Taxes & Spending

Cutting Federal Budget Down to Size

When members of Congress—including those who lost re-election—return to Washington for a post-election lame duck session, they will face a mountain of deficits and debt that threaten to push the government to the brink of insolvency.

In the past two years, President Obama and the Democratic-run Congress have swollen the national debt by $2.7 trillion, including a record-breaking $1.4 trillion budget deficit in fiscal year 2009 and a $1.3 trillion deficit in fiscal 2010.

“If Congress does nothing and simply continues existing taxing and spending policies, [annual] federal deficits will grow, reaching a projected $2 trillion deficit in just 10 years—and even that assumes a return to peace and prosperity,” says Heritage Foundation’s chief budget analyst Brian Riedl.

Obama and the Democrats want voters to think that tax cuts are the cause of the deficits. But tax cuts and lower revenues account for less than 14 percent of the sea of red ink that threatens to engulf our economy. Less than that when tax cuts are scored by accounting for increased economic growth.

“Soaring spending drives these dangerous deficits. By 2020, federal spending is set to soar to 26 percent of the gross domestic product (GDP), after having averaged 20 percent after World War II,” Riedl says in a new budget analysis circulating on Capitol Hill. “To reduce deficits, Congress must cut spending.”

In their midterm election Pledge to America, House Republicans promised to bring annual “non-security discretionary” spending down to pre-recession 2008 levels and to permanently extend all the 2001 and 2003 Bush tax cuts to boost investment, economic growth, and new job creation.

But political opponents of the GOP’s proposed budget cuts, and their allies in the new media, have already launched their offensive against the Republicans plans to reduce the size of government.

“Independent analysts say that would require eliminating about $105 billion—or more than 20 percent of spending by departments like Education, Transportation, Interior, Commerce and Energy—a level of reductions that history suggests would be extremely hard to execute,” The New York Times alleged in a front-page story late last month.

The Times story offers a largely one-sided, liberal view of the spending catastrophe, suggesting there are relatively few places to cut that would bring down the deficit.

The truth is that in a $3.5 trillion-a-year budget, there are plenty of places that not only cry out for spending cuts, but for the wholesale elimination of entire programs and agencies.

In a budget-cutting study released just last week, the Heritage Foundation showed how to cut $343 billion in federal spending, or more than one-fourth of the 2010 deficit, as a down payment to put government spending on a downward trajectory.

The Heritage plan, being studied by GOP budget-cutters, would achieve its goal by turning over certain federal programs to state and local governments, such as job training and highway funding programs; consolidating hundreds of duplicative programs; ending corporate welfare; and abolishing dozens of outdated, ineffective programs.

Among the programs targeted for elimination:

o    Obamacare
o    Community Development Block Grant Program
o    Economic Development Administration
o    Overseas Private Investment Corporation
o    Trade and Development Agency
o    Legal Services Corporation
o    Job Corps
o    Rural Utilities Service

Among the mandates to implement:

o    Cut the federal employee travel budget in half.
o    Sell off unused federal properties worth billions.
o    Freeze and reform federal pay.
o    Cut House and Senate budgets to 2008 levels.
o    Privatize Amtrak.
o    Replace farm subsidies with Farmer Savings Accounts and improved crop insurance.
o    Rescind remaining stimulus spending.

Throughout the midterm elections, Democratic candidates and party leaders goaded Republicans to say where they intended to cut the budget, looking for politically sensitive spending targets to shoot down.

But House Minority Leader John A. Boehner refused to play that game, and for voters worried about a rapidly escalating $13.7 trillion debt, the GOP’s pledge to bring the Democrats’ spending spree to a halt was enough.

That pledge will be carried out next year in the GOP-controlled Appropriations Committee where Republican budget cutters will be able cut and trim their way through a swollen $3.5 trillion budget containing thousands of bloated expenditures.

“Almost all of the proposed cuts in federal spending will provoke strong objections from constituencies that benefit from having members of Congress give them taxpayer money taken from someone else,” Riedl said.

“Yet the difficulties caused by each of these cuts should be measured against the status-quo option of doubling the national debt over the next decade, risking an economic crisis, and drowning future generations in taxes,” he added.

Cartoon courtesy of Brett Noel.

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