Budget cuts that raise costs
By David Cay Johnston
The opinions expressed are his own.
The Obama administration’s support for killing off the U.S. Statistical Abstract underscores what’s wrong with Washington’s approach to cutting the budget. This nearly thousand-page compendium of official data is in its 130th and evidently last edition since 1878. It is published online and in print.
Taxpayers will save the $2.9 million it costs in a year to compile the data from a multitude of government, academic, nonprofit and industry websites.
But how much time will be wasted hunting for data without this ready reference? How much will state and local taxpayers pay for the extra time reference desk librarians need to answer questions? How many questions will go unanswered? And what of the Statistical Abstract’s value in quickly and efficiently pointing to other sources for a deeper look that spares researchers having to hunt through the vast array of government and private websites?
Corporations, entrepreneurs, researchers and state and local taxpayers will pay much more than what the federal government saves.
It’s a perfect example of what’s wrong with Washington’s approach. The conventional wisdom, a dogma for some, is that federal spending must be cut because government costs more than we can afford.
Yet as the impending demise of the Statistical Abstract exemplifies, proposals for cutting government spending put forth by Democrats and Republicans alike will make the federal government less costly while making America worse off economically.
The mindless rush to embrace spending cuts will throw fiscal sand in the gears of the economy instead of applying the right amount of grease.
The sum the federal government would spend to produce the Statistical Abstract amounts to less than Washington will spend in the first 25 seconds of fiscal 2012, which begins in a month on Oct. 1. Come up with 379,737 more cuts of this size and the projected budget deficit vanishes, at least in the minds of politicians who have conveniently forgotten the concept of cost-benefit analysis.
Last year the online site was accessed 5.6 million times. If the absence of a Statistical Abstract increases search time by even two minutes, then the cost, based on the all-in average pay of reference librarians, will be about five times the federal savings. Were Congress to order up a cost-benefit study, the figure would be a loser, costing society at least $5 for every dollar of tax money saved.
I would not be surprised if the cost to entrepreneurs, businesses and nonprofits was $100 for each federal dollar saved given the pay researchers get and how long it can take to locate data.
The Obama administration is far from unique in failing to think through the implications of spending cuts. Consider Representative Paul Ryan, the Wisconsin Republican who is treated by the press corps as a serious and informed budget expert.
Ryan has twice put forth plans that he accurately says would save the government over the next 75 years the equivalent of more than $5 trillion immediately.
What Ryan did not say is that using the same official data he relied on, the Ryan plan would raise private spending on healthcare by $39 trillion, as liberal economist Dean Baker showed using pure spreadsheet mechanics and the same data source as Ryan. Spending nearly $8 to save $1 is, like killing the Statistical Abstract, just plain foolish.
Of course if the Ryan plan were to become law, that $39 trillion would not be spent because people would not be able to afford it. Many of them would just die sooner, and more painfully, because affordable healthcare would become beyond their reach.
Our Washington politicians are thinking the same way as a girlfriend from long ago whose shiny almost-new Camaro ran like a clunker. She thought not changing the oil saved money. Penny wise and pound foolish.
The truth almost no one in Washington dares speak is that raising taxes can actually put more money in your pocket. My neighbors and I learned this a few years ago when we voted to raise our taxes. For every dollar of added tax my wife and I paid this year we enjoy $1.86 more in our pockets.
How can raising taxes put more money in your pocket? By increasing efficiency.
This year we paid $210 in higher property taxes to finance trash collection and sidewalk snowplowing. Purchased retail, those services would cost about $600. So we spent $210 to save $390. That translates into a savings of $1.86 for every dollar of increased tax. As an added bonus we have just one garbage truck a week down our street, not a different company’s truck everyday, and garbage cans on the street only on Thursday mornings.
What matters in public finance is not how much government spends, so much as what it buys with our tax dollars. But don’t count on the new “Super Congress 12″ committee to undertake serious cost-benefit analysis because cutting spending has become dogma and reality-based policies would be economic heresy.