs they need serious reform. Too many people rely on these entitlement programs to see them through life or end of life. We must as a country become more fiscally responsible about not only our own money but about the way our government is managing our money.

Perhaps you could provide your thoughts on the case above? What is your opinion of entitlement spending?

I have attached an article that goes well with our chapters reading. If you click the "Entitlements" heading you will be directed to the article.

Spending Freezes

This week’s reading focused on the politics behind the desire to balance budgets which is particularly relevant in the wake of this past week’s State of the Union Address and our current economy which faces a budget deficit in the trillions. One of the proposed solutions to combat the growing deficit is to implement a three-year spending freeze. How will this affect companies that rely on federal spending or contracts to keep their doors open during the recession?

The federal government historically has been one of the remaining spenders or buyers of goods during economic hardship. Many of the contractors I deal with in my job are still operating due to federal government contracts for equipment and services that support national defense and security. JLG Industries, which has local manufacturing plants in both Shippensburg and McConnellsburg, has faced economic uncertainties over the last several years. However, for the time being, they are able to continue to manufacture products because of Department of Defense contracts and continue to provide jobs in their communities.

While the administration’s intent is to not freeze spending for defense and national security, I would imagine that other industries that rely on federal agency contracts will be negatively affected by the proposed spending freeze. The freeze will also likely impact educational programs that are already underfunded at the state and local levels.

I’m certainly not an economist and I can’t claim to understand exactly how the proposed budget freeze will affect the economy. And I understand the public’s perception is that government spending is out of control. Maybe we will be able to look back and say that it was the best plan of action for the nation under the current circumstances. I suppose I just don’t understand how a spending freeze for certain federal agencies will make much of a difference when programs that depend on federal spending will be adversely affected. Especially when we consider that the entitlement spending will continue to increase in the coming years. There is still a need to reform Social Security and Medicare spending, but very little attention has been given to those issues lately.

Rule making and rule breaking.

I am not worried about the incremental approach that Wildavsky discusses. I worry more about the constant state of flux the rules of budgeting seems to be in. Rubin discusses the major changes in budgeting over the years. I find it very disturbing that the legislature is constantly reforming the rules to fit their situation. I understand the desires to curb deficits and the Gramm-Rudman-Hollings act. What I don't understand is why then, there is so much effort put into circumventing these rules. Then effort goes into reforming the rules. Now the budget is so large and complicated I wonder what the point is of actually spending time and money on making rules. It seems that all of the actors do what they want, regardless of what the rules are. Each committee and each congressman only pays attention to those aspects that affect them the most. It seems to me that when budgeting is so complicated that our elected representatives cannot follow rules and cannot read the legislation they are passing, then sweeping changes are needed.

Earmarking Discussion Comment

I believe earmarking is necessary if the need is reasonable. The example given in the book was Social Security because thousands of senior citizens depend on the payouts to support themselves after retirement. I cannot complain too much about this type of earmarking because I feel it protects a legitimate need in our society.

However, I do feel that earmarking has a natural tendency to lead to abuse, especially when earmarked funds are for private businesses as opposed to non-profit entities. I think the lines can be blurred as to whether or not the funds are in the public’s best interest when given directly to private industry. Considering that the basic premise behind earmarking is the elimination of competition with other budget expenditures, it is very risky to have funds given to private industry without a serious inspection into how the earmarked funds are going to be spent.

It was mentioned later in the chapter that tax breaks are often not evaluated after the fact to determine if they are achieving the desired outcome or goal. I would imagine that the same is true of earmarking. If that is the case, how can adequate oversight of earmarked funds be accomplished?

Discussion week of Jan 17

Hello everyone, I wanted to comment on the upcoming weeks reading earlier but just got around to completing the reading. I thought it was interesting in the Rubin book to look at all the ways that federal, state, and local governments can tax people and businesses.

One thing in the chapter that caught my eye and that we discussed briefly last week in class was Earmarks. I found it interesting that Earmarking was considered more of a state practice than a federal one. Living close to West Virginia I always hear about Senator Byrd. He is affectionately refered to as "The King of Pork". Granted he is the oldest and I believe the longest serving member of Congress currently. He has received over $1 billion in Earmarks for his state. He has over 30 projects that feature his name such as the: Byrd Freeway, Byrd Highway, Byrd Cancer Research Center, and Byrd Institute just to name a few.

On the federal level Earmarks allow for money to be set aside for projects that don't have to compete with other items in the budget. Earmark money is a guarantee if you win it for your state. However are Earmarks really beneficial? Do you believe that everyone gets their fair share or do some states get overlooked while others (such as West Virginia) get too much? Should Earmarks even exist?