Former House Majority Leader Dick Armey: Cut Federal Spending by Scrapping Federal Programs

Thursday January 20th, 2011   •   Posted by David Theroux at 10:13pm PDT   •  

In a January 19th article in the Wall Street Journal, “What Congress Should Cut,” former U.S. House Majority Leader Dick Armey and FreedomWorks President Matt Kibbe propose abolishing “the Departments of Commerce and Housing and Urban Development, end farm subsidies, and end urban mass transit grants, for starters.”

The primary economic challenge today is that our government spends too much money it doesn’t have, and it is involved in too many things it cannot do well and shouldn’t do at all. This burden is manifested by a $1.3 trillion annual deficit and a $14 trillion national debt. The more pernicious effects of this fiscal drag are unseen: a debased dollar, massive (and hidden) unfunded liabilities, and a crushing burden on would-be job creators.

Milton Friedman correctly argued in 1999 that the “real cost of government—the total tax burden—equals what government spends plus the cost to the public of complying with government mandates and regulations and of calculating, paying, and taking measures to avoid taxes.” He added, “Anything that reduces that real cost—lower government spending, elimination of costly regulations on individuals or businesses, simplification of explicit taxes—is a tax reform.”

Since 2007, Congress has been on an unprecedented spending binge. That means a first and obvious budget-cutting step would be to return discretionary spending to the baseline before things got so out of control. If Congress returned to the baseline before the supposedly “temporary” stimulus bill of 2009, $177 billion per year would be saved, according to calculations by FreedomWorks based on figures from the Office of Management and Budget and the Congressional Budget Office (CBO). If spending went back to the 2007 baseline, the beginning of the first Pelosi Congress, $374 billion would be saved. Over 10 years, that is $748 billion and $1.56 trillion in savings, respectively.

Repealing ObamaCare is another obvious source of reduced spending. The absurd claim that this government takeover of health care produces budget savings is based on budget gimmickry—such as assumed Medicare cuts that, according to estimates by the Centers for Medicare and Medicaid Services, would put 15% of our hospitals out of business, and thus will never happen. The claim also ignores the historically explosive growth in other similar programs. Medicare grew nine-fold larger than was projected during its first 25 years. In its first 10 years alone, the program experienced a 700% cost overrun.

But let’s for the moment accept CBO’s numbers on ObamaCare spending. They still mean that repealing the health-insurance exchanges and the premium subsidies, including the expansion of Medicaid, saves $898 billion over 10 years. Repealing the individual mandate alone—and thus reducing rather than eliminating these premium subsidies and Medicaid outlays—would cut $252 billion.

Still more savings can be realized by eliminating taxpayer-funded bailouts. We need to cut the cord between taxpayer wallets and Fannie Mae and Freddie Mac. As Alabama Rep. Spencer Bachus, the new chairman of the House Financial Services Committee, said last March of Fannie and Freddie, “Taxpayers have already contributed more than $127 billion to the bailout and they are on the hook for hundreds of billions more.” The CBO estimates that the cost to taxpayers could rise to $389 billion. Others estimate it will take around $1 trillion. Fannie and Freddie need to be broken up and returned to the private sector now. . . .

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January 2011
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