How to Reduce Federal Spending

Now that republicans and conservatives have taken control of the House of Representatives, the air waves are filled with debate on how they will fulfill all their campaign promises regarding the economy. The biggest questions focus on their ability to reduce the deficit without raising taxes. Most commentators act as if this is impossible but here is a newsflash for the media as well as Washington – it can be done!

There are two big problems for the republicans – first, they only control one house of Congress and second, they have no direct control at the department level – that belongs to the President.

All that said, if either side was serious about fixing this problem and salvaging the economic future for the next generation they could work together because together they have the ability to do it. The truth is the solution is so simple politicians can’t seem to see it.

Here are 10 very simple, time tested methods used in the business world that if applied to government would fix the economy, create jobs and bring spending under control:

1. Run the government as if it were a for profit business. This means it must be a model of cost control and operational efficiency.

2. Declare an across the board 10-15% budget reduction in every department and agency in the federal government – period, no exceptions. Since this has never been done it should be easy the first year. We know there is a ton of waste in the way the government operates. We do this (set a reduction target) every year at the company I work for and every year we find more areas to improve or fine tune. This should be an annual ritual for the government, too. It’s called continuous improvement.

3. Declare that budget reductions can not be met by simply reducing services to citizens. Evaluate all service offerings to determine if they even fall within the constitutional scope of the federal government, if not eliminate them. Let the states provide the things that they should provide. Also we should sunset all agencies which have outlived their usefulness.

4. Declare budget reductions can not be met by cutting core entitlement programs such as Social Security and Medicare. The recipients shouldn’t lose their benefits to allow uncessary spending to continue, the government should be forced to eliminate waste first.

5. Eliminate all “nice to have” spending. In government just like private industry there are “nice to haves” that will not affect the quality of services provided if they were delayed or eliminated all together. These should not be credited toward the 15% reduction requirement. All eliminated “nice to haves” should come right off the top.

6. Consolidation of operations, workforce reduction and outsourcing should be considered. How many buildings, vehicles, people, etc. could be eliminated without changing the quality of services provided? The size of the government’s footprint is incredible. How much money could be brought in by selling off excess assets? How much manpower could be eliminated through improved processes, systems and automation?

7. Evaluate all discretionary spending. Examples: Review all foreign aid programs. Review the need for all foreign military bases. Get out of the business of “funding research” instead create incentives to stimulate research in the private sector.

8. Hold the management accountable. Where else in America do managers get to ask for larger and larger budgets each year while delivering such pathetic results? Why shouldn’t there be a culture that challenges these managers to do more with less? The taxpayers are their “shareholders” so where is our shareholder value proposition? It is simple – make the managers manage.

9. Cut government wages to align with industry average wages for comparable private sector jobs. Realign government benefits and retirement programs to those in the private sector.

10. Negotiate lower prices from all vendors and suppliers. Tell all suppliers that the government must lower costs and that they must lower their prices to retain business. This happens all the time in the private sector.

Last and not least there is the nasty business of generating government income to fund the things which are necessary such as infrastructure, homeland security and national defense. We must cut base tax rates for business to stimulate investment and job growth. Creating business growth builds a larger tax base and job growth creates more individual taxpayers.

We must also either lower income tax rates for individuals or better yet scrap the progressive income tax model in favor of a national sales tax. A national sales tax is the fairest tax for individuals because it taxes your ability to spend not your earnings. In other words, wealthy people buy stuff, the more stuff you buy – the more tax you pay. It also taxes the underground economy which eliminates significant tax fraud by those that are self employed working for cash and not reporting their real earnings.

If the government held itself to the same performance standards as private companies do, we would be able to fix the deficit. If every time the government borrowed money to spend they had to provide a justification and a return on investment model before they borrowed it – how much of the spending would be approved?

In the end, if the politicians could just stop trying to get elected long enough to look at the real problem solving it might be easier than everyone thinks – eliminate the waste and increase the value. The only politician that seemed to understand this in the last 20 years was Ross Perot – but then Perot wasn’t really a politician, he was a successful businessman.

Restore the Republic, Reject Socialism!

“The budget should be balanced, the treasury should be refilled, the public debt should be reduced and the arrogance of public officials should be controlled”. – Ross Perot

“Government is like a baby. An alimentary canal with a loud voice at one end and no responsibility at the other”. – Ronald Reagan

4 responses to “How to Reduce Federal Spending

  1. Agree with all, but especially with scrapping income tax system for national sales tax. The income tax system is a political football, always has been, and always will be. The desire to work, create businesses or services, and hire employees should not be punished in a free enterprise system of economics.

  2. You do not even mention/suggest any downsizing of the military or of interest payments (these are more than 60% of the budget), nor do you enlighten us as to how the huge overhang of T-securities that are maturing is to be refinanced.

    • I did mention closing unnecessary foreign military bases but more importantly I suggested a spending cut in every department of 10 – 15%. Maybe if we stop spending on things we don’t need we can pay off a few of the securities as they mature.

  3. Another addition for your consideration:

    Review (1.) ALL ‘methods and procedures’ with the idea of (2.) reducing or eliminating said ‘methods and procedures’.

    Often Government(s) only reduce head-counts in tight fiscal times, only to fill or exceed them down the road. This mentality ‘will never’ get ‘government’ in the mode of being efficent with our money.

    If governments would focus on ‘managing’ government’s paper requirements and demands, i.e. “reduce or eliminate” METHODS AND PROCEDURES …. the head-counts would automatically be reduced.

    Also, there are some Agencies, Departments etc., that need to be entirely ‘retired’ and some that could be cut as much as 50%, especially the first year!

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