Commentary

Cut the Talk — and the Spending

This article appeared on National Review Online on March 16, 2004.

Thomas Jefferson once warned, “When all government shall be drawn to Washington as the center of all power, it will render powerless the checks provided of one government on another, and will become as oppressive as the government from which we just separated.” Sadly that day may have arrived. The federal government now consumes about 20 percent of gross domestic product and plans to spend at least $2.4 trillion in fiscal year 2005.

Government’s size and scope have reached beyond acceptable levels. If they were faithful to the Founding Fathers, lawmakers would finance a government that focused only on the constitutional mission of national security and justice. This represents roughly $400 billion of today’s $2.4 trillion federal outlays. It’s time to walk the walk and cut federal spending.

It’s not as if we have a choice. For the last four years, Washington should have been pruning the budget. Social Security and Medicare costs will explode when the baby boomers retire. Longer life spans and rising health care costs will exacerbate the tax-burden on our children if entitlement programs are not reformed.

The coming fiscal crunch from entitlements requires a radical reform. Senate Budget Committee chairman Don Nickles (R., Okla.) wants billions of dollars of reductions in entitlements. He’s right. In addition, we need to move beyond Social Security to an individual savings-based system. Such a system would create the incentives to get today’s workers to save capital for their retirement and prescription drugs, rather that rely on tomorrow’s taxpayers.

Congress should also freeze the discretionary portion of the budget. Discretionary spending has grown by 41 percent (through 2005). Some say this is for the war against terrorism. But non-defense spending (excluding homeland security) has increased by 32.4 percent.

The easiest way to cut spending is to root out waste and fraud. Under the initiative of House Budget Committee chairman Jim Nussle (R., Iowa), committees have identified federal waste totaling $100 billion over ten years. However, this waste has not been cut. And there are still cuts to be made to pare government back to its defense and justice functions.

Next: At minimum, abolish the Departments of Education, Commerce, and Energy. In May 1995, the House approved ending some of these departments but the legislation went no further. Meanwhile, domestic agencies that Republicans slated for elimination almost ten years ago are now some of the most bloated parts of the federal government. Education’s budget grew by 80.1 percent under President Bush’s watch while Energy and Commerce grew, respectively, 37 percent and 23 percent.

Another issue that Republicans pushed with the “Contract with America” was the need to shift programs back to the states. In fiscal year 2004, the federal government will pay out more than $400 billion in grants to state and local governments for transportation, education, housing, environment, and other programs. This is ridiculous. Why should taxpayers send money to Washington, which takes its slice and then sends it back to the states? Congress should transfer all these programs back to state and local governments and reduce the federal taxes that go with them.

End corporate welfare. As former budget director Mitch Daniels noted, “It was not the federal government’s role to subsidize, sometimes deeply subsidize, private interests.” He’s right. Unfortunately, there is at least $90 billion of corporate welfare in this year’s budget. Farmers get a large share of subsidies, with over $30 billion in 2004 in the form of crop subsidies and loans. With the federal government in deficit, corporate welfare is the perfect place to curtail spending.

All levels of government contain pork. According to Citizens Against Government Waste, in fiscal year 2003, the GOP-controlled Congress porked-out a record $22.5 billion. Two examples: $100,000 renovation of the historic Coca-Cola building in Macon, Georgia, and $350,000 for construction of a folk cultural center in Pinellas County, Florida.

Finally, the feds should privatize businesses such as NASA, air traffic control, the U.S. Postal Service, and Amtrak. These operations should not be publicly run, especially given their poor performances. Even welfare states in Europe have learned this lesson. For instance, Germany’s postal service is private. Canada’s private air traffic control operates well. And private space exploration is on its way in Russia. These industries ought to be private in America too.

Government is too big and it spends too much. Equally important, it spends money foolishly. It subsidizes the wrong things and penalizes the right things. Politicians create programs to solve problems, which invariably make things worse and lead to more spending. America need not creep into a stagnant, bureaucratic wasteland. Yet we will become like France if Congress continues to spend like French politicians.

Veronique de Rugy is a fiscal policy analyst at the Cato Institute.