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A Spending Cut Spree

Ideas for getting the federal budget under control.

by James Leroy Wilson
December 7, 2010

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A Spending Cut Spree

Last week, the President's Fiscal Responsibility Commission issued its recommendations. Although there is much to criticize in it, it is good to see some recognition in Washington of the need to do something about the debt crisis.

The Cato Institute's Chris Edwards has also introduced a plan, and one piece of information he reveals is striking. He notes that "In fiscal 2011, federal aid to the states will total $646 billion, which will be distributed through more than 800 separate programs."
That averages out to almost $13 billion per state. Considering the average population of a state is over 6 million people, that's around 2,100 in per capital spending.
Here's a suggestion for what to do with that money:
1.       Abolish ALL of these programs
2.       Send the money, on more or less a per capita basis, to the state government, allowing each state legislature to decide how to spend it
3.       Cut this aid by 20% every year for ten years; by the tenth year, it will be just $1.4 billion for the average state
With this money, a state could continue to fund programs previously mandated by the Feds, or could scrap what it sees as unnecessary programs and focus the money on more urgent needs. It would also operate with the knowledge that almost 90% of this money will not be there for them in ten years, and they could plan ahead and make choices about what is necessary and what is not.
Edwards also notes that there are 2,000 subsidies for individuals and businesses, although he doesn't give a figure of the total amount spent. But again here's a suggestion:
1.       Abolish ALL of these programs
2.       With money saved from individual subsidies, give a per-capita tax rebate to all individual income tax filers in the U.S.
3.       Cut this rebate amount by 20% every year for ten years
I'm not offering anything concrete, but I would ask questions that might spur recommendations for other cuts:
·         Why do we have troops in 120 different countries, and why are we shouldering the defense of wealthy nations like South Korea, Japan, and Germany?
·         What are we doing in Iraq and Afghanistan, and why?
·         Is foreign aid "humanitarian," or is it a means to exert influence and tell other countries what to do?
·         Even if we concede a federal role in helping the poor and the handicapped, why is it necessary to provide welfare payments (Social Security) and health care to middle-class and wealthy elderly people?
·         Are there any laws regarding drug patents, health care professional licensing, and insurance regulation that causes health care in America to be so expensive?
·         If it wasn't so expensive (labor regulations, payroll taxes, health insurance requirements) to start a business and hire people, would we really need to pay unemployment benefits?
It is easy to claim that my suggestions would never be implemented, and that these questions will fall on deaf ears in Washington. Typical D.C. politicians and bureaucrats espouse the ideologies of control freaks. That's why they want all of life – in America and throughout the world – to be funded by D.C. and regulated by D.C. They won't give up their power easily.
On the other hand, the looming bankruptcy of the U.S. may give them no choice. Roger C. Altman and Richard N. Haass are by no means small-government ideologues, but they write in Foreign Affairs that if American politicians don't get spending under control, global capital markets will force them. This happened in 1979, after Jimmy Carter proposed a budget with larger-than-expected deficits:
"That was the last straw. The dollar plunged, triggering an international financial crisis. Within one week, markets had forced the Federal Reserve to raise interest rates sharply and Carter to retract his budget, generating a U-turn in U.S. economic policy."
Today's budget mess is worse than back then. Either American politicians can be proactive in averting the mess, or the mess will come and austerity will follow. We can either wait until China stops purchasing Treasury bonds, or we can take action now.
I, for one, do not share the ideology of Altman, Haass, or the Fiscal Responsibility Commission. They all seem to think that more government is still the answer to life's problems; I think less government and more freedom will bring about a more prosperous world. But I do agree that we should take action now instead of waiting for a dollar collapse.

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