Seeking to recast himself as a fiscal conservative, Obama is projected to propose a freeze on discretionary spending – NPR, NEA, “green” jobs, “disaster” relief, foreign aid? Well, perhaps, but before awarding him the 2010 “Wastrel Recovery” prize, consider the various ways government burdens the economy. Limiting spending and government growth requires a systemic approach. Consider the rich array of political means: taxes, regulation, guarantees, entitlements, inflation, monetary misallocation, and “discretionary” spending. Tax cuts have been a conservative nostrum for many years and taxes can be costly but, too often, they’re paid for with debt or inflation. The costs of inflation, regulation, guarantees are largely off-budget. There are no “accounting” gains for cutting back on these interventions. Entitlements such as social security and medicare (especially after the massive expansion of Bush and the Republican Congress) dwarf discretionary spending but Obama seems unlikely to challenge these sacred cows.
Still, better than nothing? Perhaps, if Obama would cease campaigning for ever more costly regulations, halting the onslaught of financial, environmental and medical rules, or abolish Freddie, Fannie and the other TBTF faux capitalist GSEs cluttering the economic landscape, we’d have more confidence. Why not get ahead of the game-do a “Nixon in China” and seek to privatize retirement and medicare? Monetary policy is nominally the Fed’s but why not allow a “Taxpayer Choice of Currency” with each citizen designating their own tax metric, thus disciplining inflationary policies?
Yes, if NEA and NIH and NASA and the army of acronymic pigs at the public trough can be curbed, it would be good. But, a starved program merely encourages the relevant interest groups to push back toward the trough. Only abolishing programs can yield any significant results. So let’s hope that Obama reaches for his roots and becomes an Abolitionist. Till then, expect lots of rhetoric but not much hopeful change!