Air Travel and the Sequester: A Problem Of Priorities

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As I write this column, I am spending a week traveling and giving talks. This involves taking five plane flights, visiting six different airports, and generally gaining lots of experience with the impact of the sequester-induced budget cuts on air travel in the U.S.

I don't want to tempt fate, but so far, so good. While I firmly believe that the Obama Administration is trying to make these cuts as painful as possible for the average citizen, the federal government employees on the ground do not seem to have cooperated so far; my travel has been normal. (And by the time you read this, I will be safely home and Congress will have replaced the cuts to air traffic controllers with other ones that are aimed at lower priority spending. That bill is just awaiting the president's signature as of this writing.)

The problem with air travel and the sequester budget cuts is that priorities were never set. The cuts were meant to be to high priority items so that they would never actually happen.

The important lesson here is that government always wants more money to spend, tends to measure its production in terms of spending instead of actual accomplishments, and routinely threatens that any cuts will impact the most favored programs in order to gain public support for continued spending growth. This happens at all levels of government and will continue until voters put a stop to it.

Businesses, by contrast, are always looking for efficiency gains. They want to produce more and earn more while spending less and needing fewer employees. Competition breeds efficiency because inefficient companies cease to exist.

Governments often don't even think to measure production; they just track spending and assume that more spending means that they did more. Because governments think of spending as their output, spending is something to be protected, not reduced, and efficiency is not really measured. After all, one dollar of spending produces one dollar of spending. Perfect efficiency, right?

Because so many government services provide few benefits to most people and because there is plenty of wasteful spending that can be cut, governments need a method to defend their spending and protect these treasured budgets. As mentioned, the most favored strategy is to threaten that the cuts will be in the most beloved government services.

National parks, for example, are often at risk of budget cuts and other popular programs (national defense, medical research, airport security) are routinely thrown into this mix. After the most recent budget cuts, the White House even shut down White House tours and warned that the Easter Egg Roll might be cancelled due to the budget cuts coming from the sequester (it wasn't).

Local governments practice the same policy when they fund low priority and wasteful spending with general tax revenues while holding referendums on extra taxes to pay for popular things like new schools, parks, fire stations, and roads. Of course, those things should have been priorities to begin with and funded with the tax revenue already in hand. But then the voters would reject higher taxes for the spending on marginal or highly targeted programs that only benefit a few residents of the community.

We, as voters and taxpayers, need to stop letting the government determine the marginal spending that needs "protecting." Government spending will not be cut by a meaningful amount until the top priority items are protected from spending cuts, so that the cuts fall solely on the waste, inefficiency, and programs that should be eliminated. Clearly, to do this we must somehow reach tentative agreement or at least compromise on what are the top priorities of government.

While this would certainly be difficult in total, I suspect that a large percentage of any government's budget can be put into the protected category without too much trouble. For example, at the federal level we might get quick agreement on Social Security, most Medicare spending (not the waste), some portion of national defense, food assistance programs for children, WIC, medical and science research, federal courts, and the FBI.

With some priorities established, voters need to hold politicians accountable so that priorities are funded first, then we can argue about cuts involving what the majority agrees are the lower priority extras along with the programs where no agreement exists about their importance.

Whenever politicians make cuts equally to all programs or even a group of programs, you can be sure they are making spending cuts the wrong way. The only time across-the-board cuts make economic sense is when you tell each agency to find the designated savings as a way to eliminate wasteful spending. The cuts may be equal at the big-program level, but the agency heads will make the cuts strategically and unequally at the more detailed level at which the cuts actually happen. This is good and all governments can use a round of such cuts once in a while.

However, most of the time, governments should be forced to prioritize and then cut the least beneficial and worthwhile programs first. Jack Welch became famous as CEO of GE partly by pushing all his managers to continually eliminate employees in the bottom ten percent. Congress should force the executive branch to identify five or ten percent of what every agency does to be eliminated. We probably cannot do this every year, but we could do it once (or once every four years).

An agency's budget would not have to be cut by that full percent, as Congress might want to increase funding for other, higher priority items in some agencies' budgets. However, we could find significant spending to cut in this way and it would also go a long way toward establishing what the budget priorities should be.

Government spending needs to be reduced. For the politicians who want to accomplish this, instead of arguing for less spending all the time they should start by debating government priorities. Once a consensus is approached on what the low priority government programs are, the spending cuts will follow easily.

Jeffrey Dorfman is a professor of economics at the University of Georgia, and the author of the e-book, Ending the Era of the Free Lunch

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