When President Barack Obama was selling his economic stimulus plan to the American people, he promised that, if enacted, the legislation would prevent unemployment from rising above 8 percent. Three billion dollars in Cash for Clunkers bailouts, $10 billion in government union bailouts, $16 billion in Medicaid bailouts, $13 billion in home buyer tax credits, and $814 billion in stimulus act spending later the nation’s unemployment rate stands at 9.5 percent. And now the Congressional Budget Office (CBO) says that number is not going to come down any time soon. Yesterday, the CBO released its 10-year budget baseline predicting that the economy will grow at an anemic 2 percent next year (half the growth rate it predicted last summer) and that unemployment will remain above 9 percent through the rest of this year. And that wasn’t even the worst news.
The CBO also said the federal deficit will surpass $1.3 trillion this year, and predicted an additional $6.2 trillion in deficits over the next decade. But even these numbers are too rosy. By law the CBO only analyzes federal budgets as written ignoring almost certain policy changes that include the annual “doc fix” (stopping cuts to doctor’s Medicare payments), rising discretionary spending, and tax changes. Using more realistic assumptions, The Heritage Foundation’s Brian Riedl shows that: 1) annual budget deficits will never fall below $1 trillion and will reach nearly $2 trillion by 2020; 2) the national debt held by the public will pass 100 percent of gross domestic product (GDP) by 2020; 3) by 2020 half of all income tax revenues will go to pay just the interest on our $23 trillion national debt.
Even leftist economists are now admitting that this administration’s borrow and spend economic plan has been a complete failure. But instead of cutting their losses, the left wants to double down … with your tax dollars. Last month, Vice President Joe Biden told ABC News that the only problem with the Obama administration’s economic policies was that they failed to spend more and drive us into debt faster. This is insanity. It must stop. To get our country back on the right track The Heritage Foundation’s Solutions for America chapter on Reining in Runaway Spending and Deficits recommends:
Stop Digging: Washington should repeal the remaining stimulus funds, which have failed to create jobs and growth. Any new unemployment assistance should be offset by spending cuts elsewhere. Remaining TARP funds should be rescinded before they can be allocated to new spending. Most important, lawmakers must repeal Obamacare, a ticking spending and deficit time bomb.
Rein in Entitlements: Social Security, Medicare, and Medicaid are driving long-term deficit growth. It is impossible to rein in runaway spending significantly without fundamentally reforming these programs.
Enact Spending Caps: Congress should enact a firm cap on the annual increase in total government spending, limited to inflation plus population growth. Lawmakers should exert all effort to keep overall federal spending to less than 20 percent of U.S. GDP, the historical postWorld War II average for federal spending.
Empower States: Washington taxes families, subtracts a hefty administrative cost, and sends the remaining revenues back to state and local governments with specific rules dictating how they may and may not spend the money. Instead of performing many functions poorly, Congress should focus on performing a few functions well. Most highway, education, justice and economic development programs should be devolved to state and local governments.
Empower the Private Sector: Anyone who has dealt with the post office or lived in public housing understands how wasteful, inefficient and unresponsive government can be. Government ownership of business also crowds out private companies and encourages protected entities to take unnecessary risks. Any government function that can also be found in the yellow pages may be a candidate for privatization.
Ban Corporate Welfare: Even before the financial bailouts, Washington spent more on corporate welfare ($90 billion) than on homeland security ($70 billion). There is no justification for taxing working Americans to subsidize profitable companies. Lawmakers could start by reforming Americas largest corporate welfare programfarm subsidies, which are overwhelmingly distributed to large, profitable agribusinesses rather than struggling family farmers.
Bring Federal Pay in Line with the Private Sector: Federal employee total compensationhourly wages plus benefitsis 30 to 40 percent above that of comparable private sector workers. Congress should bring equity to federal pay and align federal compensation with market rates. Doing so would save taxpayers approximately $47 billion a year.
These spending reforms may not be easy, but the alternativerecord government debt and historic tax increasesis even worse.