July 14, 2016 | Executive Summary on Budget and Spending
The Heritage Foundation is publishing a three-part Mandate for Leadership Series of documents over the course of 2016. Each document educates the American public, specifically including Congress, the new American President, and the new President’s team. All three parts deliver a clear, unified policy vision for Congress and the President to preserve and create opportunities to enable all Americans provide for their families, contribute to their communities, and pursue their dreams.
Part I, “Blueprint for Balance: A Federal Budget for 2017,” which Heritage published in March 2016, provides detailed recommendations for the federal budget put forth by Congress. Part II, “Blueprint for Reform: A Comprehensive Policy Agenda for a New Administration in 2017,” this edition, establishes a long-term vision, and policies to achieve that vision, that requires presidential leadership and congressional action. Part III will identify presidential and Cabinet-level priorities for reforming major agencies consistent with the policy proposals presented in the first two parts of the Mandate series.
For Americans to achieve better lives, the next President and Congress must take steps to allow Americans to build for themselves a stronger economy, a stronger society, and a stronger defense. Heritage regularly assesses the strength of America’s economy, society, and defense and has found great need for improvement, as reflected in:
Adoption of the recommendations set forth in this Blueprint for Reform would strengthen America’s economy, society, and defense.
The federal government of the United States has grown considerably both in size and scope under President Obama. Years of defense budget cuts have also resulted in a smaller and weaker military at a time when protection of individual liberties at home and abroad requires a strong national defense. The policies pursued by Congress and the President have led to a demonstrable reduction in personal freedoms and an increase in debt, resulting in declining economic freedom.1
Federal debt has nearly doubled, from $9.986 trillion at the end of 2008 to $19.207 trillion in May 2016.2 By the end of this year, gross debt will have increased from 68 percent of the economy to 105 percent between 2008 and 2016, according to the Office of Management and Budget.3
The growing debt is expected to double annual debt service payments within five years and quadruple them over the next 10 years, from $253 billion in 2016 to $839 billion in 2026.⁴ That $839 billion in interest represents 59 percent of the entire amount of the discretionary spending projected for the government in 2026. In fact, the government projects that it will spend 17 percent more on debt service payments than it will for national defense in that year. The country cannot and should not sustain the current course of excessive spending and borrowing.
Excessive spending has driven the growing debt and created an unsustainable budget. A recent Heritage Foundation study finds that the growth in federal programs accounting for 60 percent of total spending over the next 10 years cannot be supported by future tax increases.5
Reforming the major entitlement programs, especially the federal health care and retirement programs (i.e., Medicare, Medicaid, and Social Security), is essential to improving the budget outlook and avoiding a future debt crisis.
There has also been an unparalleled expansion of the regulatory state in the last eight years. The Obama Administration has imposed 229 major rules since 2009 at a cost of $108 billion annually (according to the regulatory agencies own numbers). The actual costs are far greater, both because costs have not been fully quantified for a significant number of rules, and because many of the worst effects—loss of freedom and opportunity, for example—are incalculable.
The next President of the United States and Congress will face significant challenges in restoring to public life the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense. They can begin by pursuing the following proposals:
Pro-growth tax reform. The tax system should raise the revenue necessary to fund a limited government at the lowest level possible for constitutionally appropriate activities, but the current U.S. system is outdated and extracts too much from the private economy. The tax system should apply the least economically destructive forms of taxation, have low rates on a broad base, minimize interference with the operation of the free market and free enterprise, and minimize the cost of compliance for taxpayers. It should also minimize adverse impact on the core institutions of civil society.
Balance the Budget. The federal budget absorbs enormous resources from the economy, both in money taken in from taxpayers and in money borrowed. The budget should be balanced by driving down federal spending, including through entitlement reforms, while maintaining a strong national defense and not raising taxes.
Reduce Regulatory Burden. In a post-Obama era, the need for reform of the regulatory system will be greater than ever before. Immediate reforms should include the requirement that legislation undergo an impact analysis before a floor vote in Congress, as well as a requirement that every major regulation obtain congressional approval before taking effect. Sunset deadlines should be required for all major rules, and independent agencies should be subject to the same White House regulatory review as executive branch agencies.
Repeal Harmful Laws such as Obamacare and Dodd–Frank. The Patient Protection and Affordable Care Act of 2010 (Obamacare) and the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd–Frank) greatly expanded federal control of the health care and financial sectors. Obamacare is unpopular, unaffordable, and unworkable.
Congress should repeal Obamacare in its entirety and replace it with patient-centered, market-based reforms. Dodd–Frank should also be repealed. Additional reforms should include removing the federal government from housing finance, ending the Federal Reserve’s emergency lending power, and ending federal loan and security guarantees.
Rebuild the Military Capabilities of the United States. The military capabilities of the United States to protect America and its interests abroad have been significantly reduced. The risk to Americans everywhere posed by global terrorism, the eruption of conflicts in many regions of the world, and American retreat in the face of challenges have begun to show the American people what a world without America looks like. The ability of the United States to exercise leadership and protect its interests depends substantially on the strength of the U.S. armed forces. The new President and Congress need to allocate the necessary resources to strengthen U.S. military capabilities.
Reform Welfare. The current U.S. means-tested welfare system has failed the poor. It fails to improve self-sufficiency and the cost of the welfare system is unsustainable. Total federal and state government spending on means-tested welfare now reaches over $1 trillion annually. Welfare reform should encourage work, a proven formula for reducing dependence and controlling costs. Furthermore, the vast majority of means-tested welfare spending is federal. Because states are not fiscally responsible for welfare programs, they have little incentive to curb dependence or rein in costs. States should gradually assume greater revenue responsibility for welfare programs; that is, they should pay for and administer the programs with state resources. Additionally, leaders should work to strengthen marriage. The absence of fathers in the home is one of the greatest drivers of child poverty. Policymakers should reduce marriage penalties in the current welfare system and find ways to promote marriage in low-income communities.
The first six chapters of the Comprehensive Policy Agenda provide policy summaries in the areas of economics, tax, entitlements, regulation, energy and natural resources, and foreign policy and defense. The second section of the book is dedicated to establishing agency and department budgets and policy objectives for the next 10 years. Each agency and department chapter also contains a revised “Mission Summary” outlining its proper scope. The appendix includes estimates showing how the policies presented here will affect the federal budget and agency budgets. The book can serve as the next President’s first budget.
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