Federal Budget Cuts
In a conversation with a friend recently he
mentioned that all the employees at his company would have to take a 10% pay
cut this year. He was naturally concerned but at the same time he realized that
it was necessary in order for everyone to keep his or her jobs.
Companies, even major ones like the one he worked
for, cannot necessarily raise their prices in order to achieve greater revenue.
In a highly competitive environment, higher prices often mean less actual
revenue as customers either flee to cheaper products, or just buy less.
Unfortunately, the Federal Government does not work
this way. Facing a huge operating deficit, the President can only propose
increasing prices or taxes without one cent of spending reduction.
Here is a modest proposal. Many years ago I read a
letter to the editor of a major newspaper from the owner of an auto dealership
that was trying to weather another economic recession like ours. He came up
with what he called a 5-10-15 plan. In his company the top third of wage
earners had to take a 15% pay cut. The middle third had their pay cut by 10%,
and the bottom third only had to take a 5% cut.
In other words, if the CEO was making $150000 per
year, his pay was cut by 15% or $22500. Someone making $75000 per year had to
take a cut of 10% or $7500. An administrative assistant making $30000 per year
had to take a cut of 5% or $1500. Given the circumstances, anyone would agree
that these cuts were fair and equitable, but they also worked. The company was
saved and weathered the storm until the economy recovered, but in the meantime
not one employee lost their job.
How much would the Federal government save if every
employee, including the President and Members of Congress, making over $150000,
had to take a 15% pay cut? Substantially more would be saved if the great mass
of Federal employees making between $50000 and $100000 had to take a $10% cut.
Even greater savings would be realized if all those making less than $50000 per
year had to take a 5% cut.
In this way, no one would lose their jobs and there
would be no need to cut needed departments and services. Cutting jobs usually
means that higher salaried government workers just bump lower salaried ones out
of their jobs. To ease the pain the cuts could be phased in over two years.
This 5-10-15 plan would be an important first step
in turning the massive ship of state around before it sinks under the massive
load of debt and taxation. We are not too far from following Greece and Italy
into a titanic disaster. ###
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