Following a multi-year spending spree that pushed
federal spending above $20,000 per household and the budget deficit
up to nearly $500 billion, lawmakers are finally seeking ways to
control federal spending. President George W. Bush's 2005 budget
provides a positive first step by proposing to freeze most
non-security discretionary spending at 2004 levels.
Reducing federal spending is
extraordinarily difficult. Even the most wasteful programs are
passionately supported by armies of recipients, administrators, and
lobbyists. Yet avoiding these difficult decisions only makes the
problem worse. The baby boomers will soon collide with Social
Security and Medicare to produce a sea of red ink, leading to a
near doubling of all taxes or the termination of most federal
programs. Lawmakers need to get spending under control immediately
while laying the groundwork for comprehensive Social Security and
Medicare reforms.
If
they are serious about controlling spending, lawmakers should take
the following five steps:
- Stop
digging. Federal spending is growing at its fastest rate
since the 1960s, but many of the same lawmakers that are calling
for spending restraint also support legislation to expand highway
spending by 72 percent, increase special education spending by 151
percent, and once again extend unemployment benefits. Each of these
spending increases will dig the United States deeper into its
financial hole and necessitate even more difficult choices later.
Lawmakers should cut spending now.
- Balance the
budget by 2014 without raising taxes. Budget deficits are
merely a symptom of two larger problems: a sluggish economy and
runaway spending. Restoring economic growth requires low tax rates,
and runaway spending is the most dangerous threat to pro-growth tax
relief. Balancing the budget with spending cuts will improve the
country's ability to deal with the massive Social Security and
Medicare liabilities that will come due when the baby boomers
retire.
-
Freeze
discretionary spending in 2005. Discretionary spending
leaped 39 percent between 2001 and 2004. Even after excluding
defense and costs related to September 11, discretionary spending
is rising 7 percent annually. Do these agencies need yet another
spending increase this year? Congress and the President should do
what millions of families do: set priorities and balance each
high-priority spending increase with a low-priority spending
cut.
- Reform
entitlements. Spending cannot be restrained without
reforming entitlements, which comprise two-thirds of all federal
spending and threaten the country's long-term finances. (See Chart
2.) These programs are projected to grow by 6 percent annually for
the next decade. Table 1, which displays the spending restraint
needed to balance the budget by 2014, shows that all scenarios to
balance the budget by 2014 require reducing the 6 percent annual
growth rate of mandatory spending. Lawmakers seeking to rein in
spending should put all entitlement spending on the table,
including the 2003 Medicare drug bill and the 2002 farm bill.
- Fix the budget
process. Lawmakers still cling to a budget process created
in 1974. Over the past 30 years, successive Congresses have punched
this process full of holes, and federal spending has
correspondingly tripled. The current budget process provides no
workable tools to limit spending, no restrictions on passing
massive costs onto future generations, and no incentive to bring
all parties to the table early in the budget process to set a
framework. The Family Budget Protection Act, authored by
Representatives Jeb Hensarling (R-TX), Paul Ryan (R-WI), Chris
Chocola (R-IN), and Christopher Cox (R-CA), provides a
comprehensive proposal for creating a budget process that reflects
America's budget priorities and should be closely examined by
anyone interested in budget reform.
As lawmakers work to bring federal spending under
control, they should avoid the following common traps:
- Expecting an
economic boom to balance the budget. While recent tax cuts
will likely aid economic growth and bring in new tax revenues, it
is unrealistic to expect tax revenues to grow at the 9 percent
annual rate necessary to balance the budget by 2014 under current
spending trends. Balancing the budget requires spending
restraint.
- Increasing
spending through accounting gimmicks. Lawmakers tried to
hide the 2004 spending increases by shifting budget authority
between years, which is Congress's equivalent of backdating its
checks. These accounting gimmicks could not cover up the 9 percent
increase in projected discretionary outlays for 2004. Lawmakers are
already discussing an innovative gimmick to increase domestic
spending in 2005: funding a large domestic spending increase by
taking the money out of defense, knowing that an underfunded
defense budget can be remedied later by substantially adding to the
President's planned 2005 supplemental defense bill. If lawmakers
insist on these gimmicks, spending could again grow rapidly.
- Making only the
easy spending cuts. Lawmakers often reject any spending
cut that could offend someone. Yet every dollar government
spends--no matter how wasteful--is received by someone who would be
angry to lose these benefits. Every spending cut will offend
somebody, and any easy cuts surely would have been made by now.
Lawmakers who are serious about cutting spending should focus on
the millions of taxpayers--both current and future--who are forced
to sacrifice their financial well-being in order to fund
ineffective federal programs.
Belt-Tightening Budgets Versus Priority
Budgets
Following several "expansion budgets,"
President Bush has moved the debate in a more responsible direction
by proposing a "belt-tightening budget" that asks most agencies to
accept a near-freeze in discretionary spending. But would most
families trying to cut costs simply freeze each expenditure
equally? Or would they fully fund priorities like food, the
mortgage payment, and insurance while completely eliminating
unaffordable luxuries such as vacations and entertainment?
Most
families would choose this "priority budget" over a
"belt-tightening budget," and so should government. A priority
budget would ask lawmakers to fully fund a few top priorities, such
as defense, homeland security, and a few domestic programs, and
then terminate such unaffordable luxuries as the approximately $60
billion in corporate welfare spending; the $20 billion pork-project
budget; $100 billion (at least) in waste, fraud, and abuse; and
hundreds of ineffective, outdated, and unnecessary programs.
Belt-tightening budgets are certainly
preferable to the expansion budgets of the past few years. However,
reducing a program's funding without correspondingly adjusting its
structure, goals, and duties can lead to ineffective government.
Better a few vital activities performed well than a multitude of
activities performed poorly.
President Bush proposes terminating 65
programs at a savings of $4.9 billion. (See Appendix 1.) Although a
step in the right direction, these low-priority terminations
represent only 0.2 percent of all federal spending. By contrast, a
priority budget would:
- Fully fund a limited number of
high-priority spending categories, such as defense and homeland
security;
- Terminate entire categories of
lower-priority programs, such as corporate welfare;
- Institute a moratorium on pork
projects;
- Limit non-security spending increases to
programs that pass their audits; and
- Substantially reform programs growing at
unsustainable rates, such as Social Security and Medicare.
Time to be Bold
Congress last attempted to enact a
priority budget in 1995 and 1996, when the 104th Congress
terminated several programs whose irrelevance was proven by how
quickly they were forgotten. But Congress then committed several
strategic errors, such as overreaching and shutting down the
federal government in 1995. After President Bill Clinton deftly
exploited these mistakes, budget cutters overreacted to Clinton's
tactics by completely abandoning the mission of smaller government.
By 1998, federal spending was growing once again as a paralyzed
Congress decided that budget confrontations with the Clinton White
House could never be won and should be avoided at all costs.
In
2004, national defense, homeland security, and entitlement
challenges make spending reform more important than ever. It is
time to step back and think about the role of government, the
obligations of the private sector, and the delineation between
federal and state responsibilities. For those interested in lean,
effective government with low taxes, the following are 10
guidelines for getting spending under control.
GUIDELINE #1: Build a constituency for
limited government and lower taxes.
Interest groups are always ready to defend
their special-interest subsidies. Taxpayers rarely fight wasteful
spending because they do not believe they will ever see the
savings. Policymakers can organize taxpayers in opposition to
wasteful spending by linking specific reforms and spending
reductions to specific tax cuts, such as legislation to:
- Terminate corporate welfare and use the
savings for capital gains and business tax cuts;
- Reduce
outdated and duplicative programs and use the savings to reduce
income taxes across the board;
- Privatize federal corporations by
offering current public employees stock options at below-market
prices;
- Commercialize air traffic control duties
and privatize airports, targeting the savings to airline security;
and
- Devolve
programs to states while alleviating federal mandates and reducing
federal taxes.
Using the military base closing commission
as a model, Congress should create an independent commission that
would present Congress with a list of all duplicative, wasteful,
outdated, and failed programs that should be eliminated, and
earmark all savings to an immediate across-the-board income tax
cut. To prevent
Members from preserving their own special-interest programs, the
legislation should not be amendable. When faced with a clear
decision between funding outdated government programs and reducing
the tax burden, most taxpayers would encourage their
representatives to let them keep more of their own money.
GUIDELINE #2: Turn local programs back to
the states.
Only
the federal government can handle national defense, international
relations, and the administration of federal laws. But why should
politicians in Washington decide which roads are built in Appleton,
Wisconsin? Or which community development projects are funded in
St. Louis, Missouri? Or how education dollars are spent in
Cheyenne, Wyoming?
The
federal government taxes families, subtracts a hefty administrative
cost, and then sends the remaining tax revenues back to the state
and local governmentswith specific rules dictating how they
may and may not spend the money. In that sense, the federal
government is merely an expensive middleman, contributing little
more than meddling mandates that constrain the flexibility that
state and local governments need to address their own issues
creatively.
No
distant bureaucrat in Washington, D.C., can know which policies are
best for every state and locality. One-size-fits-all federal
mandates rarely succeed as well as flexible programs designed by
state and local officials who are closer to the people affected.
Moreover, legislators have little incentive to design programs that
work beyond their home constituencies.
State and local governments, which often
consider federal grants "free money," also lack sufficient
incentives to spend this money well because they did not have to
extract the taxes themselves. (Many seem to forget the high federal
taxes that local residents paid for this "free money.")
Consequently, local officials rarely object to federal grants for
unnecessary projects.
Few
local governments, for example, would consider taxing their own
residents to fund the following pork-barrel projects found in the
2004 federal budget:
- $725,000 for the Please Touch Museum in
Philadelphia, Pennsylvania;
- $200,000 for the Rock & Roll Hall of
Fame in Cleveland, Ohio;
- $150,000 for a single traffic light in
Briarcliff Manor, New York;
- $100,000 for the International
Storytelling Center in Jonesborough, Tennessee;
- $500,000 for the Montana Sheep Institute;
and
- $50 million to construct an indoor
rainforest in Coralville, Iowa.
The
federal government can promote accountability, flexibility, and
local control by eliminating many of the mandates on how state and
local governments address their own issues and letting them raise
their own revenues and create their own programs without meddling
Washington bureaucrats and politicians. Specifically, Congress
should:
- Turn
back the federal gas tax, as
well as all federal highway and mass transit spending, to the
states (2004 spending: $37 billion, discretionary);
- Devolve
federal housing programs to state and local governments and cut
federal strings on how the programs are operated ($31 billion,
discretionary);
- Send
job training programs back to the states ($5,600 million,
discretionary);
- Transfer economic development programs
(e.g., Community Development Block Grants, the Appalachian Regional
Commission, the Denali Commission, and the Tennessee Valley
Authority) back to the regions that best know how to address their
local economies ($5,952 million, discretionary);
- Devolve
Bureau of Reclamation and Army Corps of Engineers projects to state
and regional authorities ($5,614 million, discretionary);
- Allow
states flexibility and control over their own education
programs;
- Send
the Superfund program to the states and allow local flexibility in
deciding how to clean contaminated sites ($1,108 million,
discretionary);
- Turn
back law enforcement grant programs to the states ($3,041
million, discretionary);
- Devolve
the Natural Resources Conservation Service to the states ($3,046
million, discretionary);
- Transfer the Institute of Museum
Services and Library Sciences to the states ($262 million,
discretionary);
- Devolve
Youth Opportunity Grants to local governments ($40 million,
discretionary);
- Send
the Neighborhood Reinvestment Corporation to the cities it affects
($114 million, discretionary); and
- Eliminate the practice of earmarking
federal funds for local projects.
GUIDELINE #3: Privatize activities that
could be performed better by the private sector.
Over
the past two decades, nations across the globe have reaped the
benefits of privatization, which empowers the private sector to
carry out functions that had been performed by government. In the
1980s, British Prime Minister Margaret Thatcher saved taxpayers
billions of dollars and improved the British economy by privatizing
utilities, telecommunications, and airports. More recently, the
former Soviet republics and China have seen the promise of
privatization. The United States, however, has been
uncharacteristically timid in recent years.
There is little economic justification for
the government to run businesses that the private sector can run
itself. Even when there is a compelling reason for government to
regulate or subsidize businesses, it can do so without seizing
ownership of them. Government failures are often larger than market
failures, and anyone who has dealt with the post office, lived in
public housing, or visited a local department of motor vehicles
understands how wasteful, inefficient, and unresponsive government
can be.
Furthermore, government ownership crowds
out private companies and encourages protected entities to take
unnecessary risks. After promising profits, government-owned
businesses frequently lose billions of dollars, leaving the
taxpayers to foot the bill.
Entrenched opposition to privatization,
which comes mostly from interest groups representing government
monopolies, has been overcome elsewhere by (1) working with
government unions and relevant interest groups to design
privatization proposals, (2) offering low-cost stock options to
current employees, and (3) ensuring a transparent, open bidding
process.
Candidates for privatization are
numerous. Congress
should:
- Sell
the remaining Power Marketing Administrations through a stock
offering (2004 spending: $155 million, discretionary);
- Require
that the Corporation for Public Broadcasting fund itself as all
other television networks do ($437 million, discretionary);
- Privatize the Saint Lawrence Seaway
Development Corporation ($14 million, discretionary);
- Allow
government agencies to accept bids on government printing jobs
instead of having to use the Government Printing Office (GPO) ($130
million, discretionary);
- Shift
the National Agricultural Statistics Service to the private sector
($124 million, discretionary);
- Sell
Amtrak through a stock offering ($1,334 million,
discretionary);
- Privatize the next-generation high-speed
rail program ($27 million, discretionary);
- Turn
over the foreign market development program to the
assisted industries ($24 million, mandatory);
- Privatize ineffective applied research
programs for energy conversation research, fossil fuels, and solar
and renewable energy ($1,640 million, discretionary);
- Sell
many of the federal government's 1,200 civilian aircraft and
380,000 non-tactical, non-postal vehicles;
- Shift
the Energy Information Agency's duties to the private sector ($78
million, discretionary);
- Privatize the Architect of the Capitol
($534 million, discretionary); and
- Privatize-commercialize air traffic
control operations and fully fund with user fees.
Government-owned enterprises are not the
only candidates for privatization. In 2003, taxpayers were on the
hook for the federal government's $249 billion in outstanding
direct loans and $1,184 billion in outstanding guaranteed loans.
Government loans typically undercut the financial services
industry, which has sufficient resources to provide loans to
businesses and
individuals.
Even
worse, government often serves as a lender of last resort to
organizations that private banks do not consider qualified for
loans, and the low-cost nature of government loans encourages
recipients to take unnecessary risks with their federal dollars.
Consequently, a high percentage of federal loans are in default,
and taxpayers were saddled with $17 billion in direct loan
write-offs and guaranteed loan terminations in 2003.
Therefore, Congress should:
- Begin
selling government direct loan programs and create new agency loan
guarantees such as those of the Rural Utilities Service, Small
Business Administration, Export-Import Bank, and Rural Housing
Service.
GUIDELINE #4: Terminate failed, outdated, and irrelevant
programs.
President Ronald Reagan once pointed out
that "a government bureau is the closest thing to eternal life
we'll ever see on earth." A large portion of the current federal
bureaucracy was created during the 1900s, 1930s, and 1960s in
attempts to solve the unique problems of those eras.
Instead of replacing the outdated programs
of the past, however, each period of government activism has built
new programs on top of them. Ford Motor Company would not waste
money today by building outdated Model T's alongside their current
Mustangs and Explorers. However, in 2004, the federal government
still refuses to close down old agencies such as the Rural
Utilities Service (designed to bring phones to rural America) and
the U.S. Geological Survey (created to explore and detail the
nation's geography).
Government must be made light and
flexible, adaptable to the new challenges the country will face in
the 21st century. Weeding out the failed and outdated bureaucracies
of the past will free resources to modernize the government.
Status Quo
Bias. Lawmakers often acknowledge that certain programs
show no positive effects. Regrettably, they also refuse to
terminate even the most irrelevant programs. The most obvious
reason for this timidity is an aversion to fighting the special
interests that refuse to let their pet programs end without a
bloody fight.
A
less obvious reason is that eliminating government programs seems
reckless and bold to legislators who have never known a federal
government without them. Although thousands of programs have come
and gone in the nation's 228-year history, virtually all current
programs were created before most lawmakers came to Washington. For
legislators who are charged with budgeting and implementing the
same familiar programs year after year, a sense of permanency sets
in, and termination seems unfathomable. No one even remembers when a
non-government entity addressed the problems.
The
Department of Energy, for example, has existed for just one-tenth
of the country's history, yet closing it down seems ridiculous to
those who cannot remember the federal government before 1977 and
for whom appropriating and overseeing the department has been an
annual ritual for years. Lawmakers need a long-term perspective to
assure them the sky does not fall when a program is terminated. For
example, the Bureau of Mines and the U.S. Travel and Tourism
Administration, both closed in 1996, are barely remembered today.
Instead of just assuming that whoever
created the programs decades ago must have been filling some
important need that probably exists today, lawmakers should focus
on the future by asking themselves the following question: If this
program did not exist, would I vote to create it? Because the
answer for scores of programs would likely be "no," Congress
should:
- Close down
failed or outdated agencies, programs, and facilities,
including:
- The U.S. Geological Survey (2004 spending: $841 million,
discretionary);
- The Maritime Administration ($633 million,
discretionary);
- The International Trade Commission ($61
million, discretionary);
- The Economic Development Administration
($417 million, discretionary);
- The Low-Income Home Energy Assistance
Program ($1,892 million, discretionary);
- The Technology Opportunities Program ($12
million, discretionary);
- Obsolete military bases;
- The Appalachian Regional Commission ($94
million, discretionary);
- Obsolete Veterans Affairs facilities;
- The Rural Utilities Service (-$1,493
million,
mandatory); and
- Repeal Public Law 480's non-emergency
international food programs ($127 million, discretionary).
- End low-priority
programs that should never have been created in the first place,
including:
- The Denali Commission (2004 spending: $56
million, discretionary);
- The Conservation Reserve Program ($1,879
million, mandatory);
- The Commission of Fine Arts ($8 million,
discretionary);
- The Historic Whaling and Trading Partners
Exchange Program ($9 million, discretionary);
- The Office of Navajo and Hopi Relocation
($14 million, discretionary);
- AmeriCorps ($324 million,
discretionary);
- The National Endowment for the Humanities
($131 million, discretionary);
- Farm subsidies for wool, mohair, lentils,
and chickpeas ($28 million, mandatory);
- The Marine Mammal Commission ($3 million,
discretionary);
- The East−West Center ($20 million,
discretionary);
- The Legal Services Corporation ($341
million, discretionary);
- The protectionist programs of the
International Trade Administration ($364 million,
discretionary);
- The Bureau of International Labor Affairs
($105 million, discretionary);
- The National Commission on Libraries and
Information Science ($1 million, discretionary);
- The U.S. Institute of Peace ($17 million,
discretionary);
- The Agriculture Department's wood
utilization research ($6 million, discretionary);
- The National Endowment for the Arts ($112
million, discretionary); and
- Most of the 945 federal advisory
committees and commissions scattered across 52 agencies.
- Cutting the non-security workforce by 10
percent;
- Reducing the number of consultants
employed by the federal government by 150,000;
- Suspending acquisition of new federal
office space;
- Trimming the federal vehicle budget by 5
percent; and
- Freezing the federal travel budget at $8
billion (Total
annual savings: $11 billion).
- Taking back grants to state and local
governments that have not been spent within the past three
years;
- Rescinding any remaining appropriated
funds to promote the new $20 bill (2004 spending: up to $53
million, discretionary); and
- Consolidating the dozens of small,
irrelevant education programs that divert money from more effective
education programs ($200 million, discretionary).
GUIDELINE #5: Improve financial management
and reform wasteful programs.
Congress must provide stronger financial
management oversight for federal programs, which are losing
billions of dollars every year from mismanagement. The following
examples of inexcusable waste make a convincing case for
reform:
- The federal government cannot account for
$24.5 billion spent in 2003.
- The U.S. General Accounting Office refuses to certify the federal
government's own accounting books because the bookkeeping is so
poor.
- Of the 26 departments and major agencies,
18 received the lowest possible rating for their financial
management, meaning that auditors cannot
even express an opinion on their financial statements.
- The Medicare program pays as much as
eight times the cost that other
federal agencies pay for the same drugs and medical supplies.
- The federal government made $20 billion in overpayments in
2001.
- The Department of Housing and Urban
Development's $3.3 billion in
overpayments in 2001 accounted for over 10 percent of the
department's total budget.
- Recently, the Department of Agriculture
was unable to account for $5
billion in receipts and expenditures;
- The Internal Revenue Service does not even know how much it collects
in payroll taxes.
- Congressional investigators were able to
receive $55,000 in federal
student loan funding for a fictional college they created to test
the Department of Education.
- The Army Corps of Engineers has been
accused of illegally manipulating
data to justify expensive but unnecessary public works
projects.
- A recent audit revealed that employees of
the Department of Agriculture (USDA) diverted as much as 3 percent of
the USDA budget to personal purchases through their
government-issued credit cards.
- Over one recent 18-month period, Air Force
and Navy personnel used government-funded credit cards to charge at
least $102,400 for admission to
entertainment events, $48,250
for gambling, $69,300 for
cruises, and $73,950 for exotic
dance clubs and prostitutes.
The government's own auditors, as well as outside
watchdog groups, have recommended specific reforms to:
- Reduce
food stamp overpayments (annual net losses: $600 million,
mandatory);
- Verify
parent incomes for school lunches (up to $120 million,
mandatory);
- Improve
eligibility verification and tracking of student loan recipients
(at least $1 billion, mandatory);
- Prevent
states from using accounting tricks to secure extra Medicaid funds
(several billion dollars, mandatory);
- Combat
fuel tax fraud ($1 billion, discretionary);
- Stop
veterans program overpayments ($800 million, mandatory/
discretionary);
- Collect
$3 billion in outstanding debt owed to the Department of Veterans
Affairs;
- Stop
Medicare overpayments ($12.3 billion, mandatory);
- Reform
Medicare so that it no longer overpays for prescription drugs and
medical supplies ($2,900 million, mandatory);
- Recover
the $7 billion owed by Medicare contractors; and
- Reform
the Earned Income Tax Credit (EITC) to stop overpayments ($9
billion, mandatory).
GUIDELINE #6: Terminate corporate welfare
and other mistargeted programs.
There is no justification for taxing
waitresses and welders to subsidize Fortune 500 companies.
Mistargeted programs, such as approximately $60 billion in annual
corporate welfare spending, come in many formsdirect
payments, low-cost loans or insurance, and subsidized
servicesbut they all provide services to which special
interests are not entitled and that they do not need.
These programs harm the economy. Operating
subsidies and loans to private businesses overtax productive
sectors of the economy and redistribute that money to less
productive sectors, based on the fallacy that it will somehow
create jobs. Programs subsidizing start-up companies represent a
misguided attempt by government to pick the market's winners and
losers.
In
addition, research subsidies for profit-seeking businesses, which
already have an incentive to fund their own profitable research,
merely displace private research funding with taxpayer funds.
Emergency grant and loan programs encourage businesses to take
irrational risks with the assurance that taxpayers will cover any
losses.
Congress therefore should:
- Eliminate direct
corporate welfare payments by:
- Closing down the Minority Business Development
Agency (2004 spending: $22 million, discretionary);
- Disqualifying high-income farmers and
agribusinesses from farm subsidies ($8,000 million, mandatory);
- Eliminating the Small Business
Administration ($3,978 million, discretionary);
- Terminating the Overseas Private
Investment Corporation (-$157 million, discretionary);
- Shutting down the Trade and Development
Agency ($62 million, discretionary);
- Eliminating the Market Access Program
($119 million, mandatory);
- Closing down the Export−Import
Bank
(-$1,582 million, mandatory);
- Repealing the Davis−Bacon and
Service Contract Acts; and
- Terminating the Essential Air Service
Program ($57 million, discretionary).
- The Advanced Technology Program (2004
spending: $195 million, discretionary);
- The Manufacturing Extension Partnerships
($40 million, discretionary);
- The Cooperative State Research, Education
and Extension Service ($1,082 million, discretionary);
- The Agricultural Research Service ($1,179
million, discretionary); and
- The Department of Energy research grants
that displace private funding.
- Requiring agribusinesses and farmers to
assume the full cost of their crop insurance coverage (2004
spending: $3,965 million, mandatory); and
- Imposing user fees on commodity futures
and options contract transactions to help finance the Commodity
Futures Trading Commission ($91 million, discretionary).
- Restricting federal housing assistance to
those with the greatest need and requiring able-bodied, non-elderly
recipients to engage in work-related activities;
- No longer providing substantially more
federal aid to Howard University than is provided to other private
universities;
- Limiting Congress's franking privilege to
non-election years to prevent taxpayer funding of campaign
mailings; and
- Enforcing current laws limiting School
Lunch program eligibility to low-income families.
GUIDELINE #7: Consolidate duplicative and
contradictory programs.
Government's layering of new programs on
top of old ones inherently creates duplication. Having several
agencies perform similar duties is wasteful and confuses program
beneficiaries who must navigate each program's distinct rules and
requirements.
Some
overlap is inevitable because some agencies are defined by whom
they serve (e.g., veterans, Native Americans, urbanites, and rural
families), while others are defined by what they provide (e.g.,
housing, education, health care, and economic development). When
these agencies' constituencies overlap, as in veterans housing or
rural economic development, each relevant agency will often have
its own program. With 342 separate economic development programs,
the federal government needs to make consolidation a priority.
Consolidating duplicative programs will
save money and improve government service. Merging related block
grants will give states more flexibility to target their funds. The
new Department of Homeland Security provides one example of a
successful consolidation of separate agencies and programs. A
recently announced consolidation of the 22 different federal
payroll systems into just two will save $1.2 billion over the next
decade. At the state level, governors such as Virginia's Mark
Warner (D) are proposing consolidations that will save hundreds of
millions of dollars.
Except for those that should be eliminated
altogether, Congress should consolidate the following sets of programs:
- 342
economic development programs;
- 130
programs serving the disabled;
- 130
programs serving at-risk youth;
- 90
early childhood development programs;
- 75
programs funding international education, cultural, and training
exchange activities;
- 72
federal programs dedicated to assuring safe water;
- 50
homeless assistance programs;
- 45
federal agencies conducting federal criminal investigations;
- 40
separate employment and training programs;
- 28
rural development programs;
- 27 teen
pregnancy programs;
- 26
small, extraneous K-12 school grant programs;
- 23
agencies providing aid to the former Soviet republics;
- 19
programs fighting substance abuse;
- 17
rural water and waste-water programs in eight agencies;
- 17
trade agencies monitoring 400 international trade agreements;
- 12 food
safety agencies;
- 11
principal statistics agencies; and
- 4
overlapping land management agencies.
GUIDELINE #8: Convert several remaining
programs into vouchers.
Government programs should not be bloated
bureaucracies that shepherd recipients into one-size-fits-all
programs. Voucher programs, which allow individuals to purchase
goods and services on the open market rather than receiving them
from the government, have two distinct advantages:
- Choice.
Instead of forcing program recipients to take what a bureaucracy
provides, vouchers allow them to shop around and find the goods and
services that fit their needs.
- Efficiency. Providing health insurance
or housing vouchers is much less costly to government than the
construction and maintenance of government-owned hospitals or
housing. Competition among private firms for vouchers would bring
about lower prices than government monopolies.
Some
policymakers believe that low-income individuals cannot be trusted
to make intelligent economic decisions with their vouchers,
condescendingly implying that government employees know best how to
run the lives of poor families. Those worrying that private markets
could not accommodate the influx of voucher-wielding families fail
to recognize that vouchers create markets by strengthening demand
and thereby inducing new supply.
Food
stamps provide the model for a successful voucher program. Instead of building a
bureaucracy to grow and distribute government food to low-income
families, the program simply provides families with vouchers to
purchase food themselves. Housing vouchers that subsidize private
rent costs have proven better for low-income families than
dilapidated, dangerous public housing. Most child-care programs
subsidize the private facilities that parents choose instead of
forcing them into government-run facilities. Federal student loan
programs exist as a type of education vouchers.
Vouchers can provide choice without
bureaucracy in many other areas. Medicare and Medicaid could be
made more like the Federal Employees Health Benefits Program
(FEHBP), in which federal employees choose between competing
private health plans with the federal government subsidizing the
premium. More public housing programs can be replaced with rent
vouchers.
GUIDELINE #9: Terminate programs rather
than trimming them or phasing them out.
Budget cutters often commit the tactical
error of settling for small reductions or lengthy phaseouts of
obsolete programs instead of immediately terminating them. They
mistakenly believe that securing small program reductions now will
allow them to come back and cut the program more next time.
But
leaving obsolete programs in place simply creates an opportunity
for future Congresses to restore funding. Furthermore, retaining
the programs leaves the bureaucracy in place and allows it to
enlist interest groups in a counteroffensive against spending
reductions. The old line that "those attacking the throne had
better kill the king on the first shot" applies to government
programs as well.
In
the 1980s, President Reagan successfully terminated only 12 of the
94 programs he proposed be eliminated. Congress would often block
the terminations by negotiating slight reductions and lengthy
phaseouts, waiting a few years for the President's focus to shift
elsewhere and then restoring the programs to their original
funding. Similarly,
Members of the 104th Congress who proposed ending federal subsidies
to programs such as AmeriCorps and the Corporation for Public
Broadcasting were persuaded to settle for slight spending
reductions and a promise to cut more later, and the budgets of
those programs have since rebounded to all-time highs.
One
must never assume that spending reductions today will be followed
up with additional reductions later. Retaining a program means
retaining a bureaucracy dedicated to self-preservation, interest
groups dedicated to aiding the bureaucracy, and a budget line item
to which Congress can easily attach a larger number next year.
GUIDELINE #10: Utilize the "ideas
industry" for specific proposals.
Those seeking specific proposals to reduce
wasteful spending have several options available:
- The Congressional Budget Office (CBO)
periodically releases a Budget Options book containing more than
200 specific reforms that would reduce more than $100 billion in
wasteful spending, complete with justifications and savings
estimates. (See Appendix 3.)
- The General Accounting Office (GAO)
conducts hundreds of studies each year on wasteful and
underperforming federal programs. The GAO also often releases a
Budgetary Implications of Selected GAO Work for the current fiscal
year, which is a book similar to CBO's Budget Options, detailing
hundreds of specific, implementable ways to reduce waste.
- The Government Performance and Results Act
(GPRA) requires agencies to lay out specific multi-year goals to
improve performance and reduce waste and report regularly on their
progress toward these goals. Together with Inspector General (IG)
reports, GPRA reports show which programs are failing in their
missions.
- Think tanks such as The Heritage
Foundation, the Cato Institute, and Citizens Against Government
Waste release hundreds of studies each year showing how to save
taxpayer dollars.
The
President should try to eliminate wasteful programs in his budget.
Legislators should also examine every line item in the President's
budget appendix and terminate programs that lack sufficient
explanations or justifications.
Conclusion
Difficult times present opportunities for
leaders to chart a new course. During World War II, President
Franklin Roosevelt reduced non-defense spending by 36 percent to
save resources. Policymakers funded the Korean War by immediately
reducing non-defense spending by 25 percent. Those spending cuts
required difficult choices, and lawmakers rose to the
challenge.
In
2004, bold steps are again needed to rein in spending. The choices
will be as difficult as those of the past, but that is what budgets
are about--setting priorities. Congress and the President should
seize this opportunity to refocus the federal government on the
programs that matter most. Otherwise, the American people will face
higher taxes, fewer jobs, less economic growth, and less effective
government.
Brian M.
Riedl is Grover M. Hermann Fellow in Federal Budgetary
Affairs in the Thomas A. Roe Institute for Economic Policy Studies
at The Heritage Foundation. Heritage Foundation research assistant
Keith Miller contributed to this paper.