budget
Return to Common Sense
July 16, 2010
Section: Domestic
- Budget
“The ever
expanding budget reflects entitlements on autopilot to bankruptcy, monies for
redistribution back to states, and new unfunded programs added every year which
will require more than doubling marginal tax rates causing more damage than
good to address these shortfalls.”
“The nearest thing to
eternal life we will ever see on this earth is a government program.”
Ronald Reagan.
Philosophy
(Background, Issues, Objectives):
Annual governmental budget process is
only a spending plan.
- Federal spending
has reached $25,000 per household in 2008.
- Budgetary
outlays consume almost 24% of gross domestic product (GDP) in 2010.
o
Government spending exceeds 50% of GDP in
o
Government spending is more than 45% of GDP in
o
Excessive government has serious adverse effect:
slower growth, higher unemployment, and lower living standards.
o
CBO projects federal spending to grow to 40% of GDP
due to entitlement growth.
- Total cost of mandatory entitlement spending is projected to leap
from 13.4% of GDP in 2010 to 14.1% of GDP by 2020:
o
Social Security is projected to expand by 6%
annually.
o
Medicare is projected to expand by 7% annually.
o
Medicaid is projected to expand by 8% annually.
o
Net interest spending will consume an additional 9%
to 46% of GDP unless programs reined in.
o
Increasing marginal tax rates will have to more than double, which
is not economically feasible as a solution to these run-away costs.
- Defense spending
(20% and recovering).
- “Discretionary”
spending (25% with open ended commitments).
- Grants to state
and local governments are over $400 billion.
- Earmarks and
pork projects are appended to existing legislation to avoid open voting.
- American people
understand little of the details, but understand the budget is in trouble.
- Spending
determined first, then superficial examination of revenue sources.
The federal budget includes a staggering 1,804
subsidy programs,
including grants, loans, insurance, scholarships, and other benefits.
·
The growth in the number of subsidy programs
illustrates the government’s increasing disregard for federalism (the
constitutional principle that the federal government ought not to encroach on
state, local, and private activities).
·
State governments are becoming little more than
regional divisions of the national government and nonprofit groups and
businesses are becoming tools of the state.
There are only two sources of
governmental revenue.
- Taxing
individuals and businesses.
- Borrowing.
The federal government produces a budget
each year that no private company could get way with.
- The Office of
Management and Budget publishes the budget.
o
The totals for the current and upcoming fiscal
years are only projected amounts.
- The Government Accountability Office (GAO) oversees the use of
public funds.
o Establish accounting standards for the federal government
o Conduct audits of internal controls and financial management.
o Conduct program evaluations and analyses of a broad range of federal activities.
o In 2008 for the 12th year in a row, the U.S. Government was unable to express an opinion on the consolidated financial statements because of control weaknesses and other limitations.
In 2006 there were 814 federal grant
programs for state and local governments.
Government has built and continues to mismanage
several major infrastructure programs:
- Government
enterprises compete with private alternatives, but are paid for by public
funds.
- Public productivity rarely competes favorably vs. private
enterprise.
- Amtrak intercity passenger rail service (46 states) with no self supporting routes.
- Federal highway system (47,000 miles) with
no self sustaining revenue source.
- Postal Service (50 states) with competition
eroding the target customer base.
- High Speed Rail (HSR) for 125mph trains is stealth
subsidy for freight haulers.
Internet access is becoming personal and business
basic requirement.
- In 2005 74% of
Americans, including 94% of computer users, used the Internet
- Cable firms
served approximately 60% of broadband subscribers in 2005.
- Satellite, fixed
wireless, and broadband over power line technologies also compete for
customers
- Deployment of
universal broadband connections could create economic benefit of $400
billion a year.
- Online sales
totaled $76 billion in 2002, but still only 1.5% of all sales.
- Additional
competition in video services could lower cable bills by 15%.
Principles:
Government programs must each be self
sustaining.
- Programs must be
periodically examined for effectiveness.
- Spending can
only be driven by expected revenue.
Federal government should subsidize
interstate infrastructure projects.
- Once
infrastructure is constructed, then privatize its operation.
Inter-state wealth redistribution is not
a valid purpose for any program.
- If States need
money, they can tax their residents directly.
Recommendations:
Short
Term, reform federal budget process:
- Institute biennial budgeting and appropriations to restore order to
the spending process.
o
Deliver annual report to American
citizens of the country’s financial condition.
o
Require balanced budget for each year.
o Limit federal government spending to no more than 20% of GDP.
- Isolate Social Security, Medicare and Medicaid as a separate part
of the total budget converting them into regular “discretionary” programs
o
Enact long term budgets and review at
least every five years with triggers or action-forcing devices that
automatically make changes when spending exceeds budgeted amounts.
o Comply with GASB 45 to establish an accrual accounting approach to
report the cost of benefit as an expense during the years in which the employee
is working.
§
Include State Children’s Health Insurance
Program (SCHIP) as separate line item.
o Include a complete and objective cost benefit analysis in any
healthcare regulations.
- Require Dynamic Analysis to evaluate any tax policy macroeconomic
changes:
o
Identify explicit sources of funds for
each spending program (or group of programs).
o
Limit spending based on projected
sources of revenue.
o
Recognize future unfunded obligations in program
budget estimates.
o
Abolish use of budget “trust funds” since funds are virtual and easily diverted to
spend on pork projects.
Use Performance Assessment Rating Tool
(PART) to evaluate program and regulation effectiveness.
- OMB should subject all major regulations to a benefit-cost analysis
before being implemented.
o
ExpectMore.Gov developed to monitor
program effectiveness.
o Calculate
benefits for all new programs, not just “major” (estimated economic
impact greater than $100 million; less than 1% of all programs) programs.
o Reduce
regulation compliance burden.
- Terminate
programs and regulations that are ineffective or inefficient
Authorize a Presidential line item veto authority to limit
“earmark” and “pork” projects.
- Provide a searchable website showing spending from the Office of
Management and Budget.
o Empower
taxpayers to monitor federal spending with internet access tools.
- Enact a
Taxpayers Bill of Rights (TaBOR) to restrict
spending increases.
Require audits of all government departments based on standard
private business accounting practices.
- Each department should create a permanent board, whose charter is
to search out and identify waste.
- Give each
government department independent auditors.
- Compare
estimated vs. actual costs for all government programs.
Long
Term, downsize government, with particular emphasis on
unsustainable entitlement spending:
- Privatize entitlement programs into personal accounts:
o
Medicare (325B) - Privatize
into Personal Health Savings Accounts.
o
Social Security - Privatize
into personal accounts.
- Devolve entitlement programs back to the states:
o
Medicare Prescription Drug Benefit
($62B)
o Medicaid ($186B)
o SCHIP.
o State Payment for Family Support ($4,142M).
o Temporary Assistance for Needy Families
($18,099M)
- Abolish Cabinet departments not covered under enumerated powers
(see individual issue sections):
o
Department of Agriculture ($142.0
billion annually).
o
Department of Commerce ($16.7
billion annually).
§
Abolish
business subsidies should be abolished, including technology subsidies,
handouts to fishermen, and minority business aid ($1.2 billion).
§
Eliminate
economic development funding ($469 million).
§
Terminate
the International Trade Administration ($389 million).
o
Department of Education ($106.9
billion annually).
o
Department of Energy ($38.2
billion annually).
o
Department of Housing and Urban
Development ($62.5 billion annually).
o
Department of Interior.
o
Department of Labor.
o
Department of Transportation
($90.9 billion annually).
§
Eliminate
the Federal Highway Administration ($51.8 billion annually).
§
Eliminate
the Federal Transit Administration ($15.5 billion annually).
§
Privatize
air traffic control and end airport grants ($14.2 billion annually)
- Privatize activities that could be performed better as a standalone
businesses:
o
Privatize the Postal Service ($8.1B).
o Privatize Amtrak ($2.53 billion annually).
o
Privatize federal electricity utilities
§
Privatize Tennessee Valley Authority ($8.5B)
§ Privatize Power Marketing
Administrations ($788M).
- Privatize infrastructure activities that could be performed better
by the private sector:
o
Privatize FAA Facilities (Air Traffic Control) &
Equipment ($2.9B).
o
Privatize highways.
o
Privatize the nation’s airports, while ending
federal subsidies.
o
Privatize the nation’s seaports.
o
Privatize Army Corps of Engineers ($4.9B).
§
Dams ($10.0B).
§
Energy Facilities ($10.0B).
- Privatize activities that could be performed better by the private
sector:
o
Export-Import Bank.
o
Federal National Mortgage Association
(Fannie Mae), ($6.5 B).
o
Federal Home Loan Mortgage Corporation
(Freddie Mac), ($6.5 B).
o
Geographic Survey ($.5B).
o
Global Positioning Service ($7.0B).
o
Government National Mortgage Association
(Ginnie Mae).
o
Government Printing Office.
o
Legal Services Corporation ($350 M).
o
NASA ($15.7B).
o
National Weather Service ($2.3B).
o
Pension Benefit Guarantee Corporation.
o
Retirement Insurance, including Social
Security (527B).
o
Risk Management Agency ($3.4B).
o
St. Lawrence Seaway.
o
Transportation Security Agency ($2.7B).
o
USDA Agricultural Research Centers ($4.0B).
- Sell off excess federal assets:
o
Strategic Petroleum Reserve (232M).
o
Excess electromagnetic spectrum ($150B).
o
Commodity lands (Forest Service, BLM) ($160B).
o
Government buildings and lands ($10.B).
- Privatize federal insurance programs since the government has no
Constitutional role providing or guaranteeing insurance coverage:
o
Crop Insurance.
o
National Flood Insurance.
o
Property Insurance.
o
Terrorism Risk Insurance (TRIA).
o
Windstorm Insurance.
- Devolve local programs back to the states:
o
Child Care Entitlement Grants ($2.7B).
o
Child Care & Development Grants ($2.1B).
o
Community Oriented Policing Services ($575M).
o
Community Service Grants ($631M)
o
Environmental Protection Agency ($3.6B).
o
Federal Transit Administration ($8.4B).
o
Foster Care & Adoption Grants ($6.5B).
o
Head Start ($6.8B).
o
Social Service Grants ($1.8B).
- Terminate corporate welfare and other mis-targeted
programs:
o
Administration on Aging ($1.4B).
o
Agricultural Marketing Service ($1.2B).
o
Assisted Housing Programs ($601M).
o
Bureau of Reclamation ($1.2B)
o
Employment and Training Administration ($5.2B).
o
Farm Service Agency
($26.2B).
o
Fossil Energy and Clean Coal ($615M).
o
Homeless Assistance Grants ($1.3B).
o
Low Income Housing Assistance
($22.9B).
o
Low Income Home Energy Assistance ($2.1B).
o
Small Business Administration ($3.0B).
o
Substance Abuse & Mental Health ($3.2B).
o
Trade Adjustment Assistance ($1.1B).
- Terminate failed, outdated, and irrelevant programs:
o
Agency for International Development ($3.7B).
o
Bureau of Indian Affairs ($2.4B).
o
Corporation for Public Broadcasting ($466M).
o
Economic Development Administration ($392M).
o
Energy Conservation ($874M).
o
Energy Supply ($820M).
o
Maritime Administration ($411M).
o
National Endowment for the Arts & Humanities
($254M).
o
Rural Development ($1.0B).
o
United Nations
($362M).
- Consolidate duplicative and contradictory programs:
o
At-risk youth.
o
Disabled.
o
Early childhood development.
o
Economic development.
o
Homeless assistance.
o
International education.
o
Safe water.
- Terminate programs, rather than trimming them or phasing
them out.
Subsidize building Internet of the
future across U.S.A. to provide universal wireless broadband access.
- Ban Internet access
services taxes (federal, state, and local).
- Limit video
franchising regulation.
References:
“The
Wealth of Nations” by Adam Smith, 1776.
“Policy Recommendations for the 105th Congress”
published by CATO Institute, 1997.
“Downsizing
the Federal Government” by Chris Edwards published by CATO Institute,
2005.
Citizens
Against Government Waste (CAGW)
tracks waste, mismanagement, and inefficiency in the federal government and
publishes at http://www.cagw.org/site/PageServer .
Office
of Management and Budget (OMB) ExpectMore.gov at
http://www.whitehouse.gov/omb/expectmore/ .
“Tech,
Telecom, and Internet – General Principles” published by The
Cato Institute at http://www.cato.org/tech/genprinciples.html .
“Privatize
the Postal Service” by Edward Hudgins dated
“Corporate Welfare Update” by Chris
Edwards and Tad DeHaven dated May 2002 published by The
Cato Institute at http://www.cato.org/pubs/tbb/tbb-0205-7.pdf .
“Government
Schemes Cost More Than Promised” by Chris Edwards dated September
2003 published by The Cato Institute at http://www.cato.org/pubs/tbb/tbb-0309-17.pdf .
“How to
Get Federal Spending Under Control” by Brian M. Riedl
dated
“Federal
Aid to the States Ripe for Cuts” by Chris Edwards dated May 2004
published by The Cato Institute at http://www.cato.org/pubs/tbb/tbb-0405-20.pdf .
“Broadband
by 2007: A Look at the President’s Internet Initiative” by
James L. Gattuso, John M Kneuer,
David McIntosh, Harold Furchtgott-Roth, and Peter Pitsch dated May 13, 2004 published by The Heritage
Foundation at http://www.heritage.org/Research/Regulation/upload/71075_1.pdf .
“Downsizing
the Federal Government” by Chris Edwards dated
“’Blue
Dog’ Democrats See Eye to Eye” by Paul M. Weyrich
dated
“House
Appropriators’ PART Prohibition Perpetuates Wasteful Spending”
by Michelle Muccio and Allison Acosta Fraser dated
“Federal
Budget Should Include Long-Term Obligations from Entitlement Programs”
by Allison Acosta Fraser dated
“What
Price Government?” by Ernest S. Christian and Gary A. Robbins dated
“A good
way to beat traffic: Lease major toll roads” dated
“Four
Elements of a Successful Government Waste Commission” by Michelle Muccio and Brian M. Riedl dated
“How to
Improve Government Waste Commission Proposals” by Brian M. Riedl and Michelle Muccio dated
“Empowering
Citizens to Monitor Federal Spending” by Chris Edwards dated July
2006 published by The Cato Institute at http://www.cato.org/pubs/tbb/tbb_0718-38.pdf .
“Will
the Senate Raid the Treasury for Amtrak?” by Ronald D. Utt dated
“All
Aboard Fiscal Conservatism” by Joseph Vranich
dated
“Number
of Federal Subsidy Programs is Soaring” by Chris Edwards dated
October 2006 published by The Cato Institute at http://www.cato.org/pubs/tbb/tbb_0611-41.pdf .
“Fiscal
Policy Lessons from
“Should
We Copy
“Dynamic
Analysis at Treasury: What Arne the Next Steps?” by Tracy L. Foertsch dated
“Of
debts and deficits” by Bruce Bartlett dated
“Understanding
Public Attitudes about Federal Budget” by Alison Kadlec
and Will Friedman dated December 2006 published by Public Agenda at http://www.publicagenda.org/research/pdfs/understanding_public_attitudes_about_the_federal_budget.pdf .
“Entitlement
Reform Without a Tax Hike” by Peter Ferrara dated
“Losing
Sleep Over the Trade Deficit” by John Stossel
dated
“Trade
Deficits: Good or Bad?” by Walter E. Williams dated
“The
Republican Study Committee’s Taxpayer Bill of Rights: Making Federal
Budget Accountability a Reality” by Nicola Moore and Alison Acosta
Fraser dated
“A
Fiscal Wake-up Call” dated March 2007 published by The Concord
Coalition at http://www.concordcoalition.org/events/fiscal-wake-up/fiscal-wake-up-call.htm .
“Show
Taxpayers the Spending” by Phil Kerpen
dated
“Deficit
Deceptions” dated
“Belabor
the Point” by John Fund dated
“Broadband
Triple Threat” by Cesar Conda dated
“Reform,
the FDR way” by Amity Shlaes dated
“Examining
the Year’s Privatization Trends” by Leonard C. Gilroy dated
“Congressional
Spending: Past Abuse Is No Excuse for Today’s Excess” by Ernest
Istook Jr. dated
“Drain
the Swamp” dated
“Bridges
to Somewhere” dated
“The
New Privatization” by Steven Malanga dated Summer 2007 published by City Journal at http://www.city-journal.org/html/17_3_privatization.html .
“’Starve
the Beast’ Origins and Development of a Budgetary Metaphor” by
Bruce Bartlett dated Summer 2007 published by The
Independent Review at http://www.independent.org/pdf/tir/tir_12_01_01_bartlett.pdf .
“Fixing
Flood Insurance Before the Next Disaster: House Bill Takes Several Steps in the
Wrong Direction” by David C. John dated September 27, 2007 published
by The Heritage Foundation at http://www.heritage.org/Research/Regulation/wm1645.cfm .
“Form a
Panel to Deal with Boomer Costs” by Robert Samuelson dated
“
“Our
view on catastrophic coverage: When the government sells insurance, everybody
pays” dated
“What’s
Left for Government to Do?” by Stephen Goldsmith dated
January/February 2008 published by The American Magazine at http://www.american.com/archive/2008/january-february-magazine-contents/what2019s-left-for-government-to-do .
“Balancing
the Bottom Line” by Jeff Sessions and Johnny Isakson dated
“The
Privatization of Public Services” by John Chapman dated
“Federal
Spending by the Numbers 2008” by Brian Riedl
dated
“Entitlements
Digging
“Taking
Back Our Fiscal Future” by Stuart M. Butler, Allison Acosta Fraser,
and others dated
“Federal
Funds and State Fiscal
“Entitlement
Reform, Not Tax Increases” by Peter Ferrara dated
“Distrust
Fund” by John Berlau dated
“Promoting
Dependence” dated
“Swimming
in Subsidies” by Eli Lehrer dated
“CBO’s
Warning on Raising Taxes to Pay for Medicare, Medicaid, and Social Security”
by Stuart M. Butler dated
“Amtrak:
Not a Model Railroad” by Douglas Stone dated
“Presidents
and the Economy” by Randall Hoven dated
“Why
Government Spending Does Not Stimulate Economic Growth” by Brian M. Riedl dated
“Jumping
Off the Government Bridge” by Peter Van Doren
and Chris Edwards dated December 9, 2008 published by National Review Online at
http://article.nationalreview.com/?q=NzNlODhhOTM5OTQ0OTNiNzNlZmJjNWFmZmMwZTczNzA=
.
“U.S.
Government’s 2008 Financial report: Demonstrates Significant Problems”
dated December 15, 2008 published by Government Accountability Office at http://www.gao.gov/press/financialreport20081215.pdf .
“Fiscal
Federalism” by Chris Edwards dated February 2009 published by The
CATO Institute at http://www.downsizinggovernment.org/fiscal-federalism
.
“All
Aboard the Gravy Train” by Chris Edwards dated April 15, 2009
published by National Review Online at http://article.nationalreview.com/?q=ODZmNTg2ZWUyMTA1ZDU5N2MyYzhkNjFjZWMyZGI5NTc= .
“Insurance
Against Terrorism” by Eli Lehrer dated August 10, 2009 published by
The Weekly Standard at http://www.weeklystandard.com/Content/Public/Articles/000/000/016/796qucel.asp .
“Privatizing
Fannie, Freddie Could ‘Mitigate’ Risks Caused by Government
Intervention, Says GAO” by Matt Cover dated September 15, 2009
published by Cybercast News Service at http://www.cnsnews.com/news/article/54021 .
“Will
Obama’s High-Speed Rail Plan Become a Subsidy for Freight
Railroads?” by Ronald D. Utt dated October
1, 2009 published by The Heritage Foundation at http://www.heritage.org/Research/SmartGrowth/wm2637.cfm .
“Taxpayers
Deserve an Annual Report to the Shareholders” by Carl Paulus dated February 5, 2010 published by American Thinker
at http://www.americanthinker.com/2010/02/taxpayers_deserve_an_annual_re.html
.
“The
Dead Shall Be Raised: The Future of Fannie and Freddie” by Peter J. Wallison dated February 12, 2010 published by American
Enterprise Institute at http://www.aei.org/outlook/100938
.
“Recovery
via Spending Cuts, Low Taxes, and Cheaper Government” by Jeffrey L.
Scribner dated February 23, 2010 published by American Thinker at http://www.americanthinker.com/2010/02/recovery_via_spending_cuts_low.html
.
“How to
Cut the Budget” by Christopher Chantrill
dated February 23, 2010 published by American Thinker at http://www.americanthinker.com/2010/02/how_to_cut_the_budget.html
.
“The
Three Biggest Myths About Tax Cuts and the Budget Deficit” by Brian
M. Riedl dated June 21, 2010 published by The
Heritage Foundation at http://www.heritage.org/Research/Reports/2010/06/The-Three-Biggest-Myths-About-Tax-Cuts-and-the-Budget-Deficit
.
“Department
of Commerce Proposed Spending Cuts” by Chris Edwards and Tad DeHaven dated May 2010 published by Downsizing Government
at http://www.downsizinggovernment.org/commerce/proposed-cuts
.
“Department
of Transportation Proposed Spending Cuts” by Chris Edwards dated June
2010 published by Downsizing Government at http://www.downsizinggovernment.org/transportation/spending-cuts
.
