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Eventually, Republicans said they’d start by cutting $100 billion out of the 2011 budget. The media were aghast. Liberals wailed about “draconian” cuts. They live in an alternate universe. Congress was planning to spend almost $4 trillion; $100 billion is less than 3 percent of that. Firms in the private sector make bigger cuts all the time without blinking an eye.
But not governments. All that union protest and shrieking fuss in Wisconsin happened without Gov. Scott Walker proposing to actually fire anyone; he was just changing rules governing public-sector compensation and bargaining rights. In a time of widespread fiscal crises, we need to make real decisions about which state workers are pulling their weight, and what our public-sector priorities are. If our representatives aspire to create sustainable budgets, they must ax entire programs, not just tinker with work rules.
I’m reminded of one “tough conservative,” former Sen. Spencer Abraham (R-Mich.). Abraham once sponsored a bill to abolish the Department of Energy. Good for him! He was right. The department should be abolished. Transfer its nuclear-weapons responsibilities to the Defense Department and kill the corporate welfare it gives to politically favored solar panel makers. Abraham saw the waste and wanted to end it. But then President George W. Bush appointed him to head the very department he wanted to kill. Suddenly Abraham changed his mind.
“Yeah, real quick,” he tells me. “I changed it shortly after being asked to serve. It was very clear to me that we weren’t ever going to abolish the department. There wasn’t enough support for that, and the next best thing was to be in charge of it and try to change the way it operated so that at least the American taxpayers got their money’s worth.”
It would be nice if they got their money’s worth, but I doubt they did. On Abraham’s watch, the department’s budget increased by 20 percent, and he continued to indulge in the tiny, wasteful boondoggles enjoyed by his predecessors. One money-losing solar panel project he approved wound up costing $147 million.
Puerto Rican Promise
Not every politician is hopeless. You probably already know about the budget cutting efforts of various Republican governors: in addition to Walker, New Jersey’s Chris Christie, Florida’s Rick Scott, Ohio’s John Kasich, and Michigan’s Rick Snyder. But you may not know about Luis Fortuño, governor of Puerto Rico. Two years ago, Fortuño cut spending much more than any other U.S. governor. He fired 17,000 state employees. In response, union members held noisy demonstrations outside his house. They fought with police. They called him a fascist. Fortuño stood firm.
Fortuño had to make the cuts because Puerto Rico’s economy was a mess. “Not just a mess,” he tells me. “We didn’t have enough money to meet our first payroll.” Fortuño’s predecessors grew Puerto Rico’s government to the point that the state employed one out of every three workers (compared to an average of about one in seven on the U.S. mainland). The island was broke. So in 2009 the new conservative majority, the first in Puerto Rico in 40 years, finally cut spending.
What was cut? “Everything.” Fortuño says, “I started with my own salary.” The protesters said he should raise taxes instead. “Our taxes were as high as they could be,” he says, “actually much higher than most of the country. So what we’ve done is the opposite.” Fortuño reduced corporate taxes from 35 percent to 25 percent. He reduced individual income taxes. He privatized government agencies. “Bring in the private sector,” says Fortuño. “They will do a better job. They will do it cheaper.”
But even though Puerto Rico’s economy began improving almost immediately, Fortuño’s cuts haven’t made him popular. When I was in Puerto Rico in February, I asked everybody I could what they thought of the governor. Almost no one had nice things to say. And young people just hate him.
Most voters just don’t get that it’s a good thing when fewer people work for the state. It’s not intuitive. Former Michigan Gov. John Engler eventually came to be appreciated for the economic booms that followed his Fortuño-style spending cuts, for example. But he was harshly criticized in the moment. Maybe the Puerto Rican governor also will eventually be hailed as a hero. In the meantime, though, he suffers from the same problem that afflicts many of his ideological allies: He appeals to the head, not the heart.
When the union heavies who man Puerto Rico’s tollbooths were caught stealing money, Fortuño expressed his outrage this way: “We have revenue leakage.” That’s hardly a way to win converts to your cause.
Thank Goodness for the Constitution
Economics is complicated. That’s one more reason to be grateful for the Constitution: With its relatively simple rules, it helps keep government within bounds. Some Tea Party activists understand that, and it’s one reason they call for a return to constitutional, limited government.
But getting the majority of America to sign on to these ideas might require an impending crisis. Looking around the world, the next flashpoint after Greece will probably come elsewhere on the periphery of Europe or in Japan. The populations of those countries are graying—young workers are shrinking relative to the retirees they’ll need to support—faster than America’s. Watching their problems, we will get an advance look at the financial poison we are foisting on America’s young people.