Diminishing Returns

Simple interpretation of The Law of Diminishing Returns tells us that a something can be reduced by changing only one factor while holding the others constant. This is important because of all of the scrutiny being paid to the sorry bit of accommodation called the Budget Compromise of 2011. It seems that in inverse relation to the cautions spelled out on a rear view mirror, objects may in fact be far smaller than they appear. But we might be getting ahead of ourselves. 


Let's go back a few months to before the elections of 2010, when Republicans were promising budget cuts of $100 billion for 2011 if they were but given control. Of course they all but knew by then that Congress, with both houses firmly controlled by Democrats, had no real intentions of voting on a 2011 budget before the election (and as it turned out, little after). 


Flush with victory in November in the House however, these Republicans boldly announced in effect that 'there was a new sheriff in town', and things were going to change. Yeah ... not so much. Five months later we find that Republicans who controlled the House never even tried to pass a budget with the $100 billion in spending cuts promised, reducing their eventual request to some $61 billion in order to have a chance to get it passed. 


A Senate still controlled by Democrats refused to take up this weakened effort, even if only to reject it. Eventually the two sides (with the President acting as critic-in-chief), were called to the White House and Republican Speaker of the House John Boehner and Senate Majority Leader Harry Reid finally agreed to some $38 billion in discretionary spending cuts. 


It appears that like many of the numbers released by elected officials and employees of the government, this number too appears to be compromised, and in a way that no one outside of Washington perhaps expected. According to an AP story in the Washington Post, the actual number might be considered to be a couple of orders of magnitude smaller. It seems that according to the Congressional Budget Office, with the lateness in the current fiscal year and the areas from which funding was proposed to be cut, only some $352 million of $38 billion will be cut through the end of September. Evidently the compromise reached in this negotiation was only on discretionary government spending and not actual government spending. 


Now apparently this was done to protect defense spending for all of the military efforts that the US is involved in around the world; and because of this protection, very little of the $1.36 trillion of government's discretionary spending was subject to the compromise agreed upon. 


If that were not enough to make smoke come from your ears, it appears that approximately $8 billion of the immediate cuts to domestic programs are being offset by equal increases in defense spending. In fact, when all of the defense spending for the year is calculated, the government will actually spend over $3 billion more in 2011 that was originally proposed. 


In another tidbit offered in NETRIGHT DAILY, "Budgeting Apples and Oranges", we find that due to the lateness of the hour in which Congress acted, some of the cuts to Washington can and will be ignored by the dedicated bureaucrats that are the real power in government. Budgets to most of these bureaucracies were already locked in to the budgetary process and will be spent regardless of cuts made. "... Labor, Health and Human Services and Education will spend $202.5 billion in 2011 even though Congress has only authorized $156.5 billion this year. The additional $46 billion was already authorized, and not subject to the CR that passed Congress. Another example is that the Transportation and HUD will spend $131.76 billion in 2011, but the CR only authorizes $55.49 billion. The other $76.26 billion was previously authorized." 


To the credit of those in the current Congress, the cuts made should in fact affect future budgets; but like so many things in Washington, that can change quickly as discussions of the 2012 budget are taken up in the days ahead. Few bows should be taken by either party however, when considering the mindless and profligate spending by a government about to once again begin discussions to raise its own credit limit (debt ceiling). 




It seems that Washington is the set of conditions that remains the same, and that the longer we look at the budget cuts of the 2011 compromise, the smaller they become. The Law of Diminishing Returns has set in with a vengeance, and wisdom dictates that we stop contemplating the sorry nature of such compromise, lest the last bit disappear entirely.