Saturday, October 2, 2010

Business CEOs Would Lower The Federal Budget Without Benefit Cuts

A comment I posted on Carpe Diem, "Thanks for Paying Your Federal Income Taxes, Here's Your Itemized 'Taxpayer Receipt' " by Mark Perry:

The implicit assumption in these types of budget presentations is that the only way to cut the budget is to reduce benefits, entitlements, subsidies or whole line item programs, e.g. head start. Ignored in the analysis and presentation of the US budget is a business approach to the problem.

The itemization does not break out the personnel cost, including number or employees' benefits and pensions, of the Federal and State employees involved from the payments paid to the beneficiaries and from the materials used for improvements, such as for parks, space program, highways, etc.

The implicit assumption is that the only way to cut the budget is to reduce benefits or services, but that it not how business would look at the problem. Businesses would try to reduce personnel, material and process costs without eliminating or reducing the end service and benefit to the user, consumer or beneficiary.

We do not even know if it costs the government more to run any program than the dollar value of the services or benefits that program provides.

As we have seen in the current recession, businesses can recover a large percentage of US GDP without rehiring employees by becoming more productive.

Like a company that makes too many products and does not achieve economy of scale, too many inefficient government benefit, entitlement and subsidy programs cost the government too much to run.

Before we go about cutting dollars and services to beneficiaries (whether we believe in the program or not, such as ethanol subsidies), the American people should know whether or not the government is doing its job in a cost effective, productive manner.

It would be nice to know how much money could be saved:
  1. If government employees were as productive as private sector employees at the same wages and benefits of the private sector. As I remember the older studies, the general rule was it costs the government 20-30 percent more than the private sector to do the equivalent job.
  2. If the number of government programs were simplified and combined, e.g. why is head start separate from k-12? Couldn't head start be run in schools under the same bureaucracy as k-12 with reduced overhead costs for personnel, rent, heating, etc?
  3. If all health benefit programs were combined. Why is there one bureaucracy for Medicare, another one for Medicaid, and another for child medical benefits?
  4. How much money could the government save, without reducing the value of the benefits to the recipients, if we switched all entitlement and benefit programs to a voucher system like food stamps?
  5. If we combined all the disparate benefit and entitlement programs and just paid one monetary lump sum in monthly payments to individuals for all there entitled needs, food, rent subsidy, medical expenses, etc. The same for corporate subsidy programs.
My guess is that if government were viewed as a business, a CEO could find many ways to reduce costs and to save a lot of money without affecting the consumer product or service produced by the business/government.

If we then reviewed and eliminated our import tariffs and other price support policies, we probably could reduce the cost to households for necessary items, like food and clothing.

Likewise, a similar review for corporations could reduce their operating costs. These extra dollars in the pockets of households and corporations would be equivalent to a government subsidy and reduce their need for other government benefits.

There is a lot that could be done to reduce government budgets and costs before we have to get to looking at reducing the value of benefits to the consumer.


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