The Wrong Approach to the Deficit Could Imperil More than Just the Recovery

by Craig Jennings, OMB Watch
Published on
Jan. 24, 2011

When President Obama delivers the State of the Union address Tuesday, one topic he will likely devote many words to will be the nation’s finances. For months, we’ve heard calls from all sides to “rein in the deficit” – a deficit so massive that, if some politicians are to be believed, it may plunge the nation into another Dark Ages. If Obama echoes these unceasing cries coming from inside the Beltway and sets forth a budget plan designed to meet the needs of Washington politics and not the nation, he could imperil the nascent economic recovery and future growth while stifling public protections, the effectiveness of the federal workforce, and the economic well being of millions of families.

The recent increase in the federal deficit that has caused so many fainting spells around the capital has also added millions of jobs to the economy. Some of the deficit growth has been driven by the Recovery Act, which will pump some $800 billion into the economy before it fully winds down. That’s $800 billion into the pockets of individuals who found the extra income helpful after their jobs disappeared and into the bank accounts of thousands of private businesses that used the additional income to hire new workers. The funds also helped state and local governments retain teachers.

Despite all this, House Republicans have proposed to immediately cut up to 30 percent of non-security discretionary spending. Such action is reckless. It will undo the slow progress made to dig out from underneath our economic collapse. It diverts attention from the main causes of the deficit: weak employment, inadequate revenues, and long-term health care entitlement costs. Moreover, it does damage by plucking extra cash right out of Americans' pockets and bank accounts, causing private businesses to cut workers loose as Washington puts the brakes on road construction, bridge repair, and other infrastructure upgrade projects, not to mention the investment in our children’s education.

The federal government currently funds a raft of initiatives that will pave the way for future economic growth. Smart electrical grids that deliver power to businesses more efficiently reduce production costs. Broadband expansion brings the Internet to more corners of the country, which is vital to keeping America competitive in the global marketplace. Cures for diseases and other ailments discovered through grants at the National Institutes of Health not only improve quality of life but also result in a healthier workforce. In fact, the federal spending that has enabled economic growth has boosted federal revenues through economic expansion, which has resulted in fatter bottom lines. Paring back spending in these and other economic investment areas will have real and long-term impacts. But the economy and job creation aren’t the only things in which the federal government invests.

Our tax dollars support the federal workers and institutions that, when fully funded, reduce the chances you’ll be sickened by contaminated peanut butter or spinach or hamburger meat or anything else you eat; ensure that your child’s crib won’t collapse and cause serious injury or death; make sure your car stops when you hit the brakes; sanction employers who cheat their employees out of earned pay; prevent oil spills; keep planes from falling out of the sky; and stop terrorist attacks. The list could go on and on. As chief executive in charge of federal agencies, Obama should, more than anyone, understand the vast array of public protections provided by the government. There is no excuse for proposing a budget that shortchanges the people and agencies that keep us safe.

Moreover, as someone who works daily with federal workers, the president should be first in line to loudly defend the scores of smart, hard-working, and dedicated civil servants who serve the country. Attracting top talent to fill the ranks – from front-line employees to executive managers – requires competing with the private sector. Freezing the pay for federal workers and thinning their ranks is no way to attract talent or thank civil servants for their work.

In both total numbers and as a percentage of the American workforce, the size of the federal bureaucracy has been on a downward trend for the past two decades. We have a federal workforce that is being stretched thinner every year, and proposing pay freezes and headcount reductions will lead to a crippled bureaucracy that doesn’t have the resources required to maintain the host of services the government provides to all Americans. Such a freeze would reduce the $1.3 trillion deficit by about $2 billion per year; at 0.02 percent of the deficit, the freeze is nothing but a PR gimmick that has a profound effect on the entire federal government and the everyday lives of Americans.

The federal budget is a statement about the president’s national priorities. When he delivers his State of the Union address, President Obama should first ask, “Is the federal government providing necessary public protections, an adequate social safety net, and equitable economic investment?” Any long-term deficit reduction plan must first meet these standards.

Craig Jennings is the Director of Federal Fiscal Policy at OMB Watch, a nonprofit research and advocacy organization dedicated to promoting government accountability, citizen participation in public policy decisions, and the use of fiscal and regulatory policy to serve the public interest.

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