Surviving the Coming 50% Budget Cuts – Part II


Marc Faber (Link to Business Insider Story)

As reported by the Drudge Report and Business Insider this afternoon, Marc Faber, investor and economist known for his spot-on assessment of the world economy and author of the Gloom, Boom and Doom report told CNBC in an interview on Monday, “The debt burden in the U.S. and other Western countries will continue to increase leading to a “colossal mess” within the next five to 10 years.  Additionally, bureaucracies in the U.S., as well as Europe, are far too big, and are a burden on the economy.”

So, what does he propose as the solution to the problem?  “My medicine for the U.S. is: Reduce government by minimum 50 percent.  The impact would be immediately an improvement in the economy.”

50%  Really???  That’s out of touch.. that’s extreme.. that’s… that’s.. that’s… just the right answer???

Last November, I wrote a blog post entitled Surviving the Coming 50% Budget Cuts.  The post didn’t garner much traffic, and some thought it was a bit extreme or over the top… but the credibility for the approach and solution are making more and more sense, and are worth a second look.  This isn’t just something based on a CNBC interview.  Just a few days ago, on October 19th, Reason Magazine released a poll of California likely voters looking at issues in the upcoming election.  The poll wasn’t surprising to most people looking at the presidential election, but deeper in the poll internals, there was a very intriguing set of questions and answers.

Most notably, the following question was asked:

The state budget calls for spending $131 billion this fiscal year. For every dollar the California state government spends, about how many cents do you think are wasted?

  • Mean $0.49
  • Median $0.50

50 cents out of every dollar is wasted?  This is what voters in California think that state government is wasting each year – 50%.  If the people whose taxes pay for government think that 50% of their tax dollars are being wasted…. it will only be time before they demand increased accountability for the funds which should be used to efficiently and effectively fund government.

Combine that with this CNBC interview today, and it’s about time to start looking seriously at what would be needed to both accomplish those goals while preparing for it, so when it comes, people are more prepared to identify what really is wasteful spending and duplication of work.  Below are the five key areas covered in  Surviving the Coming 50% Budget Cuts, but condensed for your reading pleasure.

  • Vision / Purpose – Know where your program is going, and don’t try to solve something apart from other areas.  If you “solve” problems in a vacuum, it will end up creating more problems to clean up down the road.  Be consistent over time.  Know what you know and believe.  And tie your efforts to a larger vision/purpose – that will drive you to collaborate, innovate, learn, network and improve communication.
  • Knowledge Management – Why do we do what we do?  What tasks are we doing – are they all essential?  What tasks are we supposed to be doing, but we don’t have the time to do?  Am I the only person who can do this task?  Is there someone else who would be better suited to do this portion of what I do?  Are there ways to automate or improve efficiency of performing our daily tasks?
  • Collaborative Intelligence – How can the combination of our ideas be more effective and powerful than the individual concepts on their own merit?  What questions can we only solve through collaboration?
  • Connecting the Dots – Where are the connections between customer, provider, programs, departments, businesses?  Who do we depend upon for services and what inter-dependencies exist? Who else is asking similar questions to us?
  • Innovation – This isn’t the first time we’ve faced these challenges, but we have seen that innovations in transportation, communication, health care, construction are essential to growth.  Guess which decade saw these inventions – the bulldozer, radio / television, air mail, penicillin, band-aids, traffic lights, rockets, and the combustion engine automobile?  All of these were created in the 1920′s (“Roaring Twenties”).  But do you know about the Depression of 1920-21?  Unemployment was near 12%, the stock market fell nearly 50%, and there were major challenges recovering from wartime.  During the Coolidge administration, these events happened, and they occurred while reducing actual government expenditures and taxes at the same time.  Sounds pretty familiar?  Innovation through 2020 will be critical to our success as well.
  • Integration – Don’t just try to address one of the above areas.  Individually they may allow 5-10% reductions, but combined, they can accomplish much more.  Implement ALL of these themes, and as a whole, you will more easily be able to implement larger reductions in costs.

So, is there enough support for this model?  Let’s look back at the Reason poll for some additional questions and answers:

Generally speaking, would you say California is on the right track, or is it on the wrong track?

  • Right track 34%
  • Wrong track 58%
  • Don’t Know/Refused 8%

Between 2000 and 2010, state government spending increased 42 percent per person, adjusted for inflation. Would you say the increase in state government spending…

  • Improved the quality of life in California 14%
  • Decreased the quality of life 52%
  • Had no impact on the quality of life 28%
  • Don’t know/Refused 5%

Would you favor or oppose the state government returning its spending levels to what it spent per person in the year 2000, after adjusting for inflation?

  • Favor 56%
  • Oppose 25%
  • Don’t know/Refused 19%

California voters who represent one of the largest economies of the world are speaking…  What about you?

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