Welfare Can And Must Be Reformed
“Saving the American Dream: The Heritage Plan to Fix the Debt, Cut Spending, and Restore Prosperity,” Heritage Foundation, May 10, 2011 by Stuart Butler, Ph.D. , Alison Acosta Fraser and William Beachis one of the finest papers I have ever read. Over the next few days I will post portions of this paper, but I will start off with the section on federal spending reform.
Replacing Farm Subsidies with Farmer Savings Accounts. Intended to
remedy low crop prices and farmer poverty, the current farm subsidy system does
neither. Farm subsidies encourage overplanting, which drives prices down
further, necessitating even more subsidies. Moreover, rather than focusing on
low-income farmers, most farm subsidies go to commercial farmers who report an
average annual income of nearly $200,000. Claims that the agriculture industry
could not survive without large subsidies are contradicted by the fact that
nearly all subsidies go to growers of just five crops (wheat, cotton, corn,
soybeans, and rice), while fruit, vegetable, livestock, and poultry operations
thrive with almost no government aid.
The real problem—yearly income fluctuations due to crop and weather
unpredictability—can be solved inexpensively with farmer savings accounts. Under
the Heritage plan, growers of all crops, not just the “big five,” can save money
during boom years in tax-deductible IRA-style accounts and withdraw those funds
during bust years as taxable income, thus smoothing out their yearly income
fluctuations. An improved no-net-cost crop insurance system will assist when
major disasters deplete most farmers’ accounts. All farmers can participate in
the new system regardless of income or crop grown and at a fraction of the
current cost to taxpayers.
Capping and Reforming Antipoverty Spending. Since 1990, federal
antipoverty spending, including Medicaid, has expanded 236 percent faster than
inflation, from $190 billion to $639 billion (an increase of 2.2 percent of
GDP). Antipoverty spending has grown as much as Social Security, Medicare,
defense, and education spending combined. Overall, the federal government
spends approximately $28,000 per family with children in the bottom third of the
income table without encouraging independence. Many of the programs do not
include enforced work requirements and continue to reward illegitimacy and other
destructive behaviors that block the road to independence.
Once the unemployment rate drops back to normal levels (projected in 2014),
the Heritage plan returns total federal antipoverty spending to its 2007 level
(adjusted for inflation) and then caps total spending growth at the inflation
rate (using the medical inflation rate for the health care portion). Congress or
states could shift spending among antipoverty programs to increase effectiveness
as long as total spending does not exceed the cap. This cap and flexibility will
force lawmakers at all levels to reexamine the size and goals of the welfare
state and tailor assistance more efficiently to help families escape poverty and
dependence and achieve independence.
Other Spending Reforms. Multiple federal programs should be returned
to the state or local levels. For instance, there is no compelling reason for
Washington to finance local job training, justice, environmental, or community
and economic development programs. Therefore, the plan eliminates these federal
grant programs with the expectation that state and local governments will
determine whether to address these local issues with local funds and be held
accountable by local voters. Energy research and development spending that is
commercial in nature is moved to the private sector. Lawmakers are also expected
to pare $15 billion in costs associated with the estimated $125 billion in
annual federal payment errors.
Asset Sales. The federal government currently owns and controls vast
assets, including huge swaths of commercial land, especially in the West; power
generation facilities; valuable portions of the electromagnetic spectrum;
underutilized buildings; and financial assets. Given the federal government’s
huge debt, it makes sense to sell at least a portion of these assets, especially
those that are currently generating revenue below market levels (in which case
the sale value would be above the present value of the current income on the
assets). Sales of assets would immediately reduce the government’s operating
deficit and debt, reducing future interest costs.
The Heritage plan includes a program of asset sales totaling approximately
$260 billion over 15 years. This includes partial sales of federal properties,
real estate, mineral rights, the electromagnetic spectrum, and energy-generation
facilities.
The Daily Hatch 