What does the Heritage Foundation have to say about our potential choices concerning federal spending:Study released May 10, 2011 (Part 5)

   Thomas Sowell – Welfare

“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.

Reforming the Federal Budget Process. When Congress established its current budget process in 1974, the United States was in debt by about a half-trillion dollars; it is now in debt over $14 trillion. Regrettably, for any proposal to deal with the nation’s fiscal problems, the budget process does little to help and in many ways impedes good and bold policy. For one thing, its focus on just 10 years diverts lawmakers from dealing with the mounting long-term challenges, such as retirement programs. For another, the lack of firm budget controls and enforcement procedures makes fiscal discipline very difficult. Reforming the budget process is therefore an implicit part of reforming the budget itself.

In the Heritage plan, we change the budget process to impose enforceable caps to reduce total federal spending to 18.5 percent of GDP by 2021 (including entitlement programs) and then keep spending at that level. Within those overall caps we also cap non-defense discretionary spending at 2.0 percent of GDP. Anti-poverty spending is also capped, as described above. These statutory restrictions on future spending are to be no higher than the modern historical level of federal revenues.

We also propose amending existing federal laws that provide permanent or indefinite appropriations for federal agencies or programs (including and especially entitlement programs), or that allow agencies or programs to spend funds they receive from fees or other sources, rather than depositing them in the U.S. Treasury, so as to retrieve congressional control of spending for those agencies and programs. Within our specific reforms for Medicare and Medicaid we also include a fixed budget amount for each program.

To make the budget process more visible, understandable, and accountable to the American people, we require Congress to estimate and publish the projected cost over 75 years of any proposed policy or funding level for each significant federal program. Any major policy change should also be scored over this long-term horizon.

Finally, in addition to calculating the costs of proposed congressional actions without regard to the response of the economy to those actions (known as “static” scoring), we require a parallel calculation that takes account of that response (known as “dynamic” scoring) so as to make more practical and useful cost information available to Congress when it decides whether to pursue the actions.

The Bottom Line

Runaway federal spending threatens to drown the nation in taxes and debt for generations to come. Promoting economic prosperity requires streamlining government, cutting spending, and empowering families and entrepreneurs.

The Heritage plan achieves those objectives by focusing Washington on performing a limited number of appropriate duties well rather than a wider range of questionable duties poorly. It transfers more power to state and local governments, which are closer and more responsive to the people; transfers functions to the private sector that the market can perform better; targets federal spending more precisely to those in need; and eliminates wasteful, unnecessary, and duplicative spending.

These steps will unleash the power of the private sector to meet market demands, create jobs, and raise living standards. Taking these steps, combined with entitlement and tax reform, means that Americans can look forward to opportunity and prosperity rather than a future of debt and economic decline.

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