The Government Isn't a Household

I was recently told that the balancing the U.S. budget is like balancing a family budget. If you're spending too much, cutting out a lot of little things can make a big difference. In the conversation, cutting back on the EPA was a theme.

The EPA budget in 2011 was about $8.5 billion. The Federal government spent $3,630 billion that year and brought in $2,314 billion. This is a deficit of $1,316 billion. So if we to eliminate--not merely scale back but completely remove--the EPA, we are shaving off a little more than 0.6% of the deficit.

Let's put that in perspective. Suppose your household make $50,000 a year (after taxes) but you spend about $78,435 a year (this keeps our household income and expenses in proportion to the Federal government: here our deficit is $28,435). Our EPA equivalent is an expense of $170.61. You're spending more than $28,000 a year than you earn and some people are arguing you can solve your problem by three fewer video games.

Yes, yes, I know. The argument is that if we do enough of these little cuts (and keep in mind, I'm eliminating the EPA, not just cutting it back), it adds up into a significant effect. Forget the fact that there aren't enough little cuts to use until you run into the politically tough stuff (Medicare, Social Security, defense). The household analogy is fundamentally flawed beyond that.

Imagine you attempted the same strategy but you needed everyone's approval before you made changes. You can't cut your cellphone budget unless your talkative daughter approves. The video game budget adjustments need approval from your kids. Hell, even your dog has to approve adjustments to how many new toys he gets.

Now spending your time and effort taking away a few video games seems really dumb. In fact, it might be better to spend more on video games just so the kids won't complain when you dip into their college fund (which is a really big expense and can solve the problem by itself).

Like a household budget, our budget needs to be balanced. But there's where the analogy stops because to change the Federal budget, you have to get approval from folks who are about as forward thinking as teenagers and as thoughtful as a family dog.

The Scarce Resource of Political Capital

A couple of days ago I participated in a round table discussion on the state of the economy. It was organized by the office of Representative David McKinley and included local business leaders and political actors. Two of Bethany's best students were there as well, about 12 overall.

While the main purpose of the meeting was sequestration, the businessmen wanted to express concerns about the EPA, making sure the congressman was aware of the barriers it sets up. The EPA's smothering them and, by extension, job creation. I emphasized regime uncertainty: the only way we're going to get the investment needed to bring job growth back up is for Congress to strike some kind of deal. There's too much uncertainty in the market. Everyone agreed, but I don't think people really got it.

Everyone seemed to believe that McKinley could do both: help strike a budget deal and weaken the EPA (and do other things, too). But he can't. He only has so much political capital to spend and making these things happen requires getting a lot of people on board. McKinely's a Republican so reigning in the EPA will upset some Democrats which will make it harder to strike a deal. And since he's a member of the Tea Party Caucus, increasing taxes is politically tricky, too. A common Sophie's choice in politics: what the country wants or what the constituents want. (Oh wait, that's not a good analogy; they will side with their constituents almost every time.)

This is why I like pork. If you think of it solely as a project (e.g. a bridge to no where), then yes, it's wasteful. No one seemed to like pork at the round table discussion and I regret I didn't defend it because pork makes things easier. If EPA deregulation and politically stable is what you buy with political capital, pork is a way to earn it.

Pork is cheap. Giving every Representative a $5 million pet project would cost a little less than $2.2 billion dollars. If that gives us a budget deal, we get stability and economic growth: that's worth hundreds of billions of dollars. Yes, it might take more than $5 million to get cooperation from some, but others won't require any pork. It's a good deal.

Political capital's a scarce resource. Like the money Congress is fighting over, you can't have everything. But if you sleep with the pigs, you might get enough to make everyone satisfied.