WHB March 4, 2009 - Priorities

Priorities are the Budget, PAYGO and Procurement

The following is taken from the White House blog. The comments in red are my thoughts critically examining these communications, which are in black.

-Kleio
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Wednesday, March 4th, 2009 at 11:32 am
Priorities -- Not lining the pockets of contractors
Last week the President laid out the foundation of a new vision for our budget and the way government does business. It is a vision based not on ideology, but on the idea that we can and must invest boldly in our future while also making the hard choices and being vigilant to bring in a new era of fiscal responsibility.

[Clicking on the “new era of fiscal responsibility” link will take you the Office of Management & Budget (OMB) where one can read the president’s address to the budget. The budget itself is also available here.] Anyway, around page 2 on this address Obama proclaims that “ours is a market economy.” Well, as economists will tell you, a pure market economy does not exist. Usually, a market economy exists where supply and demand set the prices as opposed to a planned economy where the government sets prices. A pure market economy does not exist if some government intervention exists. Government regulation affects the price set by the market and is definitely government intervention. When an economy has government intervention but that intervention is not so extensive and pervasive to make it a planned economy, then the market is called a mixed economy. Perhaps it is more accurate to say that ours is a mixed economy, after all the government is certainly intervening.

Also, in this address, Obama says, “We need to put tired ideologies aside, and ask not whether our Government is too big or too small, or whether it is the problem or the solution, but whether it is working for the American people.”

Isn’t that the fundamental ideology that should guide the spending practices of this our government? If we set aside this argument, we as a people are abdicating power. If we follow Obama’s advice we would set aside an issue which prompts a very important question. We must ask and continue to ask, should the federal government provide the solution to this problem. If we fail to ask this question and simply focus on allowing the federal government to address any problem or social ill, we as people have given away the very power our Constitution and founding fathers sought to preserve. This is the basic idea of federal power versus state power. Those who generically say that the government is too big generally favor state’s rights and less government intervention. This is not an ideological argument to be left behind but rather a fundamental tenet of our governmental structure.

Finally, I have included for your convenience the last paragraph of Obama’s address, please take a moment to first read through this.

“Finally, while we have inherited record budget deficits and needed to pass a massive recovery and reinvestment plan to try to jump-start our economy out of recession, we cannot lose sight of the long-run challenges that our country faces and that threaten our economic health—specifically, the trillions of dollars of debt that we inherited, the rising costs of health care, and the growing obligations of Social Security. Therefore, while our Budget will run deficits, we must begin the process of making the tough choices necessary to restore fiscal discipline, cut the deficit in half by the end of my first term in office, and put our Nation on sound fiscal footing.”

Now, consider this: deficit is calculated on a yearly basis and debt is a cumulative total. When I skimmed this I marveled at how after inheriting trillions of dollars of debt, Obama has a plan to cut that in half by the end of his first term. Not true and that isn’t what he said. No, he has said that he will, on a yearly basis have a budget deficit rather than a budget surplus. Obama promises to cut the deficit in half during the re-election year. Presumably after putting together a $1 trillion deficit, in four years Obama anticipates only needing a $500 billion deficit. It is interesting to note that Obama is pledging in the re-election year to budget $581 billion, this is still about $100 million more than George W. Bush allocated in his budget for the 2008 election year. Of course, debt isn’t going to be decreased by 50%, no, it is apparently going to increase by about 23.6% or about $2.6 trillion. This compares G.W. Bush’s 2009 budget to Obama’s 2012 budget.

Last week began with the fiscal responsibility summit, where the President and members of Congress came together to generate ideas to get the country on a sustainable long-term track. One of the exchanges that got the most attention was between the President and Senator John McCain, who discussed the idea of procurement overruns, in Defense Department contracts in particular.

Well, the gist with this is to return to the PAYGO system of the 90’s. Ah, the PAYGO system, where new spending or tax changes must not add to the federal deficit. I feel compelled to reminisce on the 90’s. George HW Bush was President from 1989-1992. The PAYGO system was first applied to the FY1991 budget. At first PAYGO worked well until Congress started around 1998 to creatively circumvent the PAYGO rules. Using means like advance appropriations and emergency designations. By 2001, emergency spending was not considered a measure of whether PAYGO was being applied. Did I mention that Bill Clinton was President from 1993-2001? In the end, the erosion to PAYGO that began in 1998 culminated when PAYGO was allowed to lapse. Naturally, I would suspect that a new PAYGO system will close the loopholes that made PAYGO ultimately unsuccessful.

Today Sen. McCain joined the President again to develop that idea further, along with Senators Carl Levin and Claire McCaskill and Representatives Edolphus Towns and Peter Welch. The President signed a Presidential Memorandum that will reform government contracting by strengthening oversight and management of taxpayer dollars, ending unnecessary no-bid and cost-plus contracts and maximizing the use of competitive procurement processes, and clarifying rules prescribing when outsourcing is and is not appropriate. The OMB will be tasked with giving guidance to every agency on making sure contracts serve the taxpayers, not the contractors.

Well, there is nothing bad about improving the efficiency of federal government spending. In this Presidential Memorandum [see similar abbreviated remarks included in the remainder of the blog], Obama names various agency heads and charges them with the responsibility of “[issuing by] July 1, 2009, Government-wide guidance to assist agencies in reviewing, and creating processes for ongoing review of, existing contracts in order to identify contracts that are wasteful, inefficient, or not otherwise likely to meet the agency's needs, and to formulate appropriate corrective action in a timely manner” Well, we’ll have to eagerly await July 1 to provide further interpretation. For the entire March 4, 2009 blog, please click below.


http://www.whitehouse.gov/blog/09/03/04/priorities_not-lining-the-Pockets-of-Contractors/