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Exchequer

NRO’s eye on debt and deficits . . . by Kevin D. Williamson.

The Federal Fire Sale



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The federal government wants to sell some old buildings and vacant land. This is not a bad idea, so far as it goes. What it is not, though, is a plan for reducing the federal deficit — though in some quarters it has been embraced as such. That is ridiculous.

The proposed Civilian Properties Realignment Commission, modeled on the old Base Realignment and Closure Commission, which was charged with rationalizing our military-installation footprint starting back in the 1980s, would identify underused federal real-estate assets to offload, if buyers could be found. Federal holdings are a mess: George W. Bush was the first modern president to even order an accurate inventory of them to be taken. Federal waste in asset management is of course vast and deep — but neither vast enough nor deep enough to make much of a hole in the deficit if it is redressed. The Obama administration reckons that about $3 billion could be saved in the first year. (The real savings come from avoiding the cost of maintaining the buildings, not in generating revenue from their sale; i.e., these are permanent reductions in spending rather than one-time revenue gains, a fact that is to be celebrated.)

So, $3 billion saved: Cheers to that. In 2011, the federal government is spending about $3 billion every seven hours or so.

I am not opposed to finding efficiencies. Thrift is a great American virtue (or was once). But these sorts of penny-ante projects, which generate a lot of happy talk about belt-tightening and prudence and sobriety as often as not end up being a way to not talk about the serious budget reforms that must be enacted.

Our friends at the Heritage Foundation have identified a larger asset they’d like to see the government liquidate: its gold holdings. These are worth a couple of hundred billion dollars — real money, but still only a few months of this year’s $1.6 trillion deficit. As much as I’m for downsizing Leviathan and doing what it takes to reduce the deficit, I’d advise against selling off the gold: If the United States should ever need to rebuild its currency — say, in the wake of a dollar collapse from hyperinflation resulting from incontinent spending and the monetization of the resulting deficits (Crazy, right?) — some gold might come in handy, particularly since Standard & Poor’s and the big bond investors are not convinced that the “full faith and credit” of the United States is what it once was.

Repeat as necessary: Medicare, Medicaid, Social Security, and national defense is where the spending is. Raising taxes enough to cover that spending and stabilize the debt would mean an 88 percent increase in every federal tax — not just for “the rich,” but for everybody, according to IMF estimates. Raising taxes on the middle class to support Social Security and Medicare for the middle class is a shell game. You may as well just cut the benefits: essentially the same outcome, but more cleanly executed.

You are not going to balance the budget on tax hikes only on people you do not like. You are not going to balance the budget on pulling out of Afghanistan (wise as that might be) or on eliminating foreign aid (desirable as that is) or on shuffling Uncle Sam’s real-estate portfolio (prudent though that may be). You are not going to balance the budget on eliminating waste, fraud, and abuse.

There is a caveat to that last one: We spend most of our money (more than half) on entitlements and welfare, and those are rife with abuse. Prof. Malcolm Sparrow of Harvard estimates that net health-care fraud in the United States runs $100 billion to $500 billion a year, with a great deal of that paid out by the federal government. (Miami alone is estimated to account for $3 billion in Medicare fraud annually.) Peter Orszag has estimated that 30 percent of Medicare spending (which totals more than a half-trillion dollars a year) is wasted, largely through overpayment for services. Sen. Orrin Hatch has put combined Medicare-Medicaid fraud at $200 billion a year. For comparison, the Iraq War cost $140 billion in its most expensive year.  

Getting a hold on entitlement fraud is not going to balance the budget, either, not alone, but it will do a heck of a lot more than a federal garage sale — and it’s something that should be done even if we were running a surplus.

—Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, published by Regnery. You can buy an autographed copy through National Review Online here.


Tags: Debt , Deficits , Fiscal Armageddon , General Shenanigans


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