The Government's Sequester Sob Story
This might seem hard to believe, but the federal government is starting to look even more ridiculous than it has so far this year.
With the sequester now heading toward its second month--and starting to look permanent--various federal agencies are wailing about the disruptive changes they're going to have to make. The Federal Aviation Administration may have to furlough air traffic controllers, snarling the nation's skies. The Department of Defense plans to close commissaries on military bases one day per week, beginning in April. Even the judiciary branch is struggling to deal with cutbacks that Supreme Court Justice Anthony Kennedy declared to be "simply unsustainable."
We're talking about budget cuts of only about five percent here.
This is why Americans are rapidly losing trust in government. First, millions of Americans and thousands of businesses have managed to survive amid cutbacks much steeper than a piddling five percent. Second, whining over the sequester makes the federal bureaucracy sound like a privileged class unaware that modest spending cutbacks are routine, everywhere. Yuck.
The sequester, it's important to note, is a cowardly and foolish way to cut federal spending. Members of Congress don't have the guts to single out specific programs that deserve to be cut, so they chose to cut a little bit from virtually every agency, with only a few exemptions for things like Medicare and Social Security (which are the biggest budget-busters, by the way). It's embarrassing that the nation's leaders are so spineless.
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Still, the cuts aren't so severe that they should threaten any single agency's ability to function, given decent leadership. Let's break down the FAA cuts as one example. The sequester hacks about $627 million out of the FAA's $16 billion budget, according to Reuters. That's about a 4 percent cut. Yet one solution proposed by the FAA is to furlough most or all employees one day a week. That would be a 20 percent cut in the services those workers provide, in response to a total budget cut of just four percent. And the FAA has said it might have to cut some workers two days per week, which would be a 40 percent cut in service.
Part of the problem is that government workers who keep the wheels spinning are easy to cut temporarily, while big acquisition programs that suck up a lot of federal dough aren't. This is a particular problem at the Defense Dept., where enormous cost overruns on things like the F-35 fighter jet often leave decision makers little choice but to cut personnel in favor of questionable programs with many champions on Capitol Hill. Yet big companies somehow manage to make whatever cuts are necessary, while continuing to thrive. Here are a few examples:
Since 2008, Exxon Mobil has cut its selling, general and administrative expenses (typically known as S,G&A, which generally represents overhead) by nearly 13 percent. Yet profits have fallen by less than one percent during the same period of time. That means Exxon is doing more with each dollar's worth of expenses, not less as the FAA is proposing.
IBM's S,G&A expenses have fallen by 3.4 percent since 2008. Yet its profit has soared by 35 percent.
Google is a bit of a counterpoint to the typical corporate story during the last five years. Its S,G&A expenses have risen by 254 percent, while profits have risen by only 155 percent. But Google is still a rapidly growing company investing in acquisitions, new technology and other things meant to position it for a strong future. Investors seem to approve, since Google's stock has risen by four times as much as the overall stock market during the last five years.
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Median household income, incidentally, has fallen by about five percent since 2008. That's been tough on a lot of people, but you don't hear too many Americans saying a five percent cut in their budget is "simply unsustainable." What they do instead is reduce spending (known to bureaucrats as "outlays") as much as they can and look for new ways to compensate for lost income, whether through a second job, a smaller home or a less comfortable lifestyle.
It's true that the federal government isn't the same as a company or a household. The government, in theory at least, is supposed to do the things businesses and ordinary individuals aren't able to do, or do well. But that doesn't mean the government can operate by totally different standards than the people it's supposed to serve. Somebody please tell them that.
Rick Newman's latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.
