Commentary

How to Cut the Nanny State Down to Size

By Stephen Moore
December 30, 1998

For the first time in three years Republicans demonstrated courage, conviction and testosterone when they voted to impeach Bill Clinton. By putting the nation and the Constitution ahead of public opinion polls and political expediency, Republicans took a major step in rehabilitating the party.

Will that fortitude carry over to the budget battles of 1999?

It better. In the last Congress there was no willpower on Capitol Hill to cut anything out of the budget — not peanut butter research grants, not military funding to build skating rinks in Fairbanks, Alaska, not taxpayer handouts to Fortune 500 companies. Nothing.

The result? The federal budget in 2000 will be some $300 billion higher than when the GOP took over the reins of Congress in January 1995. The four-year spending total of $7.6 trillion for 1999-2002 is more money, adjusted for inflation, than the U.S. government spent on everything combined from 1800 to 1970.


Former Democratic Congressman Tim Penny recently remarked, “The powerful political forces that impel Congress to spend money rather than save it have spread like a virus in just four years time from the Democrats to the Republicans.”


One thing is clear: if the Republicans keep enacting the bloated budget deals and pork highway bills that were their “achievements” last year, they will almost certainly lose their House and Senate majorities in 2000. And they will deserve to.

Republicans can succeed only by offering a dramatically different vision of the role of government in our lives than what President Clinton and congressional Democrats propose. The GOP theme should be more freedom and individual responsibility.

What should be the building blocks for this smaller government paradigm? I suggest five priorities:

  1. Across-the-board tax cuts. The federal tax burden has actually risen from 19 to 21 percent of gross domestic product under this Republican Congress. Last year’s GOP tax proposal would have saved Americans one penny on every dollar they send to Washington. Why bother? Conservatives should scrap targeted cuts and offer Reaganite tax relief that is pro-growth and pro-worker. Given rising tax burdens, it is time for a 20 percent reduction in all tax rates — payroll, corporate, personal income and capital gains. Those tax cuts can be made without unbalancing the budget by tapping the projected $500 billion in non-Social Security operating budget surpluses over the next five years and through sensible federal spending reductions.
  2. Save Social Security first through individual investment accounts. The current financing structure of Social Security is generationally immoral. It robs young workers of their right to save and invest for their futures. Ideally, the entire system should be privatized. But at the very least, this Congress should reserve all $1 trillion in surplus Social Security funds over the next 10 years for Personal Security Accounts so that Americans can have more control over their own retirement.
  3. End corporate welfare. The federal government currently spends $70 billion a year on direct subsidies to business. If Congress would get the Fortune 500 off the dole, the savings would be large enough to allow elimination of the capital gains tax and a cut the payroll tax, which takes 15 percent from every worker’s paycheck. What in the world are Republicans waiting for?
  4. Terminate hundreds of low-priority domestic programs.
  5. Offer tax-free medical savings accounts (MSAs) for all Americans as a way to reduce government involvement in health care.

Democrats are pushing a “patient bill of rights” that is merely camouflage for more government regulation and control of the health care industry. The GOP response should be a genuine “bill of rights” that vastly expands consumer health care choices. The centerpiece must be tax-free MSAs for all Americans who want them. An MSA is like an individual retirement account: money is put into the account tax free and then can be drawn down to pay basic, routine medical costs. Workers are free to go to any doctor, health maintenance organization or hospital they wish to with minimal government or insurance company interference. An MSA of $3,000 combined with catastrophic insurance coverage for occasional, expensive medical procedures would provide full insurance protection and reduce health care inflation by turning patients into cost-conscious consumers.

Former Democratic Congressman Tim Penny recently remarked, “The powerful political forces that impel Congress to spend money rather than save it have spread like a virus in just four years time from the Democrats to the Republicans.”

He is right. While the big spenders who populate both parties offer more Nanny-state programs, the Reagan wing of the GOP needs to reassert itself with policies that diminish Washington’s role in our lives and offer us a financial dividend for this freedom agenda in the form of tax reduction, private Social Security accounts and debt relief. As the impeachment vote shows, when the GOP stands for principle, rather than political compromise, the nation and the Republican Party benefit.

Stephen Moore is director of fiscal policy studies at the Cato Institute.