Not So Fast With The Cost Cutting

I do understand the impulse for Obama to portray an image as a good fiscal steward of the people's money. And I agree that government can occasionally be wasteful and spend money on things that don't make sense. And I'm fairly sure that all of these cuts, $100 million or so, being made by Cabinet Departments have a sound basis and will not really influence the proper workings of government - in fact, they are far too small to do so. Government should run a tight ship and use efficiencies where necessary to cut costs. In the end, these are symbolic efforts.

But like Robert Reich, I don't want to see this get out of control in the midst of a Great Recession and a huge shortfall in demand. Government needs to continue being the spender of last resort, and any waste that creates a job is at this point not waste. In other words, this impulse toward fiscal restraint cannot go off in any other directions, particularly when it comes to entitlements.

Over the longer term, Obama must be careful not to put entitlement programs on the chopping block as part of a "grand bargain" to elicit Republican support for health care and cap-and-trade. Social Security is not in dire straights; it can be made flush for the next 75 years by ever-so-slightly lifting the ceiling on the portion of income subject to Social Security payroll taxes (and if Democrats are reluctant to do that on incomes over $100,000, then they could do so on incomes over $250,000).

Medicaid and Medicare are in trouble because health care costs are rising so fast, which argues for health-care reform rather than cuts in these important programs. Yet if health-care reform has any prayer of controlling the rising tide of health care costs, the plan must allow beneficiaries to opt into a public insurance plan -- something Republicans and the health-care establishment are determined to fight. So it's critically important that the Senate wrap health care into a reconciliation bill that can be enacted by a majority vote in the Senate.

The good news is that cost savings and real reform can actually go hand in hand. The Administration has argued that health care reform equals entitlement reform, period, and by bending the curve on health care costs we can improve the health of our budget while providing more health care to more Americans than ever before. Another more provocative example would be Tom Ricks' call to shutter the service academies and use campus-based ROTC schools in their place, saving money and breeding a better type of officer.

So let's not get too cozy with these calls for budget-tightening in a time where government needs to spend. And when we get around to saving money, let's do so in a way that INCREASES services and effectiveness for the American people. I actually think that Obama's team gets this, and are trying to do some rebranding on this stuff.