Republican Rep. Kevin Brady of Texas has proposed some reductions in federal outlays — hoorah! — that amount to . . . not much: about $44 billion in the next fiscal year, and about $156 billion over the next five years. Okay, fine, do it: Go ahead and cut foreign aid and the Robert Byrd memorial scholarship, and collect those billions in unpaid taxes from federal workers. That, along with some military-spending cuts, covers, oh,  about 1 percent of the expected 2011 spending. Which is to say, Brady’s bill eliminates in one year about half of the national debt the geniuses in Washington piled upon us in the month of December alone.

Yes, yes — journey of a thousand miles, and all that. This is not going to get the job done. And it will be hard even to get Brady’s modest little trims through the Senate and past President Obama.

Congress is going to have to make cuts of the size Brady proposes about once every two weeks (fortnightly, as we say around here) to get the budget balanced.

Brady goes for the easy ones, mostly: subsidies for fossil-fuel research (hippies cheer!) and eliminating the Corporation for Public Broadcasting (Republicans cheer!).

Here is what Republicans have to cut: Social Security, Medicare, Medicaid, and the Pentagon: That’s pretty much the whole show, budget-wise. Yes, by all means, take the low-hanging fruit first, do it now — do it today! — but congressional Republicans aren’t going to get out of the hard ones. Remember: You guys asked for this job, begged for it, pleaded for it. And you know what you have to do.

Now go do it. We ran a $150 billion deficit in November, 2010. A five-year plan that covers one month of deficit spending is a start. It is not a good start, not an impressive start, but it is a start.

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

I saw a performance of Richard II over the weekend. With the commoners hostile to the spendthrift king, the nobles lay out their complaints against him, including this line, in which his prodigal ways are compared to those of his predecessors:

More hath he spent in peace than they in wars.

Shakespeare: always relevant.

A thought to add to today’s editorial on Michelle Obama’s child-nutrition program, which has stalled in the House because it would be funded, in part, by cuts to the food-stamp program. I’m no fan of the welfare state, but food stamps are not at the top of my list of things to cut. (Hey, vouchers work! I wonder to what other areas of government spending we might apply that model?) Cutting basic food stamps in order to put more tofu on cafeteria trays in the suburbs doesn’t seem like the right thing to do.

To their credit, 106 Democrats in the House protested this move in a letter to Speaker Pelosi; to their discredit, each and every one of those 106 Democrats already had voted for a bill that cut not $2 billion but $12 billion from the same food-stamp program to support a bailout for spendthrift public schools and relieve pressure for reducing spending on teachers’ and administrators’ salaries and lavish benefits. Which is to say: House Democrats are unwilling to raid the pantries of food-stamp recipients to put more kale in the Pleasantville cafeteria, but they are willing to take bread from the mouths of the poor to fatten an already overfed public-school bureaucracy.

People who still believe, against all evidence, that the Democrats are the party dedicated to looking after the interests of the poor should keep Mrs. Obama in mind.

In the course of arguing that our real national debt is around $130 trillion — as opposed to the official number of $14.7 trillion — I have frequently encountered the argument that I’m wrong to include unfunded entitlement liabilities in the total. Here’s a typical example from the comments to this post:

Kevin Williamson, expected spending 75 years in the future, based on current policies and projects that are certain to change anyway, is NOT debt. No amount of calling it “debt” or calling it “our REAL debt” changes that fact. Project funding gaps are not debt. DEBT is debt.

About that, a few things.

The first and most obvious thing is that in much of the real world, liabilities of that type are defined as debt, as your favorite corporate accountant will tell you. One of the reasons that American companies started filing all those unhappy financial restatements after the passage of Obamacare was that they had a whole lot of new, measurable, real-world financial liabilities, and they are obliged to include those in their disclosures. As one of our commentators answered the above criticism:

Many promises to pay are categorized as debt according to GAAP and accounting body authorities. If government were required to report like public companies a lot of the promises would show as debt. So if you don’t believe that GAAP correctly classifies debt and that the thousands of SEC filings are wrong it’s your prerogative, but you’d better keep your day job and not become a CPA or one responsible to produce SEC financials.

Maybe you object to the word “debt,” but it’s still $100 trillion or so on the wrong side of the balance sheet.

But there is a more important reason to worry about the entitlement shortfall. To understand it, it’s helpful to take a look back at the housing meltdown and its effect on the current economy. While it is true that a shocking number of homeowners currently are upside down on their mortgages, it’s also true that a lot of homeowners experienced only “paper losses” — they bought houses for $100,000, saw the value rise to $200,000, and then watched as it fell back down to $100,000 (to take a simplified example). People often pretend that these paper losses are meaningless: If the money never hit your checking account, the argument goes, you haven’t really lost anything. (And it’s not just households; I recently heard the same argument made about the Harvard endowment fund and its “pretend losses.”)

Here’s the problem: Those “paper losses” were preceded by “paper profits,” meaning people thought that they had an extra $100,000 in assets, and they made consumption, borrowing, investment, saving, and working decisions accordingly. The simplest illustration: Your $100,000 house, which is paid for, has gone up to $200,000 on the market at the top of the bubble. If you took out a $50,000 home-equity loan against 100 percent equity in your (at the time) $200,000 house, you still had $150,000 of equity, no mortgage, $50,000 in cash, and a $50,000 equity loan to pay off. If the market value of your house crashes back to $100,000, you still have no mortgage, $50,000 in cash, and a $50,000 loan to pay off, and the same house; you haven’t really lost anything (other than opportunity cost), since the house is still worth what you paid for it; and you only make your paper losses real if you sell the house while the market is down.

But anybody who thinks your financial situation hasn’t changed is nuts. Your equity debt has gone from 25 percent of the value of your house to 50 percent. Your credit profile has changed. Any other debts have just become significantly larger relative to the value of your biggest asset. (And your other assets, like your 401(k), probably are not in great shape, either.)

Whatever you’d planned to do with that $50,000, you probably are going to think twice about doing. If it was straight-up consumption, you’ll probably forgo the bass boat and pay back your loan. If it was for home improvements, why sink another $50,000 into a house that’s worth half of what it was, making a $150,000 investment in a $100,000 house? Your economic decisions will change.

But it’s not just you. The bigger problem — bigger because it’s harder to solve — is that somebody was planning to sell you that bass boat and those home improvements. You can buy one bass boat, but the guy at Bob’s Bass Boats doesn’t manufacture them one at a time. He’s counting on selling hundreds or thousands of bass boats to guys like you (that is, guys who are cashing in some of the gains from their residential real-estate investments). The suppliers and contractors and workers who stock and run Bob’s factory, the container ships that bring components from around the world, the people who service them — the whole system gets thrown into disarray. The capital Bob invested in factory tooling and whatnot is lost or radically devalued, and he has to make new investments to create whatever products he is going to sell in the new economic environment, e.g., less-fancy bass boats, or maybe paddle boats. (Or, if the Democrats continue to spend us into penury, those little inflatable floaty things for your arms.) The Austrian economists call that problem “malinvestment” — capital has been dedicated to uses that appeared productive but are not actually viable — and they blame them for recessions.

The problem with the business cycle under this analysis, you’ll notice, is not the bust — it’s the boom. That’s when the bad investment decisions are made, largely because political influence in the markets (housing policy, tax breaks, artificially cheap money and other interest-rate subsidies, risk subsidies, etc.) distorts economic calculation.

Which brings us back to the entitlements. It’s easy to say: Well, we’ll just raise the retirement age, or cut benefits, or means-test them, or raise taxes on the wealthy who receive them (which amounts to means-testing, but Democrats like that version better). And, yes, that probably is what we will do, eventually. But that does not get us out of the economic pickle: People have been making decisions for years and years — decisions about saving, investing, consuming, working, and retiring — based at least in some part on what are almost certainly faulty assumptions about what sort of Social Security, Medicare, and other benefits they will receive when they retire. When those disappear, a lot of consumption is going to have to be forgone — and a lot of capital dedicated to producing those goods and services for consumption will be massively devalued. Businesses will have to retrench, probably in a way that is more disruptive and more expensive than the housing-bubble recession necessitated.

This is the boom. The bust is going to be a nightmare.

– Kevin D. Williamson is deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, to be published in January.

Thanks to Senators Coburn and McCain for pointing this one out:

BP may have found itself staring down huge financial losses over the past several months, but executives can take solace knowing that a stimulus windfall will help offset them. On September 28, 2009, Hydrogen Energy California, LLC (HECA), owned largely by BP, was awarded $308 million in stimulus funds to “generate more environmentally friendly electricity by capturing carbon dioxide from the burning of fossil fuels.” HECA is a joint venture of BP Alternative Energy North America and Rio Tinto subsidiaries. Stimulus funds “enabled continued development of the HECA project which otherwise would have been cancelled.” Construction is not expected to begin until December 2011, nearly three years after the passage of the Recovery Act, raising serious questions about whether it is anywhere near “shovel-ready.”

Depends on what they’re shoveling, senators.

And remember: This is on top of the $600 million a year or so in subsidies BP collects under a single federal program.

Noted Obama endorser Anne Applebaum on spendthrift Republicans:

Of course, parties can change, politicians can see the light, lessons can be learned—and perhaps some Republicans have learned them. But you cannot start from scratch. You cannot forget history. You cannot pretend that the Republican Party has not supported big and wasteful spending programs—energy subsidies, farm subsidies, unnecessary homeland security projects, profligate defense contracts, you name it—for the last decade. Before the Republican Party can have any credibility on any spending issues whatsoever, Republican leaders need to speak frankly about the mistakes of the past.

They also must be extremely specific about which policies and which programs they are planning to cut in the future. What will it be? Social Security or the military budget? Medicare or the TSA? Vague “anti-government” rhetoric just doesn’t cut it anymore: If you want a smaller government, you have to tell us how you will create one.

All excellent points. So, take it from an Obama endorser: Don’t fall for vague rhetoric, don’t ignore big, wasteful spending programs, and remember that, before you can have any credibility, you must speak frankly about the mistakes of the past.

Debt held by the public as a share of GDP:

Michael A. Fletcher of the Washington Post deserves some sort of prize for D.C. conventional-wisdom regurgitation for his piece on the states’ budget crises. Check out this lead:

State governments desperately need money. Congress is in no mood to spend it. And the reckoning will begin Thursday, when the new fiscal year will start for most states.

Nothing less than the nation’s nascent economic recovery hangs in the balance. States say that if they do not find financial rescue they will have to cut services and workers. That would deliver a potentially crippling blow to the economy, which needs higher employment levels to fatten wallets, promote spending, bolster tax revenue and reduce dependence on expensive social services.

The paradox of spending ourselves out of a budget crisis is beyond the powers of the best and the brightest at the Washington Post. Later in the piece, he writes:

… with the emergency federal money drying up, states are being forced to make draconian cuts that economists warn undermine the stimulus effort.

Which economists would those be? The 73 percent of economists who think the stimulus accomplished approximately zilch?

And what about those “expensive social services” programs? You know what the most expensive social-service program is? A government job. The wage premium for government employees is enormous, especially when one considers the pensions and other benefits attached to those inflated salaries. The states are running out of money in no small part because they are running out of well-off people to steal from, and because they are spending faster than they can steal. And I use the word “steal” advisedly: What’s going on with state employees, who are using their political muscle to capture economic benefits far beyond anything they could win in a competitive marketplace, is theft. If a bunch of them lose their jobs, that’s not an economic crisis: It’s a first step toward rationalizing our economy.

Question for Mr. Fletcher: Where exactly would that state-aid money come from? Taxpayers on Mars? Lawmakers, he writes, “are reluctant to raise taxes, particularly as the economies in so many states are listing, leaving governors little option but to make deep cuts.” But some taxpayer somewhere has to put up the money for that aid. So if we’re going to bail out a spendthrift state like Maryland, we have a choice: Tax Marylanders to fund their state’s uncontrolled spending, or tax non-Marylanders to fund their state’s uncontrolled spending. What exactly is the case for punishing more responsible states to subsidize less responsible states? Either way, federal tax dollars don’t get miracled into existence any more than state tax dollars do.

Or we can borrow, taxing future taxpayers to underwrite present stupidity. But our ability to borrow has its limits, even at the federal level. You do not want to discover those limits the hard way.

Nowhere in the piece does Fletcher even briefly consider the possibility that states are spending too much money, and that their spending less money would be a good thing for the economy and for the country. Every source he talks to is either a member of a liberal advocacy group or somebody who makes his living spending taxpayers’ money (to the extent that one can distinguish between those two categories). It’s pretty shoddy journalism, and it reveals an underlying assumption: Every time a possible spending cut is mentioned, it is presented as a tragedy and as something that will harm the overall economy, even though lots of government spending produces zero economic value, or marginal economic value: Random example, one of many thousands, here.

It would not have been too terribly difficult for a Washington Post reporter to find an economist with a different perspective on this issue, or an actual taxpayer who suspects that fruit-fly research in Paris is not an especially high-yield use of American tax dollars. These are not radical ideas. But, as Upton Sinclair put it, “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”

The report of Rep. Barney Frank’s Sustainable Defense Task Force, issued in June, is a strange document. Titled “Debt, Deficits, and Defense: A Way Forward,” its first word is “conservatives,” which suggests that Mr. Frank’s intended audience is not Barack Obama, Nancy Pelosi, and Harry Reid, the people who actually control our debt, deficits, and defense. It begins with a quotation from Kori Schake of the Hoover Institution, whom the reports’ authors are careful to identify as a McCain-Palin foreign-policy adviser: “Conservatives need to hearken back to our Eisenhower heritage,” Schake writes, “and develop a defense leadership that understands military power is fundamentally premised on the solvency of the American government and the vibrancy of the U.S. economy.” This is followed by a second quotation, from John Podesta of the Center for American Progress, which of course is of no interest.

What we discover in this report is not a budgetary document, but a pacifists’ manifesto: significant policy changes masquerading as deficit-hawking and penny-pinching. Buried in the report’s vasty depths is an eight-paragraph disquisition on the “Logic of Restraint,” the ideological framework undergirding the report’s book-balancing exercise. In other words, the conclusions precede the premises.

In its opening shot, the report identifies 19 broad categories of potential savings, and its authors suggest that nearly $1 trillion can be sweated out of military spending over the coming decade. There are only four categories in which the savings add up to more than $100 billion, and examining those gives one a taste of the ideological particularism and wishful thinking at work here. The first of them is diminishing the U.S. nuclear arsenal for a savings of $113.5 billion. The second is reversing the growth in the Army and Marine Corps budgets that accompanied the Iraq and Afghanistan wars, saving $147 billion. The third is reducing the Navy’s fleet to 230 ships, saving $126.6 billion. And the final chunk comes in the nice round figure of $100 billion, to be realized by having Congress “require commensurate savings in command, support, and infrastructure,” which is to say — magic! Smaller line items do away with the Osprey helicopter program, two Air Force fighter wings, and 50,000 troops stationed in Europe and Asia.

The policy preferences expressed in this report, and the slightly cavalier approach to the subject, come as no surprise: The authors of the report include no leading minds from the armed forces or the Pentagon, but multiple representatives from the Project on Defense Alternatives, an envoy from Peace Action, and like-minded colleagues from the Center for American Progress, the Center for Arms Control and Non-Proliferation, the New America Foundation, etc. (There are two Cato Institute scholars on the panel as well, along with Prof. Prasannan Parthasarathi of Boston College, an expert on the British empire and the author of a highly regarded history of cotton textiles.)

The Pentagon’s budget is as bloated as any typical federal agency’s, and its operations as poorly administered. There is ample room for cuts in its budget. But there is not at present occasion for these cuts, which presuppose a major change in the military posture of the United States. As crucial as spending reform is — even the chairman of the Joint Chiefs calls the federal debt our top long-term national-security threat — we should not conduct a major rethinking of our national-defense policy under the cover of budget-balancing. That is a debate that deserves to be had on its own terms.

And it is a debate that deserves to be conducted honestly. Unhappily, the authors of this report engage in the usual Washington budgetary shenanigans, calculating that military spending is responsible for two-thirds of the growth in annual discretionary spending since 2001. The key is that word “discretionary,” which functions as a way to wall off Social Security, Medicare, and Medicaid from budgetary scrutiny. Article I, Section 8 of the Constitution suggests that all spending is discretionary; certainly, all spending should be treated that way. It is inevitable that if one sets aside the largest items on the federal budget — the so-called entitlements — then the relative size of military spending will be exaggerated. In truth, defense spending represents about 20 percent of the budget; in the 2010 budget, the Department of Health and Human Services will spend $200 billion more than the Department of Defense, its budget 28 percent larger. As a share of GDP, we spend about twice as much on entitlements as we do on national defense. To exclude those facts from discussion of national defense as a fiscal issue is to present a distorted picture of federal spending.

For instance, the authors of the report propose to eliminate 24,000 personnel from the U.S. Army. Why that number? Which 24,000? Why Army personnel, and not OSHA or IRS or Interior Department staff? Paying 24,000 Army personnel for a year costs about one day’s worth of Social Security spending, probably a bit less. Talking about military spending out of the broader budget context is nonsensical, particularly given that national defense is one of the few theaters in which the federal government unquestionably is executing a legitimate sovereign responsibility, the measure of which is largely non-economic. Modest Medicare reform easily could save more money than reducing our nuclear arsenal and our missile-defense programs; but if Medicare is not up for discussion, and if one has a disinclination against nuclear munitions and missile defense to begin with, then why bother asking the question? On the other hand, what is the economic value of a single successful deployment of an antimissile interceptor? There are some gentlemen in Tehran promising to force the question.

This shoddy report is an opportunity missed, and particularly frustrating for those of us on the right who advocate a less expansive, and less expensive, national-security apparatus — those of us who share (disquieting as it is to acknowledge the commonality) Mr. Frank’s belief that the presence of thousands of U.S. troops in such non-hotspots as Germany is an extravagance and an invitation to excess. Likewise, those who are serious about setting America’s public finances aright will have to include reductions in military spending in their calculations — and the Pentagon’s budget is ripe with savings opportunities. But we must develop a sensible national-defense doctrine before working out the details of its economical implementation, rather than taking the covert, backward approach of using budget-balancing to overturn our existing arrangements. There is hard work to be done here, and Mr. Frank’s panel has failed to do it. There are many arguments for returning Mr. Frank and his party to the minority, and their inability to treat this serious issue seriously adds to them.

– Kevin D. Williamson is deputy managing editor of National Review.