January 31, 2006 | WebMemo on Federal Budget
President George W. Bush's State of the Union address called for restraining federal spending, reforming runaway entitlements, and making permanent the tax cuts that are set to expire in the years ahead. President Bush proposed much less new spending than is typical in a State of the Union address and called for savings of $14 billion next year alone. However, the President declined to reveal his goal for total spending next year, and the tradeoff he envisions between new spending and any savings will not be known until his budget is released next week. As the President said, progress in slowing the growth of federal spending must continue. The real test for President Bush this legislative year will be whether he enforces spending restraint with a veto, if necessary.
The President emphasized that 77 million retiring baby boomers will push the cost of Social Security, Medicare, and Medicaid to an unsustainable level. Indeed, these programs are projected to double in size over the next 25 years, from 8 percent of GDP today to over 16 percent, according to the Congressional Budget Office. Unless these programs are reformed, the nation will face tax increases that bring the total level of taxation to European levels, the elimination of nearly all other federal programs, or a massive, unprecedented federal debt that would place the entire economy at risk. To address this looming crisis, the President proposed a bipartisan commission on entitlements that will focus on actual policy solutions rather than political gamesmanship. Commission recommendations for entitlement reform should quickly become legislation, because each year of delay makes reform more painful and more costly.
While competitiveness is an important issue, the President's call for large increases in research and development spending is not the answer. Since 2000, such spending has surged 58 percent to $132 billion with little to show for it. Instead, these spending programs have placed Washington in the impossible role of selecting marketplace winners and losers through its grants. The result thus far has been too many programs like the notorious Advanced Technology Program, which provides millions of dollars to Fortune 500 companies and has very little technological innovation to show for it. Lawmakers should focus on fixing the current failed research and development programs rather than layering more costly programs on top of them.
The President's calls for eliminating 140 outdated federal programs and paring back congressional pork projects will help restrain the growth of government. However, last year Congress terminated only 24 of the 99 programs that the President had hoped to end, despite strong evidence of these programs' failures. Acknowledging the need to reform the role of earmarks in the budget process, President Bush should exert strong leadership to end the corrupting earmarking practice. The record 13,999 pork projects in 2005 forced hard-working taxpayers to fund things like the Please Touch Museum and Rock and Roll Hall of Fame. More than merely wasteful, pork invites corruption, encourages big government, distracts lawmakers from vigorous oversight, and compromises lawmaker independence. Eliminating outdated programs and wasteful pork projects will make Washington more efficient and accountable. If necessary, a veto would be instrumental in enforcing discipline.
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.