Ann Fudge is former Chairman and CEO of Young & Rubicam Brands, a global advertising firm. She is currently on the board of directors for GE. Before joining Young & Rubicam, Fudge worked for General Mills.
Fudge serves as chair of the U.S. Program Advisory Committee at the Gates Foundation. (The founder of the Gates Foundation, Bill Gates, has said the budget won’t be balanced without taxes going up. Fudge’s boss also urged developed nations not to cut foreign aid budgets in the face of deficits.)
She also serves on the boards of the Rockefeller Foundation (which has suggested higher taxes to save Social Security), Brookings Institution, and Council on Foreign Relations.
Fudge’s experience managing businesses might say something about her approach to the federal budget deficit. In an interview with BigThink.Com, Fudge discussed “cost-cutting” and how it relates to businesses during a recession. Fudge said, overall, businesses should think about how to budget smarter to improve their bottom line, but that, in general, she steered away from the term “cost-cutting.”
Fudge served on President Obama’s campaign finance committee during the 2008 election. Also, according to the Chicago Tribune, she gave $36,000 to Democrats that year.
The Treasury Department today reported that the federal government accumulated a $135.9 billion deficit for the month of May. While this is less than the consensus estimate, it is still an astonishing figure. The federal government has now run a monthly deficit for 20 straight months – the longest string on record.
Even if the government managed to avoid any further deficit spending this calendar year, the debt accumulated through the end of May – roughly $550 billion — would still be greater (adjusted for inflation) than the debt accumulated during any single fiscal year since World War II, with the notable exception of 2009.
Deficits like this will continue into the future until something is done to rein in Washington’s excessive spending. Congress must begin work immediately on a responsible budget that cuts wasteful government spending.
Nearly every budget in the last 10 years is guilty of the “budget creep” phenomenon. The table below outlines both President Bush and President Obama’s future budget proposals:
The problem:
From President Bush’s FY2007 budget to President Obama’s FY 2011 budget, proposed spending for FY 2011 grew by $594 billion. If we were actually going to spend in FY2011 what was slated in FY2007 the deficit would be half of the size. The graph below shows spending estimates for FY2011 in each of the last five administration budget proposals.
This year’s budget proposal increases FY2011 spending by more than $200 billion over what the Administration proposed for FY2011 last year – yet another piece of evidence of the budget creep phenomenon.
Our country’s spending and debt situation explained in a fast-paced motion graphics video (runtime is 2:20 minutes):
According to a recent GWU Battleground poll, nine in 10 likely voters are at least “somewhat” concerned about the current level of government spending. 74 are “extremely” or “very” concerned. And 58 percent think the level of spending is unsustainable.
Is the public right? Is Washington bankrupting America? Some facts from the video:
Spendingper household has risen over 40 percent in the last 10 years – and is set to do so again in the next 10 – pushing debt (and interest on the debt) to unprecedented levels. But that’s just a result of past spending.
Add in our government’s $106 trillion in future spending commitments – that cannot be paid for – and it becomes clear that our government’s spending is setting the country down a path toward bankruptcy.
We can solve it, but politicians will have to make tough choices.
Increasing taxes can’t do the trick ($106 trillion is equivalent to taking all of the taxable income from every American nine times over), nor is it fair to saddle taxpayers with a problem created by government irresponsibility.
We need real spending reform. Merely returning to the spending per household levels of the 1990s would balance the budget in three years.
Yet, policies under Bush and Obama have made the problem worse, not better: budget cuts that pale in comparison to spending increases, more lobbyists, more earmarks, expanded spending on autopilot programs like Social Security and Medicare, and savings gimmicks that don’t amount to meaningful change.
Reform can only be achieved if the public is informed and engaged. You can start by doing the following:
(1) Share this video with at least 5 friends, family and coworkers.
(2) If you haven’t already, subscribe to receive emails from us (you’ll be first to receive our videos and other timely info about economic policy).
——————
Below are sources for data featured in the video:
Our spending is unsustainable. Over the last 10 years, federal government spending per household increased by over 40 percent….and will do so again in the next 10 years.
Source: calculations based on data from the Office of Management and Budget for spending totals (Historical Table 1.1 for spending in 2000 and 2010; Summary Table S-1 for 2020) from the FY2011 Budget of the United States and the Census Bureau Table HH-1 for number of households (note: 2020 household figure determined based on an extrapolation of 2000-2010 household growth).
Over the last 10 years, federal government debt per household increased by almost 70 percent….and will do so again in the next 10 years.
Source: calculations based on data from the Office of Management and Budget (Historical Table 7.1 for debt in 2000 and 2010 and sum of “Debt Held by Government accounts” and “Debt held by the public” from Summary Table S-14 for 2020) and the Census Bureau Table HH-1 for number of households (note: 2020 household figure determined based on an extrapolation of household growth).
Meanwhile, median American household income decreased by about 1 percent in the last 10 years.
Source: Census Bureau Table H-6 (inflation adjusted dollars).
In 10 years, interest payments on the debt will more than quadrupled.
Source: calculation based on data from the Office of Management and Budget (Summary Table S-4).
In 10 years, interest payments on the debt plus autopilot programs (like Social Security and Medicare) will consume 90 cents of every federal dollar.
Source: calculation based on Office of Management and Budget Summary Tables S-1 and S-4.
Our spending is only a fraction of the commitments made. The total value of our future spending commitments – that cannot be paid for – is $106 trillion.
Source: $106.4 trillion represents the net present value of the federal government’s unfunded liabilities as calculated in Forbes by former Treasury Department economist Bruce Bartlett based on actuarial tables from the Social Security Administration and data from the Medicare Trustees Report.
106 trillion dollars = selling every home in the U.S….5 times over.
Source: Based on the Federal Flow of Funds Report from the Federal Reserve, Table B.100, line 3.
106 trillion dollars = taking all of the income of every American.…9 times over.
Source: Based on Personal Income of $12 trillion for 2009 (most recent year available) from National Income and Product Account Table 2.1 of the U.S. Government’s Bureau of Economic Analysis.
106 trillion dollars = selling every household item of value in the U.S….twice.
Source: Source: Based on the Federal Flow of Funds Report from the Federal Reserve, Table B.100, line 42.
Our spending is solvable. By merely reducing government spending per household to 1990s levels.…we could balance the budget in three years. Our spending is solvable unless Washington won’t solve it. Our spending is bankrupting America.
Source: Based on revenue projections from the Office of Management and Budget in Summary Table S-1 from the FY2011 Budget of the United States; the 1990s average is adjusted for inflation and taken from Historical Table 1.1 from the OMB); household projections are based on an extrapolation of Census Bureau Table HH-1.
Last week, Congress flagrantly blew right past its budget deadline, and it doesn’t look like it is going to begin working on a budget any time soon.
At Bankrupting America, we’re committed to bringing you the facts about our government’s outrageous spending and to holding Congress accountable to the budget process. This week we’re going to be introducing our Bankrupting America fact sheets. These fact sheets will provide you with interesting and useful facts that will put government spending and the budget in perspective.
For example:
Did you know that Congress has failed to produce a budget four times since 1980?
Did you that if we cut 2011 spending to the level we budgeted for it in 2007, we could save almost $600 billion?
Did you know that according to the Budget Act of 1974, Congress is required by law to produce a federal budget resolution by April 15th each year?
Check back with us throughout the week to learn more about our government’s spending and the budget process – here on our blog, on Facebook and on Twitter.
Big Pharma’s big win: “The U.S. drug industry fended off price curbs and other hefty restrictions in President Obama’s health-care law even as it prepares for plenty of new business when an estimated 32 million uninsured Americans gain health coverage.”
OPINION: Obama’s pivot: “Health reform may seem simple compared to what it will take to control the deficit.”
New York Times:
Crist, Rubio Spar Over Spending in Debate: “Florida Gov. Charlie Crist and his Republican challenger for United States Senate, Marco Rubio, argue the merits of the federal stimulus package.”
Wall Street Journal:
Spending Rises; Income Stagnant: “U.S. consumer spending in February rose 0.3%, even though their incomes didn’t budge amid high joblessness, while inflation stayed benign.”
With the growing public concern for government spending, Democrats and Republicans are competing to show their commitment to earmark reform.
Earmarks are provisions tacked onto larger legislation to fund politicians’ pet projects. They are often granted from party leaders to legislators in exchange for their vote on a bill, and from legislators to special interests in exchange for their campaign support.
Earmarks should be eliminated not just to for-profits and for one year but to all groups and permanently.
Representative David Obey (D-WI) claims that the Democrats’ plan to ban earmarks to for-profits will reduce total earmarks by 1,000 and “break the link between campaign contributions and earmarks that has sparked intense criticism.”
Taxpayer money shouldn’t be used to fund politically-favored non-profits anymore than it should be used to fun politically-favored businesses.
9,499 earmarks were granted in 2010, so close to 90 percent of earmarks were awarded to organizations other than for-profits. These organizations – including nonprofits and unions – spend millions on lobbyists, pay millions in executive compensation, and gain at the expense of taxpayers just like for-profit recipients of earmarks.
Besides, for-profits benefit from earmarks to non-profits by contracting with the non-profit recipients – a process from which Obey himself is not immune – according to the same Washington Post article mentioned above.
The elimination of earmarks – saving an estimated $16 billion – will not meaningfully address our deficit problem. Yet the move would be a positive step toward fiscal responsibility since earmarks represent pure waste and special interest politics at its worst. Not to mention, Americans are fed up with regularly learning of the ridiculous earmark projects funded with their money.
Be cautiously optimistic. Political promises to eliminate earmarks are common. The only way to end earmarks is for the public to demand their Members of Congress forgo earmarks and hold the rest of their colleagues to the same standard.
California may be a budget basket case but not all states are in such dire straits. In spite of the economic downturn, some states have managed to spend responsibly, avoid debt, and maintain reasonably strong economies.
This year, California is expected to spend $179.9 billion – double what it spent just 10 years ago (despite an economy that only grew by 50 percent). In June 2009, Texas Gov. Rick Perry signed a two-year budget that is slightly smaller than the previous budget because lawmakers planned for reduced revenue due to slower economic growth.
On the taxes side, tax rates are higher in California than in Texas. For instance, Texas has no income tax, while California has a top marginal personal income tax rate of 10.3 percent. Texas has also sought to counter the economic downturn by cutting taxes on small businesses.
California struggles with massive state deficits (in spite of higher taxes). Texas has a balanced budget.
The outcomes are instructive. California suffers from an unemployment rate of 12.3 percent (the fifth highest in the nation). Texas unemployment is a relatively modest 8.2 percent.
People vote with their feet. They leave states with dismal economic environments and migrate to states with greater economic opportunity. Texas has long been one of the fastest-growing states and managed to keep the number of total employed people steady.
Public policies have real consequences. People around the country should consider the different policy paths California and Texas have taken and urge their elected representatives to adopt the ones best for their state.
Greece seeks U.S. help: “Greek Prime Minister George Papandreou will ask for President Obama’s support in pushing a plan to impose new limits and stricter monitoring on complex and largely unregulated financial bets in Europe, where officials blame investors for manipulating the price of Greek bonds and fueling higher borrowing rates.”
Are benefits still temporary?: “Unemployed say extensions help to tide them over, but critics fear program may discourage work.”
New York Times:
Public Pension Funds Are Adding Risk to Raise Returns: “Even as big companies are moving their pension funds out of stocks, state governments are chasing higher returns for their plans by making riskier investments.”
Bull turns 1: Should we worry?: “Investors are set to celebrate the first birthday of this bull market. Optimists say there are reasons the odds favor a second year of gains.”
Getting job creation right: “In an Ideas piece, Lee and Jenkins say it’s about equity and accountability as well as current growth.”
The Hill:
Flake to offer measure on earmark guidelines: “Rep. Jeff Flake (R-Ariz.) is trying to refocus public scrutiny on earmarks after a rash of scandals has plagued House Democrats.”
Unemployment rate remains at 9.7 percent: “Economists had expected the snowstorms to have a bigger impact, but job losses were surprisingly mild in February as employers cut 36,000 jobs.”
House passes $15B job-creation measure: “After stalling briefly, the Democrats’ jobs agenda regained momentum on Thursday as the House passed one measure designed to boost employment and the Senate pressed forward on a more ambitious bill that is expected to come to a vote next week.”
China Budget Eases: “Beijing unveiled a conservative budget for 2010 that reinforces its gradual shift away from stimulus programs adopted during the crisis.”
Economy Sheds Jobs; Jobless Rate at 9.7%: “The U.S. economy lost 36,000 jobs in February. The unemployment rate held steady despite stormy East Coast weather that the government said may have temporarily hit payrolls.”
Broader Jobless Rate Jumps to 16.8%: “The U.S. jobless rate was unchanged at 9.7% in February, following a decline the previous month, but the government’s broader measure of unemployment ticked up 0.3 percentage point to 16.8%.”
OECD Sees Continued Recovery: “The OECD said that the world economy is in recovery, with no indication that leading economies will slip back into recession.”
LA Times:
Before TARP panel, Citi chief thanks taxpayers: “Facing the government’s bailout watchdogs for the first time, Citigroup Inc. Chief Executive Vikram Pandit publicly thanked taxpayers Thursday for the $45 billion that helped save the company during the financial crisis and said he was taking steps to ensure future handouts would not be needed.”
USA Today:
Obama’s day: Back to jobs: “Today, President Obama — still seeking a health care bill — pivots back to the jobs issue, as the Labor Department releases the new unemployment rate.”
