(This is the first in a series of posts where I will rant and rave about the state of the world and how things would be different if Roger, The Amateur Financier, was in charge. Consider them conversation starters; I’d like to hear the solutions my readers have for some of these pressing problems facing the country and world today.)
I don’t know how much of a story this was in other states, but the big news in Pennsylvania is that we finally have a state budget. The governor and the state congress have been at odds with each other for over eighty days (that’s 8-0, nearly three months) trying to work things out; they finally reached an agreement at the end of last week, although it could be another week before it goes through (and even then, our governor had threatened to veto it, although I don’t know if that threat is still outstanding). This impasse has had some serious consequences; government workers haven’t been getting paid, some have even been laid off, and any program or person who receives state money has been at the end of their financial rope for nearly three months. It’s been a horrible, horrible situation.
This whole ordeal has had me thinking. I’ve been trying to come up with some ways to improve the budgetary process in the government, to avoid situations like this in the future. (It’s either that, or start screaming in frustration at the sky.) Clearly, there’s plenty of changes that could be made to the budgetary process. So, I’ve taken on the task of fixing the budgeting process in my role as benevolent (well…mostly benevolent) fictional dictator and created a few solutions to make budgeting more effective.
No Budget, No Pay - One of the most galling parts of the whole budget debacle is that the legislators and governor continued to draw their salaries (and benefits) while people who depended on state government money, from employees to beneficiaries of state programs, had to suffer and muddle through without any help. So, my first change is rather simple: if a governing body can’t come up with a budget, the members don’t get paid. Period; no ifs, ands, buts, or per diems. Perhaps losing some of their income will inspire our legislators to be more friendly and less confrontational. (Or we go onto the next stage: locking them in the capitol building until they come up with a workable, balanced budget.)
Balance the Budget – More directed at the federal government than the states, since all the states (except Vermont, apparently) are already required to have balanced budgets. Nothing good will come if the federal government is allowed to lower taxes, raise spending, and push off the bill to the future taxpayers (and those of us young enough to still be paying taxes decades from now when the bills start coming due). Eventually, something has to give; taxes will have to go up, the budget will be slashed, or inflation will climb (and in the worst case, we will have to deal with all three at once). It’s much better to reign in the spending now, before things start to get even worse. And on that subject…
Pay Down the National Debt – I’m not saying we need to completely pay off the national debt; there are solid arguments for some level of national debt, and many people like to invest in federal government bonds. But reversing the trend, from growing fairly rapidly to staying steady, or better yet, declining, would definitely be a positive trend. Gradually decreasing the amount of government bonds issued each year (the amount of new debt we take on) will slowly decrease the debt, as well as any negative effects associated with a large and ever increasing debt.
Sell (More Specific) Bonds – Perhaps my favorite idea on the subject, inspired by the war bonds sold to help finance World War II. The concept is simple: start selling bonds that cover specific expenditures, rather than having all the proceeds from government bonds going into the same pot of money. The same values, types of bonds and return on investment; the only difference is where the money goes. So, now we’ll have Afghanistan War Bonds, WIC Bonds and National Endowment for the Arts Bonds, each providing money to different programs.
Think of it as an indirect form of voting; by buying bonds in programs we support and avoiding those we don’t, we’ll be able to help direct where the government places its priorities. If the Michigan Trout Fishing Fund can’t get enough investors, well, perhaps we can do without it. Similarly, if there is overwhelming financial support for the National Endowment for the Arts program, well, all the more reason to keep it going and expand it. (Admittedly, this gets complicated when dealing with foreign governments buying Treasuries; keeping bonds for foreign consumption broad would be one way to avoid having foreign investors dictate US policy.)
For smaller programs, this could be the only funding that is needed. Programs with expenses under $100 million (small by federal government standards) that get enough investor interest get funded; those that don’t, get canceled (unless they get funded by a specifc government bill). As a result, we can trim some of the little expenses from federal spending bills without much time or effort involved. No need for legislators to comb through the minutiae of the budget to hunt down small programs to cut; just let the market handle it.
That, in a nutshell, is my plan to fix the governmental budget system. It might not be perfect, but compared to our current system, it’ll be a definite improvement.