RSC in the News

RSC Proposal is a Reasonable Plan to Cut Spending

Diana Furchgott-Roth

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Washington Examiner, Jan 27, 2011 | comments
At last, after politicians and pundits continue to say that tax increases are the only way to deficit reduction, comes a bill to tackle government spending. The Spending Reduction Act of 2011, unveiled this week by Rep. Jim Jordan, R-Ohio, chairman of the Republican Study Group, and sponsored in the Senate by Sen. Jim DeMint, R-S.C., would reduce federal spending by $2.5 trillion over 10 years.

Coincidentally, on Wednesday, the Congressional Budget Office released its new budget and economic outlook, projecting that the federal deficit for fiscal 2011 will hit $1.5 trillion, a new high equivalent to 9.5 percent of GDP. That's $400 billion more than the CBO's August estimate.

The CBO estimated that if current policies continue, the national debt, the cumulative total of all past budget deficits, will be equal to 100 percent of GDP in 2021, up from about 90 percent in 2020 as projected last September.

Against these projections, President Obama's proposed spending cuts, announced in his State of the Union address Tuesday, are trivial. He proposes to freeze annual domestic (nondefense) spending for the next five years, reducing the deficit by $400 billion over 10 years. That's not enough.

How could Congress trim $2.5 trillion from the budget? Let us count the ways.

Jordan's bill would replace the spending levels for 2011 with spending at 2008 levels, for all lines in the budget except defense, homeland security and veterans, saving $80 billion this year.

Then, the bill would cancel unused spending authority in the 2009 stimulus bill, for a savings of $45 billion. The Republican proposal would privatize Fannie Mae and Freddie Mac, saving $30 billion more.

The largest saving comes from a 10-year freeze at 2006 spending levels for nondefense, discretionary budget programs -- agriculture, national parks, medical research, waterways and environmental protection, but not for benefits such as food stamps, Social Security or Medicare. This would save $2.3 trillion in the years 2012 to 2021.

Savings would come from cuts in the federal work force, both in numbers of workers hired and in pay, as has been suggested by New York University professor Paul Light. The work force would be reduced by 15 percent through attrition, with one worker hired for every two who quit or retire. Existing workers would not be given automatic annual pay increases.

Unlike Obama's plans to give 80 percent of Americans access to high-speed rail, the bill would cut, annually, $1.56 billion in subsidies for Amtrak, $2.5 billion for intercity and high-speed rail, and $2.5 billion for New Starts Transit. The federal civilian employee travel budget would be halved, saving $7.5 billion a year.

Many sacred cows would be eliminated. But who needs the Corporation for Public Broadcasting, with annual subsidies of $445 million, when we have a cornucopia of broadcast, cable and Internet offerings?

Why the National Endowments for the Arts and the Humanities (together, over $330 million annually in spending) when corporations and foundations sponsor art exhibits and concerts?

Why a Technology Innovation Program ($70 million a year) when Robert Nay, age 14, from Spanish Fork, Utah, has invented the physics game "Bubble Ball," topping the list of free iPhone apps?

International subsidies, such as the International Fund for Ireland and Economic Assistance to Egypt, get the hatchet, as well as contributions to the Organization for Economic Cooperation and Development and to the Intergovernmental Panel on Climate Change.

Jordan should be congratulated for identifying specific cuts, with more than 100 such programs slated for elimination or reduction.

The question is, will House Republicans pass the bill and will Congress and the president get serious about cutting the deficit? If even half of these proposed cuts went through, next year's CBO budget report would be happier reading.

Examiner Columnist Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute.

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