Making Reform Pay

Rich Tucker
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Posted: Apr 30, 2010 12:00 PM

            All the talk in Washington these days is about how to protect consumers by enacting financial reform. Maybe it’s time to put this discussion on ice. NHL ice.

            The top three seeds of the Eastern Conference were all ousted in the first round of the NHL playoffs. Since the only goal of an NHL team is to prevail in the playoffs and win the Stanley Cup, thousands of fans in Washington, Newark and Buffalo wasted tens of thousands of dollars this year on season tickets.

            This sounds like a job for Sen. Chuck Schumer.

Michelle Malkin

The New York Democrat, who may be the next Senate leader of his party (depending on how the fall elections go), has already targeted Spirit Airlines and Facebook this month. Why shouldn’t the Senate act to force the NHL to shorten its meaningless regular season or slash ticket prices for hapless fans?

            Well, because hockey fans understand what they’re getting.

Nobody in Washington is celebrating the Capital’s best regular season ever right now. Next fall, some fans may even boo when the team raises its meaningless “President’s Cup 2009-’10” banner. Still, those who bought season tickets did so willingly, understanding that they were watching relatively unimportant games.

            The same can be said for those who purchased derivatives from Goldman Sachs. Those investors were betting the housing market would continue to soar. But they knew someone on the other side was betting that market was ready to sink. As it did, to our national chagrin.

            This explains why, when it comes to financial reform, lawmakers are on the wrong track. They’ve trying to handle failures on Wall Street by passing a 1,400-page bill written by lobbyists on K Street (which is why the CEO of Goldman supports the Dodd bill). Instead, lawmakers should do something very simple and more productive: get a handle on their own spending.

            Unlike the housing collapse, which few saw coming, the coming national fiscal meltdown is predictable to anyone. Social Security now pays out more than it takes in each year. That illustrates the folly of those who’ve long claimed that the vaunted program is solvent because it contains trillions in Treasury IOUs. In fact, our government is now borrowing to cover Social Security spending, and that’s likely to continue -- indeed to grow -- as long as most of us live.

            Medicare costs are only going to grow, as well. Americans are living longer (a blessing) and thus require more elderly care. Instead of finding ways to control future spending, lawmakers recently increased our national promise to the elderly, by making the Medicare Part D prescription drug benefit even more generous.

Sadly, lawmakers keep creating new entitlements (health care “reform”) and vastly increasing discretionary spending. Budget analyst Brian Riedl reports that President Obama’s 2010 budget would (among other things):

        Permanently expand the federal government by nearly 3 percent of gross domestic product (GDP) over 2007 pre-recession levels.

        Borrow 42 cents of each dollar spent in 2010.

        Double the publicly held national debt to over $18 trillion.

        Leave permanent deficits that top $1 trillion in as late as 2020.

Congress’ attempts to limit spending have been comical. In February, lawmakers passed and the president signed a Pay-Go law, which purports to force Congress to offset any future spending by cutting an equal amount from current spending. Sounds simple enough. Akin to a family skipping a planned vacation because the house needs a new roof.

Except lawmakers ignored their own law. In February, March and April, lawmakers voted to extend unemployment benefits, shelling out about $10 billion each time. They called this “emergency” spending, so they wouldn’t have to bother cutting $10 billion from other programs to pay for it.

A simple question: If lawmakers can’t manage to trim $10 billion from a budget, can any reasonable person expect they will, someday, find the $1 trillion or so in cuts (or -- shudder -- tax increases) necessary to balance the budget? There’s no Goldman derivative available on this, because nobody’s foolish enough to bet the cuts will happen.

There’s plenty of fat in the federal budget. Just last year, Riedl identified some 50 examples of wasteful spending, many of them laughable. As one example, the Securities and Exchange Commission spent $3.9 million rearranging desks and offices at its Washington, D.C., headquarters. Wonder how much more it wasted on Internet porn?

In any event, eliminating all this waste wouldn’t solve all our problems. But it would indicate that lawmakers were finally ready to get serious about a serious issue: reducing spending.

Unfortunately, as with the Capitals hockey team, the best we can apparently hope for right now it to “wait ’till next year.”