A scalpel, not an ax, needed to cut US budget

The temptation to use an ax is going to be nearly irresistible as the people around the table discuss the budgetary cuts that will be necessary in the fiscal cliff negotiations. You can guess how the cards will be played: “OK, we’ll give you 2 percent extra revenue but we want a 20 percent cut across the board in nondefense discretionary spending.”

There are two categories of spending in the federal budget. Mandatory spending – about two-thirds of all expenditures – includes programs like Social Security, Medicare and interest payments on the federal debt. Congress doesn’t have to vote to budget the money each year for these things because the amounts are set by formulas established by previously passed laws.

The other third of all federal expenditures is “discretionary,” which means in government-speak that it is subject to review each year. Defense spending is discretionary, and accounts for about 18 percent of the total federal budget. That leaves about 15 percent of the total budget to spend on everything else. When you think about discretionary spending in your house, you probably mean what you spend on stuff that’s nice but not absolutely necessary. Unfortunately, a lot of people in Congress think that way about federal discretionary spending, and the axes are out big time.

What budgets are threatened? Hundreds of them, including all the regulatory agencies, the Veterans Health Administration, the National Institutes of Health, the Environmental Protection Agency, financial aid for college students, Head Start, the national parks – I don’t have the space to list even the most important ones.

In 2010, all nondefense discretionary spending was budgeted at $7 trillion for the next 10 years. Because of budget decisions made last year that has already been cut by $1 trillion – nearly 15 percent. If the cuts mandated by the sequestration legislation of 2011 go into effect – that is, if we fall off the fiscal cliff – another $1 trillion, for a total of 30 percent, will be cut.

Let’s consider what a cut of 30 percent would mean for just two relatively small agencies in the discretionary spending category. Not because I think they are necessarily the most important or threatened agencies, but because they have had a very high profile in the past month.

A lot of people were surprised to learn that the path of Hurricane Sandy was better predicted by weather services in Europe than by our own National Weather Service. Why? Lack of funding has already curtailed its ability to launch satellites and upgrade equipment.

“It’s embarrassing,” says meteorologist Cliff Maas of the University of Washington. “And it has an economic cost.”

What will be the cost if our weather service is unable to post warnings far enough in advance of future potential weather-related catastrophes? Cutting its budget by 30 percent may tragically provide an answer.

Based on practically every report, including the unanimous praise of the state governors directly involved, the Federal Emergency Management Agency’s response to Sandy was first-rate. FEMA took the lead during pre-storm preparations. Before the storm hit, it distributed supplies such as food, water, blankets and generators. It organized search-and-rescue operations. It is providing grants for home repairs and for those whose homes are uninhabitable. It has set up websites to help spread information of all kinds to those who need help. Also, 2,200 FEMA employees have been sent into the affected areas.

Of course, for people who are still waiting for help from FEMA, the response time has not been quick enough. I can’t help but wonder how many more of them there would be if FEMA’s budget were to be cut by 30 percent. I wonder too about what would have happened if we had listened to those who wanted to do away with the agency altogether and had relied on the states to handle natural disasters on their own.

Since the easiest way to reduce federal discretionary spending is to say, “Let the states handle that,” that idea probably still has some life. I hope not. I hope, too, that cooler heads will prevail before FEMA’s budget is cut by 30 percent at a time when our need for its services will almost certainly grow.

I can’t remember the source, but I recall reading some time ago an article about cutting costs by a prominent corporate executive.

The first 5 percent of fat is easy in most companies, he said. But by the time you get into the teens you begin to hit muscle. Once you do that, cost cutting is counterproductive and may risk the viability of the company.

That seems just as logical for vitally important federal agencies as it does for corporations. Congress needs to use a scalpel and not an ax.

Originally published 24 November 2012 on delawareonline.com