November 1, 2005

November 1, 2005 | Commentary on Taxes

A Rainbow in the Aftermath of Katrina: Realization that Overspending Must Stop

First in a Series

Author Malcolm Gladwell writes about the "tipping point," the moment when an idea that has been quietly building support takes hold. Suddenly the idea has the power to change everything.

 

Well, with "bridges to nowhere" and other needless pork projects in the news, our federal government's overspending seems to have reached a tipping point.

 

Last year, Washington spent almost $22,000 per household. And to make matters worse, it collected "only" about $19,000 per household in taxes, leading to a massive $317 billion budget deficit.

 

That's almost $3,000 per household in deficit spending -- enough for the average family to make two months' mortgage payments. Overall spending increased by 8 percent last year and is one-third higher than it was when President Bush took office.

 

This spending is stirring the ire of ordinary Americans. And it has inspired a broad coalition of conservative groups to work together to bring the federal budget under control.

 

Yes, spending always climbs during wartime. But the War on Terrorism isn't the main reason it's soaring. From 2001 through 2003, spending rose nearly $300 billion, but only a third of that went to the military. Another 11 percent went to various homeland security and rebuilding projects, while 55 percent went to new federal projects unrelated to national security.

 

That's like a homeowner who, after a break-in, installs a new door on his home -- then goes out and buys a new car. The door is necessary. But the car isn't. And both have to be paid for, eventually.

 

Here are just a few of the unnecessary domestic projects our government has funded since Sept. 11, 2001:

 

* The 2002 farm bill, estimated to cost $180 billion over 10 years. Sadly, even though this bill was sold as a measure to "save" small farmers, most of this money goes to large agribusinesses.

 

* The No Child Left Behind Act, passed in 2002, which doubled federal spending on education.

 

* The 2003 Medicare prescription-drug bill, expected to cost $724 billion in its first 10 years and up to $2 trillion over the following decade. Lawmakers started with an admirable premise: Provide drugs to needy Americans. But they instead designed a universal entitlement program that is complex and expensive. Worse, it will accelerate the loss of private-sector coverage among the three-fourths of seniors who already have drug insurance.

 

* The 2005 transportation bill, which included 6,373 earmarks adding up to more than $25 billion in wasteful spending.

 

Speaking of Medicare, it's important to note that while our children and grandchildren eventually must pay for today's deficit spending, the long-term problem is entitlements. We're on the cusp of a massive transfer of wealth from working Americans to retirees, although most retirees are fairly well off already.

 

Federal entitlements today consume nearly two-thirds of federal spending, and that's expected to double over the next decade. We are less than one generation away from Congress being unable to pay for anything other than Medicare, Medicaid, Social Security and interest on the federal debt, leaving not so much as a penny for defense or homeland security.

 

Clearly that can't be allowed to happen, so lawmakers really have two choices. They can raise taxes each year until the average household is paying $11,000 more than it does today, or do nothing and watch the federal debt expand. Of course, if we increase the debt, we ensure that even a minor interest-rate increase would induce a spiral of rising debt and interest rates, eventually grinding the entire economy to a halt.

 

Bottom line: There's simply no way the government can keep all the promises it's making today, and there's no way it can afford to spend tens of billions of dollars more each year. Things must change.

 

Conservatives have complained about undisciplined federal spending for years, but Hurricane Katrina triggered a tipping point. Now, excessive spending is on everyone's mind. Recently, leaders of a coalition including The Heritage Foundation, the American Conservative Union, the Club for Growth and the Family Research Council united to pressure the administration and Congress to control spending. Over the next few weeks, I'll explain the spending problems in detail and offer practical solutions.

Ed Feulner is president of The Heritage Foundation (heritage.org), a Washington-based public policy research institute.

About the Author

Edwin J. Feulner, Ph.D. Founder, Chairman of the Asian Studies Center, and Chung Ju-yung Fellow
Founder's Office

Related Issues: Taxes

First appeared in Investor's Business Daily