Entitlement Spending Will More Than Double by 2050
Everyone wants to know more about the budget and here is some key information with a chart from the Heritage Foundation and a video from the Cato Institute.
Spending on Medicare, Medicaid and the Obamacare subsidy program, and Social Security will soar as 78 million baby boomers retire and health care costs climb. Total spending on federal health care programs will triple.
The charts in this book are based primarily on data available as of March 2011 from the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO). The charts using OMB data display the historical growth of the federal government to 2010 while the charts using CBO data display both historical and projected growth from as early as 1940 to 2084. Projections based on OMB data are taken from the White House Fiscal Year 2012 budget. The charts provide data on an annual basis except… Read More
Authors
Emily GoffResearch Assistant
Thomas A. Roe Institute for Economic Policy StudiesKathryn NixPolicy Analyst
Center for Health Policy StudiesJohn FlemingSenior Data Graphics Editor
Senator Mark Pryor wants our ideas on how to cut federal spending. Take a look at this video clip below:
Senator Pryor has asked us to send our ideas to him at cutspending@pryor.senate.gov and I have done so in the past and will continue to do so in the future.
On May 11, 2011, I emailed to this above address and I got this email back from Senator Pryor’s office:
Please note, this is not a monitored email account. Due to the sheer volume of correspondence I receive, I ask that constituents please contact me via my website with any responses or additional concerns. If you would like a specific reply to your message, please visit http://pryor.senate.gov/contact. This system ensures that I will continue to keep Arkansas First by allowing me to better organize the thousands of emails I get from Arkansans each week and ensuring that I have all the information I need to respond to your particular communication in timely manner. I appreciate you writing. I always welcome your input and suggestions. Please do not hesitate to contact me on any issue of concern to you in the future.
I just did. I went to the Senator’s website and sent this below:
You are friends with the gang of six members and Senator Tom Coburn of Oklahoma is one of the those members. I noticed a study that Senator Coburn did on how to cut money out of our bloated federal budget and I have included below some of his suggestions concerning the Dept of Health and Human Services below:
DEPARTMENT OF HEALTH
AND
HUMAN SERVICES
The Department of Health and Human Services (HHS) is charged with protecting the health of all Americans. This includes supporting medical research, promoting wellness, preventing and controlling disease, ensuring the safety of drugs and medical devices, and providing health care and related services.
The budget of HHS ―represents almost a quarter of all federal outlays, and it administers more grant dollars than all other federal agencies combined. HHS Medicare program is the nations largest health insurer, handling more than 1 billion claims per year. Medicare and Medicaid together provide health care insurance for one in four Americans.‖1 HHS is also involved in other activities such as assisting with the management of wastewater treatment facilities 2 as well as doing house work and shopping for older Americans. 3
1 ―About HHS,‖HHS website, accessed June 30, 2011;
HHS is made up of many diverse agencies, including the Administration on Aging, Administration for Children and Families, Agency for Healthcare Research and Quality, Agency for Toxic Substances and Disease Registry, Centers for Disease Control and Prevention, Centers for Medicare and Medicaid Services, Food and Drug Administration, Health Resources and Services Administration, Indian Health Service, National Institutes of Health, the Substance Abuse and Mental Health Services Administration, Office of Global Health Affairs, and the Office of the Surgeon General, which includes the 6,500-member Commissioned Corps of the U.S. Public Health Service.
Improving Management of Funds and Resources
The entire annual HHS budget exceeds $889 billion. This mammoth budget has proven difficult to properly manage. From paying health care claims submitted for dead patients and prisoners to bonuses to nursing homes for substandard care to excess travel costs, mismanagement at HHS is costing taxpayers more than one billion dollars every week.
In 2010, the Office of Management and Budget (OMB) designated five HHS programs as ―high-error‖based on the agencies annual performance and financial reports. In just two of these programs, Medicare Fee-for-Service and Medicaid, HHS made $56.8 billion of improper payments.
4 These ―improper payments‖include millions of dollars of Medicare claims submitted under the names of dead doctors5 and ordered for medical services for dead patients.6
―Medicare fraudestimated now to total about $60 billion a yearhas become one of, if not the most profitable, crimes in America,‖CBS News recently reported, which raises ―troubling questions about our governments ability to manage a medical bureaucracy.‖7
Statement by Dr. David Acheson, Associate Commissioner on Foods at the Food and Drug Administration of the U.S. Department of Health and Human Services on Improper Payments in Government Agencies and Departments before the U.S. House of Representatives Committee on Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies, May 11, 2011; http://www.hhs.gov/asl/testify/2011/03/t20110317e.html .
―INDIAN HEALTH SERVICE: IHS Mismanagement Led to Millions of Dollars in Lost or Stolen Property (GAO-08-72),‖Government Accountability Office, June 2008; http://www.gao.gov/new.items/d08727.pdf .
Fraud is not the only cause of wasted federal health care dollars. For instance, the Centers for Medicare and Medicaid Services awarded more than $312 million a year in bonuses to nursing homes with past violations of basic health-and-safety standards that provided below-average care.8
There are plenty of other areas where HHS spending is simply excessive. HHS spent $215 million on travel, including the cost of rental cars, hotels and airline tickets, in 2008.
9 The Department spent at least $349 million on conferences and meetings over the last decade.
10
Millions of dollars of HHS equipment disappears every year. Over 5,000 items worth $15.8 million, including laptop computers, all-terrain vehicles, tractors, pickup trucks, and medical devices, were lost or stolen by employees of HHS Indian Health Service between 2004 and 2007.
11 Investigators blamed management failures and weak leadership for the problems, yet the official in charge of IHS property group still received a $13,000 bonus award in December 2008.
The Department ends every year with billions of dollars in excess funds. HHS is expected to end 2011 with more than $210 billion in unspent funds. Over $40 billion of that amount is unobligated. The Department is expected to end 2012 with an even greater amount of unobligated money.13
One way the Department could clean up their act and save taxpayer dollars is simply through complying with existing federal law. The nonpartisan analysis of an audit conducted by Ernst & Young on the balance sheets of the Department of Health and Human Services for FY2010, was included in HHSs FY 2010 Agency Financial Report, dated November 15, 2010. The audit revealed concerning conclusions; among the many findings were the following:
14
HHS is not in compliance with federal financial management law. According to the HHS Inspector Generals review of Ernst & Youngs financial audit of HHS, ―HHS’s financial management systems are not compliant with the Federal Financial Management Improvement Act of 1996.‖
Nearly $2 billion taxpayer dollars are stuck in limbo. ―As of September 30, 2010, the audit identified approximately 102,500 transactions totaling an approximate $1.8 billion that were more than 2 years old without activity.‖
Nearly $800 million dollars ―could not be explained‖differing between HHS records and treasury department records. ―Based on our review and discussions with management, we noted differences of $794 million that could not be explained.‖
Some processes and procedural manuals have not been updated since the 1980s. ―HHSs formalized policies and procedures are out of date and may be inconsistent with actual processes taking place….For example, we noted that certain policies and procedures, including certain accrual processes, had not been updated since the mid-1980s.‖
Current HHS personnel need training to ―complete their day-to-day responsibilities.‖―Further, we noted additional training on the financial systems was needed to enable HHS personnel in their ability to access needed information from the system to complete their day-to-day responsibilities – including the preparation of reconciliations, research of differences noted, and the ability to identify and clear older ―stale‖transactions dating back several years.‖
Senator Mark Pryor wants our ideas on how to cut federal spending. Take a look at this video clip below:
Senator Pryor has asked us to send our ideas to him at cutspending@pryor.senate.gov and I have done so in the past and will continue to do so in the future.
On May 11, 2011, I emailed to this above address and I got this email back from Senator Pryor’s office:
Please note, this is not a monitored email account. Due to the sheer volume of correspondence I receive, I ask that constituents please contact me via my website with any responses or additional concerns. If you would like a specific reply to your message, please visit http://pryor.senate.gov/contact. This system ensures that I will continue to keep Arkansas First by allowing me to better organize the thousands of emails I get from Arkansans each week and ensuring that I have all the information I need to respond to your particular communication in timely manner. I appreciate you writing. I always welcome your input and suggestions. Please do not hesitate to contact me on any issue of concern to you in the future.
I just did. I went to the Senator’s website and sent this below:
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.
Over and over the people representing us in Washington say they want to get serious about reducing our national debt and they want to balance the budget. One big step in the right direction would be to eliminate the Dept of Education which spends over 100 billion every year.
1. The Constitution provides no authority whatsoever for the federal government to be involved in education. Eliminating the department on those grounds would help to reestablish the original understanding of the enumerated powers of the federal government.
2. No matter how brilliantly designed a federal government program may be, it creates a uniformity among states that is harmful to creativity and improvement. Getting the federal government out of the picture would allow states and local governments to create better ways of addressing education issues and problems.
3. If education were left at the local level, parents would become more involved in reform efforts. Differences in school effectiveness among states and communities would be noted, and other regions would copy the more effective programs and policies.
4. The contest between Congress and state legislatures to demonstrate who cares more about education would be over, allowing members of Congress to focus on areas and problems for which they have legitimate responsibility.
5. Since most information about the problems and challenges of education is present at the local level, Congress simply does not have the ability to improve learning in school classrooms thousands of miles away. These problems are best understood and addressed by local authorities and parents.
6. The inevitable pattern of bureaucracy is to grow bigger and bigger. The Department of Education should be eliminated now, before it evolves into an even larger entity consuming more and more resources that could be better spent by parents themselves.
7. The $47.6 billion spent each year by the Department of Education could be much better spent if it were simply returned to the American people in the form of a tax cut. Parents themselves could then decide how best to spend that money. (Actually in 2011 it will be over 100 billion)
8. The Department of Education has a record of waste and abuse. For example, the department reported losing track of $450 million during three consecutive General Accounting Office audits.
9. The Department of Education is an expensive failure that has added paperwork and bureaucracy but little value to the nation’s classrooms.
BOEHNER: Screaming “Hell no you can’t!” Ah, the good old days.
Slate has a running update of the debt ceiling debate in Washington. So far it looks like Speaker of the House John Boehner will have the votes in the House to pass his plan. Sen. Harry Reidhas said the bill will be defeated when considered in the Senate.
“As soon as the House completes its vote tonight, the Senate will move to take up that bill,” Reid said on the Senate floor. “It will be defeated. No Democrat will vote for a short-term Band-Aid that would put our economy at risk and put the nation back in this untenable situation a few short months from now.”
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Harry Reid and the Democrats have not lifted a finger to cut federal spending and the markets know it. I am disappointed in Boehner’s recent attempt to get a bill together. It really does not cut spending much either. Chris Edwards of the Cato Institute takes us through the figures.
House Speaker John Boehner has revised his budget plan in response to an unfavorable analysis by the CBO. The CBO has examined Boehner’s new plan and finds that it would cut spending by $917 billion over 10 years. Of the total, only $761 billion would be cuts to programs. The rest of the savings would be from reduced interest costs.
Actually, the revised Boehner plan doesn’t cut spending at all. The chart shows the discretionary spending caps in the new Boehner plan. Spending increases every year—from $1.043 trillion in 2012 to $1,234 trillion in 2021. (These figures exclude the costs of wars in Iraq and Afghanistan).
The “cuts” in the Boehner plan are only cuts from the CBO baseline, which is an assumed path of constantly rising spending. If Congress wanted to, it could require CBO to increase its “baseline” spending by, say, $5 trillion over the next decade. Then Boehner could claim that he was “cutting” spending by $5.9 trillion, even though his plan hadn’t changed. You can see that discretionary “cuts” against baselines don’t mean anything.
The way to make real spending cuts is to abolish programs and agencies. But it’s been eight months since a landslide election that focused on the issue of spending cuts, and the Republican leadership hasn’t proposed any major terminations.
Senator Tom Coburn told us exactly where he wants to cut spending in this 620-page report. Senator Rand Paul has detailed $500 billion in specific cuts. Where are the spending cut plans of the other fiscal conservatives in Congress?
Members need to step up to the plate and tell us where they would cut the budget. (For help, they can look here). The reality of ongoing $1 trillion deficits is that Congress has to start abolishing programs, privatizing activities, and making other lasting reforms. Promising to reduce spending growth a bit from projected baseline increases won’t do the job.
In the article “When a state legislator’s brain shorts out…,” July 28, 2011, Arkansas News Bureau, Brummett was critical of recent statements by Representative Nate Bell of Mena. Brummett was critical of these Tea Party types not only because they sometimes mispeak but also because the Tea Party is taking the country in a direction that Brummett detests. He asserted:
For one thing, and in the immediate term, it may be that our government’s credit rating will be downgraded to the point that interest costs will rise for beleaguered Americans’ mortgages and car loans.
Let me make two points here. First, the term Tea Party is being used by Brummett for any right wing person he does not like.
One sign of the tea party movement’s success is that the term “tea party” is becoming an all-purpose smear term for any more-or-less right-wing person or activity that the writer doesn’t like. In fact, I think “Tea Party” is replacing “neocon” as an all-purpose word for “the people I hate.”
Second, Brummett claims it the Republicans who want to default, but is the Democrats who are refusing to cut the budget in a way we can lower this 1.7 trillion deficit for this year!!!!
The huge deficits are the problem. People want the debt ceiling raised, but if the huge deficits continue then what is the use? The article below shows how our government will have their credit rating devalued UNLESS WE STOP RUNNING UP BIG DEFICTIS EVERY YEAR!!
Americans, and global financial markets, are watching Washington nervously for a real plan—one that will put the nation squarely on a path to solving our twin crises of spending and debt. Without strong structural changes in spending, our debt will balloon out of control.
At stake are two issues. The short-term is obvious – will there be an increase in the debt limit before August 3? Despite the President and his team practically begging Wall Street to collapse, the markets and the rating agencies believe that there will be an increase and the federal government can safely avoid the chaos of prioritizing its bills in order to service the debt. Though they warn of the consequences if this doesn’t happen, Standard & Poor’s, has stated that
…the risk of a payment default is small, though increasing…Standard and Poor’s still anticipates that lawmakers will raise the debt ceiling by the end of July to avoid those outcomes.”
The second and even more crucial issue is whether Congress will take necessary action beyond the next year to bring our debt under control over the medium and long-term. This is where the rating agencies really voice their strong concern. Again, Standard & Poor’s:
Congress and the Administration might also settle for a smaller increase in the debt ceiling, or they might agree to a plan that, while avoiding a near-term default, might not, in our view, materially improve our base case expectation for the future path of the net general government debt-to-GDP ratio.”
Moody’s response is similar:
The outlook assigned at that time to the government bond rating would very likely be changed to negative at the conclusion of the review unless substantial and credible agreement is achieved on a budget that includes long-term deficit reduction. To retain a stable outlook, such an agreement should include a deficit trajectory that leads to stabilization and then decline in the ratios of federal government debt to GDP and debt to revenue beginning within the next few years.
What the rating agencies are saying is that Congress and the President must pass legislation that immediately begins to rein in deficits and bring our debt down to more acceptable levels, and either keeps it there or continues to drive it down further.
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We need more lawmakers like Nate Bell who want to get our country back to the tax level we were at many years ago. Our founding fathers would be SHOCKED IF THEY CAME BACK TODAY AND SAW THAT THE FEDERAL GOVERNMENT WAS SPENDING OVER 24% OF GDP.
You almost have to feel bad for Arkansas Democrats…almost. With the last remaining Arkansas Congressional Democrat, Mike Ross, announcing he will not run for re-election, they are facing the realization that the entire Arkansas delagation – save Sen. Mark Pryor who is not up until 2014 – could turn red in the next cycle. They are just coming off a tidal wave 2010 election which saw Republicans in the state capitol close to double in ranks. And with the unpopular President Obama leading their ticket in 2012, it is likely to get even worse for them.
It is so bad that Politico this week had the healine “Arkansas Democrats Face Extinction.” Ouch!
It is almost understandable then that they are doing everything they can to hang on to power – whether it is creative map drawing or trying to seize every opportunity to paint Republicans as crazy extremists. Granted, frequent e-mails circulating the Internet make for easy targets. But the over-the-top reaction to an ill-advised Facebook post from a Republican state representative has been both amusing and a bit annoying at the same time.
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John Brummett Says: July 28th, 2011 at 10:39 am ill-advised? understatement, you think? for the record, i care much less whether democrats or republicans win arkansas political races than whether the republican party can extricate itself from the cranks and kooks and affronts to advanced civilization represented by this kind of outrageously ignorant comment — a process a couple of republicans could begin right here right now by denouncing this guy’s outrage on specific merit and in unambiguous terms, not dismissing it defensively for purely partisan motivation
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If you look at the unbelievable comments that Democrats have made the last two years when they have crammed Obamacare down our throats then you could really come up with so crazy comments. Obama says the whole Obamacare debate will be on CSpan then he retreats with Nancy and does it in private and she says, “You will find out what is in it when we pass it.”
I still think that Tolbert has it right. It makes me think that the Democrat Party of Arkansas is acting much like Florida Alantic’s announcer did last year in the ASU game.
With Arkansas St. leading 37-16 late in the game, Lamont lost his marbles after FAU quarterback Jeff Van Camp scrambled, slid and then took a hit in the head by an Arkansas St. defender.
It should have been a flag. But, as we are reminded on a weekly basis, sometimes officials miss calls. It happens. Well, Lamont was in no mood for oversights. And his subsequent on-air rant was hilariously intense. Here it is:
Florida Alantic was losing at the time and that is why I have compared them to the Arkansas Democratic Party. Jason Tolbert hit the nail on the head in his comments. Is it any wonder that liberal Democrat Michael Cook revealed the Democrats next play in the playbook: “Remarks like the ones made by Nate Bell and Jon Hubbard, without apologies, should be highlighted by Democrats”
I don’t think this strategy of the Democrats will work since it President Obama and the liberals in Washington that have caused the largest pick up of seats by Republicans in Arkansas’ history. IT STILL COMES DOWN TO THE ISSUES.
Congress’s dance with the debt limit can be confusing and, frankly, the details can be a real snooze fest for many Americans. Sometimes a little humor clarifies the absurdities of Washington antics better than flow charts and talk of trillions.
The 31-second video and accompanying infographic “The Debt Ceiling Explained” by Bankrupting America offers the facts, leavened with a dose of levity. The conclusion is serious, however: The country’s debt threatens economic growth, and spending cuts are the answer.
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It is obvious to me that if President Obama gets his hands on more money then he will continue to spend away our children’s future. He has already taken the national debt from 11 trillion to 16 trillion in just 4 years. Over, and over, and over, and over, and over and over I have written Speaker Boehner and written every Republican that represents Arkansans in Arkansas before (Griffin, Womack, Crawford, and only Senator Boozman got a chance to respond) concerning this. I am hoping they will stand up against this reckless spending that our federal government has done and will continue to do if given the chance.
What would happen if the debt ceiling was not increased? Yes President Obama would probably cancel White House tours and he would try to stop mail service or something else to get on our nerves but that is what the Republicans need to do.
Senator Mark Pryor wants our ideas on how to cut federal spending. Take a look at this video clip below:
Senator Pryor has asked us to send our ideas to him at cutspending@pryor.senate.gov and I have done so in the past and will continue to do so in the future.
On May 11, 2011, I emailed to this above address and I got this email back from Senator Pryor’s office:
Please note, this is not a monitored email account. Due to the sheer volume of correspondence I receive, I ask that constituents please contact me via my website with any responses or additional concerns. If you would like a specific reply to your message, please visit http://pryor.senate.gov/contact. This system ensures that I will continue to keep Arkansas First by allowing me to better organize the thousands of emails I get from Arkansans each week and ensuring that I have all the information I need to respond to your particular communication in timely manner. I appreciate you writing. I always welcome your input and suggestions. Please do not hesitate to contact me on any issue of concern to you in the future.
I just did. I went to the Senator’s website and sent this below:
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 costtotaxpayers.
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 governmentswill 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.
Politico notes that Democratic Sen. Harry Reid’s budget plan cuts spending more than Republican John Boehner’s plan. Boehner’s two-step plan is calculated on providing a highly politicized two-step plan for raising the debt ceiling.
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After a closer look at Harry Reid’s plan, it is evident that his “austerity” turns out to be fiction. I do admit that the Republican plan is not much better, but it is false to claim that the Reid plan cuts more. “Some Austerity” by Michael D. Tanner of the Cato Institute examines Harry Reid’s plan closely:
Michael Tanner is a senior fellow at the Cato Institute and coauthor of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.
“It is clear we must enter an age of austerity,” House minority leader Nancy Pelosi mourned as she endorsed Harry Reid’s proposal for raising the debt ceiling. Austerity? Really?
The Reid plan would theoretically cut spending by $2.7 trillion over ten years. Even if that were true, it would still allow our national debt to increase by some $10 trillion over the next decade. But, of course, the $2.7 trillion figure is mostly fiction.About $1 trillion of the savings would come from the eventual end of the wars in Iraq and Afghanistan, savings that were going to occur anyway. Senator Reid might just as well have added another $1 trillion in savings by not invading Pakistan.
Another $400 billion comes not from cuts but from assuming reduced interest payments. And, of course, there are $40 billion in unspecified “program-integrity savings,” meaning the “waste, fraud, and abuse” that is the last refuge of every phony budget cutter. The plan rejects any changes to Medicare and Social Security, despite the fact that the unfunded liabilities from those two programs could run as high as $110 trillion. But those liabilities generally fall outside the ten-year budget window, so Reid — unlike our children and grandchildren — doesn’t have to worry about them.
[U]nder both the Reid and Boehner plans, actual federal spending will continue to rise.
That leaves about $1.2 trillion in discretionary and defense spending reductions over the next ten years. Let’s put that in perspective. This year the federal government will spend $3.8 trillion. Our deficit is roughly $1.6 trillion. Our national debt exceeds $14.3 trillion, not counting unfunded entitlement liabilities. We are talking about raising the debt ceiling to $16.9 trillion. This month alone the federal government will borrow $134 billion. Reid’s cuts would average roughly $120 billion per year.
This is austerity?
Of course, the House Republican plan as announced by Speaker John Boehner is only marginally more austere.
Boehner proposes a two-stage increase in the debt ceiling, with each stage accompanied by spending cuts. The first $1 trillion debt increase would be accompanied by $1.2 trillion in spending cuts over ten years, pretty much the same as Senator Reid’s plan. The big difference is that instead of Sen. Reid’s phony Iraq and Afghanistan savings, the speaker’s plan would appoint a commission — now there’s an exciting new idea — to propose $1.8 trillion in savings from entitlement programs. To be fair, Senator Reid would also appoint a commission — because that’s what Washington does — to recommend additional deficit reductions, presumably including entitlement changes. The difference is that the Boehner commission has teeth. If Congress rejects its recommendations, the president doesn’t get a second $1.6 trillion hike in the debt ceiling.
But $1.8 trillion in entitlement savings over ten years is still too small to encompass real structural reforms of the type envisioned by Rep. Paul Ryan and others. It is much more likely to simply be more tweaking around the edges, perhaps raising the eligibility age or changing the way the cost-of-living formula is calculated. True, changes such as these will have a real impact out beyond the ten-year budget window, but they fall far short of what is necessary to deal with the shortfalls to come.
Making matters worse, both Reid and Boehner are using the time-honored Washington dodge of “baseline budgeting,” meaning that the proposed cuts are not actual reductions in spending from year to year, but cuts from projected future increases. Thus, under both the Reid and Boehner plans, actual federal spending will continue to rise.
With the clock running out, we are now down to fifth- or sixth-best options. But let’s not pretend that this is austerity.
Is there a better voice for moderation, compromise and legislative solutions than Gov. Mike Beebe? His legislative career contains few policy monuments, but a warehouse full of settlements of pitched legislative battles.
So he’s a good spokesman against the current impasse created in Congress by Republicans like 2nd District U.S. Rep. Tim Griffin intent on holding the U.S. hostage to debilitating budget cuts and absolute protection of the wealthy from even a small increase in the lowest tax burden in half a century. Good for Beebe.
“They are apparently so entrenched that they’re ready to allow this country to default, with all of the economic consequences that that brings with it,” Beebe told reporters. “They’re up to the licklog, and they’d better sit down and figure out how they solve this problem.”
Beebe said both sides in the debate deserve criticism, but “it sounds to me like it’s the Republican majority in the House that has just drawn a line in the sand.”
Beebe claims it the Republicans who want to default, but is the Democrats who are refusing to cut the budget in a way we can lower this 1.7 trillion deficit for this year!!!!
The huge deficits are the problem. People want the debt ceiling raised, but if the huge deficits continue then what is the use? The article below shows how our government will have their credit rating devalued UNLESS WE STOP RUNNING UP BIG DEFICTIS EVERY YEAR!!
Americans, and global financial markets, are watching Washington nervously for a real plan—one that will put the nation squarely on a path to solving our twin crises of spending and debt. Without strong structural changes in spending, our debt will balloon out of control.
At stake are two issues. The short-term is obvious – will there be an increase in the debt limit before August 3? Despite the President and his team practically begging Wall Street to collapse, the markets and the rating agencies believe that there will be an increase and the federal government can safely avoid the chaos of prioritizing its bills in order to service the debt. Though they warn of the consequences if this doesn’t happen, Standard & Poor’s, has stated that
…the risk of a payment default is small, though increasing…Standard and Poor’s still anticipates that lawmakers will raise the debt ceiling by the end of July to avoid those outcomes.”
The second and even more crucial issue is whether Congress will take necessary action beyond the next year to bring our debt under control over the medium and long-term. This is where the rating agencies really voice their strong concern. Again, Standard & Poor’s:
Congress and the Administration might also settle for a smaller increase in the debt ceiling, or they might agree to a plan that, while avoiding a near-term default, might not, in our view, materially improve our base case expectation for the future path of the net general government debt-to-GDP ratio.”
Moody’s response is similar:
The outlook assigned at that time to the government bond rating would very likely be changed to negative at the conclusion of the review unless substantial and credible agreement is achieved on a budget that includes long-term deficit reduction. To retain a stable outlook, such an agreement should include a deficit trajectory that leads to stabilization and then decline in the ratios of federal government debt to GDP and debt to revenue beginning within the next few years.
What the rating agencies are saying is that Congress and the President must pass legislation that immediately begins to rein in deficits and bring our debt down to more acceptable levels, and either keeps it there or continues to drive it down further.
The Boehner proposal would cut $1.2 trillion in discretionary spending. There is no assurance that these cuts will occur, but let’s assume they do. Let’s even be generous and assume that they are – in the words of S&P– “enacted and maintained throughout the decade.” This would cut debt held by the public from its projected $24.9 trillion in 2021 to $23.7 trillion, and when measured against the economy from 104% to 99.4%. Certainly, this is an improvement, but it is hardly declining from today’s levels, nor would these cuts fundamentally restructure entitlements – the real driver of our deficits in the future.
Step two in the Boehner proposal would reduce deficits by an additional $1.8 trillion over ten years. Even assuming these cuts all happen, and even assuming they were all spending cuts – a broad assumption given the President’s rhetoric surrounding tax hikes on the wealthy – this would bring publicly held debt down to 92% of GDP. Better, but not that much. Even throwing in interest savings from deficit reduction would bring this down to 88%. Again, not much improvement and far worse than today’s debt ratio.
The Reid proposal doesn’t move the ball forward enough either. At best it falls somewhat short of Boehner’s $3 trillion by $800 billion ($1.2 trillion in discretionary and some confusing savings to be had from winding down operations in Iraq and Afghanistan of $1.0 trillion.)
Neither of this week’s dueling debt ceiling proposals would pass the test from Moody’s or Standard and Poor’s for a credible, firm and actionable plan that would turn the tide of our deficits to put our debt on a manageable track. And if that holds true, then a downgrade by the rating agencies could occur smack in the very election year the President is trying to scoot through.
Because spending is set to grow so significantly over the decade, the kind of onesie-twosie approach to cutting spending and increasing the debt limit is simply not adequate. Net interest payments are projected to more than triple over the next decade. The longer Congress waits to seriously control spending, the more it will have to cut just to offset bourgeoning interest costs. And if interest rates suddenly rise? Well, we have an even bigger problem on our hands.
And, as babyboomers flood into Social Security, Medicare and Medicaid swell in tandem, the kinds of changes necessary to rein in spending on these programs will be much more difficult. Here again, the longer they duck the problem, the more likely a meltdown ahead.
The fact is, the only plan that could likely pass muster with Moody’s and Standard and Poor’s is House passed, Cut, Cap and Balance. Why? They tackle spending with firm caps that are enforceable, and before the end of the decade bring spending down to 19.9% of GDP and keep it there. With the right spending changes it could fall, along with debt levels, from there. Congress must act now to rein in spending and get our debt under control. It’s time for the dueling to end.
Senator Mark Pryor wants our ideas on how to cut federal spending. Take a look at this video clip below:
Senator Pryor has asked us to send our ideas to him at cutspending@pryor.senate.gov and I have done so in the past and will continue to do so in the future.
On May 11, 2011, I emailed to this above address and I got this email back from Senator Pryor’s office:
Please note, this is not a monitored email account. Due to the sheer volume of correspondence I receive, I ask that constituents please contact me via my website with any responses or additional concerns. If you would like a specific reply to your message, please visit http://pryor.senate.gov/contact. This system ensures that I will continue to keep Arkansas First by allowing me to better organize the thousands of emails I get from Arkansans each week and ensuring that I have all the information I need to respond to your particular communication in timely manner. I appreciate you writing. I always welcome your input and suggestions. Please do not hesitate to contact me on any issue of concern to you in the future.
I just did. I went to the Senator’s website and sent this below:
If fully implemented, Obamacare will add trillions of dollars in long-term government spending to a health care system that is already unaffordable. It also increases federal controls and mandates and will impose heavy costs on states, businesses, and households. As noted earlier, the Heritage plan repeals Obamacare and replaces it with the improved, consumer-centered health care system. While this proposal for maintaining sufficient levels of defense spending assumes that future military personnel will be brought under the broader proposals for health care and retirement reform outlined in this report, it also provides for tailored transition options for current military personnel and retirees. Importantly, reforms in compensation and benefits must maintain effective recruitment and retention of, and honor reasonable commitments to, members of the armed forces.
The war on terrorism has increased defense spending to approximately 5
percent of GDP, yet it remains well below the 9 percent spent during in the
1960s and the 6 percent spent during the 1980s. While the Heritage plan
recognizes that predicting precise funding requirements for overseas contingency operations is impossible, it is reasonable to expect that the phasedown in those efforts will permit reducing defense spending to approximately 4 percent of GDP and maintaining it at that level. Ultimately, of course, defense spending will have to be whatever it takes to protect America and its interests around the globe.
Funding an Adequate Defense. The most important core function of the
federal government is ensuring America’s national security, but it needs to be accomplished as economically and efficiently as possible. The Defense Department will focus on identifying and addressing its significant levels of wasteful spending and initiating significant reforms and efficiencies in logistics and acquisition processes so that those funds can be reprioritized into the most important uses to protect America and our allies by maintaining a strong, modern, and effective military.
Making Public Health Service Spending More Efficient. Public health
service spending has grown 56 percent faster than inflation since 2000. While health research is vital, the Heritage plan eliminates waste and inefficiencies that have accumulated. For example, by consolidating redundant facilities and laboratories, the Heritage plan saves the National Institutes of Health $1 billion annually. States take over the financing and operation of health centers, health professions programs, and the substance abuse block grant. The Centers for Disease Control and Prevention sees savings over $2 billion annually by reducing travel, ending questionable public campaigns, and focusing its role on interstate coordination. Finally, converting Indian Health Service aid into a
premium-support system (where possible) and reforming the Food and Drug Administration save a combined $1 billion annually.
Thus, all Americans will have access to financial aid in attending college,
but it will not be a free ride at the taxpayers’ expense.
However, thanks to a key provision in the Heritage plan’s tax reform, higher education costs are partially defrayed through the simplified and generous tax deduction for higher education tuition. Families whose incomes are too low for them to benefit fully from this tax deduction are eligible for a Pell Grant with a value up to the tax deduction. The direct student loan program is retained with loan limits high enough to guarantee college access but with rates set to ensure that there are no budgetary costs, including the costs associated with deferred repayment until graduation as well as the costs of loan forgiveness programs.
Higher education reforms, including the new deduction for college tuition in the Heritage tax reform, ensure that students receive enough financial
assistance to attend college. Shifting from grants to student loans ensures that most college costs will be financed by the college graduates themselves, who benefit the most from their degrees, and not by other Americans.
Scaling Back K–12 Education Spending and Reforming Higher Education
Spending. Federal spending on K–12 education has grown 192 percent faster than inflation since 2000, yet this sharply increased federal spending and federal micromanagement of school districts has not improved student performance. Under the Heritage plan, total federal K–12 spending is reduced to 2000 levels (adjusted for inflation), in part by eliminating many of the numerous small education programs that Washington uses to micromanage school districts. This will allow states and school districts to manage and meet the needs of their students more effectively.
Entitlements Will Consume All Tax Revenues by 2049
Medicare Spending Is Adding to Future Deficits Faster Than Other Program Spending
The Daily Hatch 