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By now, we've all seen and heard the parade of public officials predicting doom and gloom if the $85 billion budget "sequester" kicks in on March 1. Both sides of the aisle apparently want us to forget that this is a problem of Washington's own making.
The histrionics are entirely unnecessary. There isn't a CEO in this country who would allow him- or herself to get trapped in such a predicament -- or would wait until the last minute to find a way out.
On the first point, that the "crisis" is self-made, I refer you to the Budget Control Act of 2011. Signed into law in August of that year, the act provided that automatic spending cuts would take effect on Jan. 2, 2013, if Congress's Joint Select Committee on Deficit Reduction was unable to craft an acceptable bipartisan plan to cut long-term deficit spending by at least $1.5 trillion over 10 years.
Just before Thanksgiving 2011, that committee threw in the towel, stating: "After months of hard work and intense deliberations, we have come to the conclusion ... that it will not be possible to make any bipartisan agreement available to the public before the committee's (Nov. 23) deadline."
So Congress and the White House have had 15 months to get their act together.
But they couldn't. So late last year, with Washington in a state of high frenzy about going over the "fiscal cliff," they punted, passing legislation that increased taxes on high-income individuals, but delaying the automatic spending cuts -- the so-called sequester -- until March 1.
Now a new round of histrionics: the "Washington Monument ploy." The short version is this: If the budget cuts -- really, reductions in planned increases -- are allowed, drastic measures will be necessary, such as closing the Washington Monument to tourists. And worse, they'll also be forced, the storyline goes, to cut back on food safety inspections, school lunches, security screening at airports, processing income tax returns, and other high-profile activities.
One of the problems with Washington is that, with federal spending nearing $4 trillion, nobody seems to know how much money is being spent on exactly what.
President Jimmy Carter tried to get a handle on this in the late 1970s with an approach known as zero-based budgeting, which he had adopted, as governor of Georgia, from Peter Phyrr, then a controller with Texas Instruments.
Another attempt was made during the first year of the Clinton administration, with the adoption of the Government Performance and Results Act (amended in 2010 with the Government Performance and Results Modernization Act). But neither of these efforts proved fruitful, serving as bureaucratic window dressing rather than providing serious budget analysis.
A corporate executive would do things differently.
First, he or she would know how the company's money is being spent and how much everything costs. If belt tightening is needed, good executives would do everything they can to prevent across-the-board cuts, as the Budget Control Act requires.
Many executives have faced tougher decisions than Washington faces today. The federal budget proposed by President Obama for fiscal 2013 calls for $3.8 trillion in total spending. An $85 billion reduction -- the amount spending would fall under the sequester -- would trim overall spending by less than 3 percent.
If a CEO had to pare back 2 percent to 3 percent, he or she would look at the performance of the company's operating units, determine which units are under-performing (and why), and close, sell, or spin off the ones that aren't meeting their goals. At the same time, he or she would provide additional resources to the most productive units and those with the most potential. Using this approach, the CEO probably would find 5 percent to cut without breaking a sweat.
Similarly, lots of government activities could be cut. A Feb. 2012 Government Accountability Office (GAO) report found that Washington wastes tens of billions of dollars annually on overlapping government programs. An example: 53 programs run by four agencies that provide economic development assistance.
A good CEO wouldn't make indiscriminate cuts across the board; a CEO would eliminate waste, duplication, and programs that aren't meeting their objectives.
Why can't Washington do this?
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Harold L. Sirkin is a Chicago-based senior partner of The Boston Consulting Group and co-author, most recently, of "The U.S. Manufacturing Renaissance: How Shifting Global Economics Are Creating an American Comeback." Readers may write to him at The Boston Consulting Group, 300 N. LaSalle, Chicago, Ill. 60654.
------ © 2013, The Boston Consulting Group
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February 26, 2013 @ 2:31 pm
Well of course no one in Washington can do this. We have a “community organizer” as POTUS, which is the government equivalent to CEO but without the same level of knowledge or experience. I wonder how much we would save if we cut Osama’s travel, entertainment and clothing budget for him and his family? You just know that it was our tax dollars that paid for Michelle’s appearance on the Academy Awards – not to mention her clothes and the obvious elite party they had at the White House for awards night. Seriously – it starts at the top. When the person in charge focuses on the bottom line, everyone else falls into place, but as long as he manages by cronyism no one else is going to be very motivated to fix it. I’m disgusted with all of them – Boehner included – because he had all the “power” cards and he threw most of them away last fall. He still holds just one and he is sounding like he will cave at any time. I am responsible for a fairly large budget in the healthcare area and we have had to make severe cuts in order to prepare for the coming disaster of Osamacare. If I can do it there isn’t any excuse for Congress or the POTUS other than laziness. They just don’t want to take the time and make the effort to do the hard work. Reagan would have rolled up his sleeves and expected everyone else to do the same until it was handled. I remember when the government shut down before – did anyone die? No. Did the world come to an end? No. Did anyone in Washington learn their lesson? Evidently not nearly well enough. Fire them all and send them home. Stop the paychecks for Congress, Senate, Cabinet and POTUS as well as all of their staff until the budget problem is solved, then see how quickly they sit down and hammer it out. The staffers are the ones who truly come up with the plans anyway and with their paychecks on the line I’m pretty sure they could come up with a consensus pretty quick.
February 26, 2013 @ 3:18 pm
Don’t cave Boehner! Let’s stop spending on frivolous things and keep the important, like the Military. 338.3 Billion dollars spend each year on illegals! Board up the border after sending all illegals home, including the ones O just released from jails and prisons. Stop sending big bucks to rich dictators who would like to tear American’s hearts out and those that burn the American Flag! Get rid of the hundreds of government assistants to the assistants. Michelle could do with 4 or 5 assistants instead of 20 or 30. How many assistants does it take to put her makeup on and paint her lips? How about the huge bucks for Michelle and her family jet, luxury vacations? That’s a lot of tax payers’ money. How about getting rid of EPA, Dept. of Education, Federal Reserve, and many other departments that are worthless? Save a bunch of money! How about welfare and food stamps. That could be cut back by over one half. Tell the tramps to go to work. Jobs are there or they can create jobs!. We Americans don’t pay wages to those who keep screwing up the economy and expect The People to pay for their stupidity. That’s not why congressmen/ladies and president are elected.
February 26, 2013 @ 3:46 pm
“How would business handle….” It would be business as usual – good CEO’S, CFO’s and small business owners would be all over the board accessing cuts to ‘unnecessaries’ or trimming budgets for extraneal costs. 2% would not be that earth-shattering…….except for Washington who doesn’t know how to cut their over-bloated budgets and habitual spending habits. Bring it on!
February 26, 2013 @ 4:03 pm
What is the USE!
All this mess that the White House is doing to the American People is a shame.
The people that allowed this to transpire is really going to get there $$$ worth.
Just wait and see!
As it is predicted the up and inevitable Currency War will hurt bad the some what full of them self upper middle class will get a good $$ laundering!
The Elite upper 1% will just blow off the rest of the stupid little peoples will just a smile and end up in a hotter spot!
There was a poor sick beiger at the gates of a rich man, just ignored and when they both died one was cast to hell the other went to be in paradise!
The USA is being lead by a ***** Self admitted Former Cocaine addict and a bunch of Yes Sayers to an oppressive Bunch of Socialist Progressive Communists who have there own private goals in toe.
With the Corrupt power to do what they want, with no-one willing to stand up to them! As of Yet!
February 27, 2013 @ 9:05 am
stand firm on the sequester. Then implement all cuts from the referenced GAO report and the decades-past Grace Commission reports on duplicate government services.
Next implement all cuts in last years House budgets plus the Presidents 2011 budget super-committee and the Simpson-Bowles Commission.
Then we can work to fine-tune further annual-deficit reductions around a smaller target number that people can understand.