Why The Shutdown?

It seems as if everyone in Washington, as well as the media, is playing the pointing game since Friday. What is the pointing game? The Democrats are pointing their fingers at the Republicans for blame on the government shutdown. The Republicans are pointing their fingers at the Democrats. You can read all about the blame game on Twitter with the trending hastags: #SchumerShutdown #TrumpShutdown

No matter who is running the better blame game, we need to figure out why each side is stonewalling and what the issues are about. In short, Democrats want amnesty, Republicans want a wall. But if it were only so simple, the solution would be easy.

President Trump ended the Deferred Action for Childhood Arrivals (DACA) with a 6 month waiting period to allow Congress to do their job and legislate. President Obama had previously implemented DACA by executive order because he didn’t want to wait for Congress. And as discussed previously, executive orders can be repealed by the next president. This move is what the Democrats are using as their “must have” in the negotiations on the government shutdown.

In 2017, there were 800,000 individuals enrolled in the DACA program that keeps them from being deported because they were brought here illegally by their parents as a child. When the President rescinded the DACA executive order, he left it in place for a period of 6 months to allow Congress to debate it and decide on a new plan. The 6 month waiting period ends in March, so the Democrats have taken the DACA negotiations into the government funding debate as one of their tools.

Several Republicans support some sort of the proposed policies regarding the DACA recipients. But there aren’t enough that support the Democrat version of the bill as it stands. Republicans have stated that they will not vote to pass a bill on DACA without a bill that funds the construction of a barrier for the southern border of the US.

The demand by the Republicans for funding for the border wall was reportedly agreed to by Democrats on Friday, but only for a short 1-year period. Senator Schumer only proposed a 1-year appropriation, but President Trump rejected that offer because he needs a multi-year deal. This actually makes sense because we all know how quickly the government gets things done, a 1-year deal would likely barely break ground on a wall before the time and money would run out.

One could summarize the current fight like this: Democrats are fighting for the privileges of illegal immigrants. Republicans are fighting for the protection of US Citizens from illegal immigrants. And in the crosshairs as collateral damage are the men and women of the armed forces who are currently working for no pay. They will no doubt be paid for the work they do, but it won’t happen until Congress does its job and comes to a compromise on funding the government.

UPDATE: It appears that the Democrats have come to an agreement with the Republicans to fund the government for 2 ½ weeks under the assumption that they work on a bipartisan agreement to address the DACA issue. The wall funding was likely not involved in this agreement either. This does allow the government to run for the time being, but if we can’t get past this DACA issue, we could be right back in the same situation in February. Buckle up.

**Interesting to note, the current budget that they are operating on is a budget from President Obama, so one could argue that it is in the best interest of the Democrats to find a resolution soon to keep Obama’s budget allocations in place. President Trump has proposed his own budget that has big cuts to some of the Democrats pet projects, so there will no doubt be a fight over the Trump budget soon enough.

Tax Cuts And Spending Cuts

With the passage of the Tax Cuts and Jobs Act of 2017, there is an addition $1 Trillion projected to be added to the deficit over the next 10 years.  However, this increase in the deficit should be offset some by a projected increase in economic growth due to the tax breaks.  So, now that the revenue side of the budget has an 8 to 10-year decrease because of the bill, any financial consultant with their head on straight would tell you that there needs to be an equal reduction on the expenses side.  This, however, isn’t how the government seems to work.  Every year since 1974, the budget deficit has averaged at a level of -3.1% according to the Congressional Budget Office.

To put this into perspective, let’s bring it down to a household level.  Let’s imagine that you bring home $50,000 per year (to use an even number).  If your household were using the US Government model, you would spend about $1,550 more each year than you actually bring home.  That is money going onto a credit card, a bank loan or some other form of consumer debt.  Extrapolating this over a period of 39 years (’74-’13), your household would have spent $60,430 more than it made in salary, and that isn’t including the interest that is being accrued on the balance every month.

So, what is the answer?  Cut spending, of course.  But that is where the problem comes in.  When the US Government spends money on something 1 time, the expectation is that they would spend money on that same line item indefinitely.  If you increase a handout to the citizens, it’s almost impossible to rollback those handouts because of the political fallout that would ensue.  Don’t believe me?  Go down to the Social Security office and tell everyone in line that their unemployment checks are about to be cut off and report back on how well that goes.

While cutting spending isn’t very popular, there are many areas that the US Government could cut or reduce spending where the people wouldn’t necessarily “feel” the cut, in fact, some of these cuts don’t even affect the American people at all.  Let’s look at a few areas that the US could reduce spending while continuing to help real people with real needs.

Tomato Research.

In 2017, the US government spent $1.5 Million to fund research on how to make the tomato taste better.  Now, don’t get me wrong here… who doesn’t want a better tasting tomato?  But to the tune of 1.5 million taxpayer funded dollars?  Someone call up John Kerry and see if his wife’s family would be willing to pitch in a couple mil to help their own cause.

Foreign Aid.

This past year, the United States gave away $50.1 billion in aid to other countries.  Former presidents have tried to downplay this number as being “only 1% of our total budget”, but this argument falls short because that is more than 7.5% of the total budget deficit for 2017.  If we start dismissing the “smaller” parts of the budget, then it will never balance.  Anyone who has ever had to do a personal budget knows that when you find yourself $30 in the hole on your monthly budget, you usually chip away small amounts from several places, rather than a lump from one spot.  It hurts less that way.

Now, I know that we cannot eliminate all of that foreign aid for various reasons, but there are plenty of places we can cut back.  In the late 2000’s, we were sending $4.5 billion per year to Pakistan while they continued to mock us with their nuclear program.  We gave Iran $3.4 million this past year and look what they have been doing lately to their own people.

In the days of President Bill Clinton and a balanced budget, we were only spending around $20 Billion in foreign aid.  Those numbers grew quickly in the early 2000’s, due mostly to war, but then continued throughout the 2010’s.  Cutting back foreign aid would be a huge step to righting the sinking ship.

Big Sugar.

The US subsidizes the sugar system in the country to the tune of $1.2 billion dollars per year.  This subsidy actually costs you double because part of the subsidy is government regulations that set a minimum price for sugar in the US, which is about double the average price worldwide.

Improper spending in Medicare. 

The Center for Medicare and Medicaid Services (CMS) released a report in 2016 that showed 11 percent of payments made were incorrect or improper.  That comes out to $4.1 billion dollars in improper payments.

Social Security.

Hold on to your britches for just a second.  Not trying to eliminate it, but revise it.  The current system allows older adults to being drawing (reduced) social security checks at 62 under the early retirement program.  If you wait til 65, you can draw full social security (This will eventually become 67 years of age through a revamp of the system already in progress).  The problem with social security is that when it was implemented in 1935, the average life expectancy of a US adult was 59.1 years of age.  Today, it is 78.8 years of age.

Raising the age of social security eligibility to 70 would save $200 million over the first year and a whopping $7.6 billion over a 5-year period.  It’s time for American’s to work longer and be more responsible for their own retirement funds.

Afghanistan Highways.

Last year we spent $255 billion dollars on building highways in Afghanistan.  I get that they are a war tattered country, but $255 billion is more than 1/3 of the total budget deficit.

Sesame Street.

Yep, you read that right.  We spent $14.8 million to finance international versions of Sesame Street.  14.8 million isn’t that much though right?  Yes. It is way too much.

Walmart Cashiers… in Mexico.

We spent $15 million to train Walmart cashiers in Mexico.  I have 2 issues with this. First and foremost, it’s Mexico.  Second, it’s Walmart.  Isn’t everyone going to self-checkouts these days anyway?

Kenyan Farmers.

And finally, while small in decimal places, this one is a real doozie.  The US Government spent nearly $100,000 to teach Kenyan farmers how to use Facebook.  What the what?  My budget would have a great big ole’ “X” through that little program right there.

 

So, with these 9 examples from a little bit of digging, we have been able to successful eliminate about $290,531,400,000 or 290 Billion dollars in just 1 year.  Extrapolating that out to 10 years (including a greater savings in the Social Security field), we would save a total of $2.9 trillion. So, we just took a 1 trillion dollar addition to the deficit over 10 years due to the tax cuts and successfully turned it around to an extra 1.9 trillion dollar savings over the next 10 years.  And there is plenty more where that came from.

This isn’t rocket science, it’s just simple math.  But it means that some of the extra fat needs to be trimmed off.  None of the proposals above would put any American into poverty, nor would it wouldn’t keep a child in the slums of Detroit from eating dinner.  All it takes is some effort, bipartisanship discussions and hard work on the part of those we elected to run our country.  Rather than talk about who used foul language in a meeting, or who tried to mislead people with medical records, let’s put Washington to work to get rid of all this debt.  Because as you know, the borrower is slave to the lender.