THE ENTERPRISE
Happy Valentine's day from THE ENTERPRISE. Take the occasion to tell the ones you love, how much you love them. You can never do that too often.
The economists couldn't find much to talk about this week--that's good news. The Super Bowl is over, so now we can concentrate on the Michael Jackson trial, which rap group will win the Grammy for the most outrageous performance, and who will win the Grammys, Oscars and assorted other awards designed to glorify entertainers and make lucrative TV shows.
But hold it a minute. A lot is still going on. In Iraq real people are dying for freedom...both the Iraqis and US/Allies. Our Federal Budget deficit is still too large, but as you'll see if you scan the proposed budget, the only one courageous enough to tackle the big problems (entitlements) is (gasp!) President Bush--who has been widely blamed for the size of deficit. (By the way, repealing the Bush tax cuts for the richest 2% of Americans will NOT balance this budget--or even come close.)
(See Budget Chart below--from Kiplinger Forecasts, vol. 82, no. 6, Feb. 11, 2005)
Note: The Iraq military campaign could add $100 Billion more to defense spending in 2005-2006.
Where would you cut to get the Federal budget under control? And how would you do it? And if you could stimulate the economy to grow revenues and help reduce the deficit that way--why not? If we don't cut the rate of growth of entitlements, can anyone ever get this budget under control?
Vilfredo Pareto taught us centuries ago that in most instances, 80% of the results are caused by 20% of the events--the old 80/20 rule. It is little different now. We can argue about a billion here and a billion there, but as my old Illinois Senator Everett Dirksen once said, "a tenth of a billion here and a tenth of a billion there and pretty soon you are talking about some real money!" Still, 70% of the $2.5 trillion budget is concentrated in the top 6 line items, four of which are self-sustaining, continuously growing entitlement programs.
That doesn't mean we should continue to fund many of the ridiculous pork barrel projects sponsored by virtually every legislator--we shouldn't. These show up in the bottom 2/3 of the line items. But arguing over the little numbers at the bottom of the list fails to address the really serious issues that exist at the top of the list.
As every good manager and executive knows, budgeting is a bottom-up and then top -down process. Part of that top-down is to sort the revenues and expenses in descending order of their annual magnitude...and then work them all. Work diligently on the big ones and squeeze the (pork) fat out of the small ones by looking for the unjustifiable waste.
Most important of all, don't lose track of the forest and the trees. Let's hope our government doesn't either.
Best, John
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