Why then has federal spending as a percentage of national income increased from 19 percent in 2000 to 23 percent in 2006 while Republicans controlled the House, Senate and presidency? And this after federal spending as a percentage of national income had fallen from 23 percent to 19 percent from 1992 to 2000 — with Bill Clinton facing a Republican Congress? Three reasons:
(1) The modern conservative movement consists of the “leave us alone coalition” of groups where regarding their primary, vote-moving issue, what they want from the government is to be left alone. This includes gun owners, small businessmen, taxpayers, property owners and homeschoolers.
Raise taxes as President Bush the elder did and taxpayers leave the room. Challenge gun rights and National Rifle Association (NRA) members leave the room. But no constituency walks out of the room when government spending creeps too high. The moving parts of the conservative movement all grumble. They would all like less spending. But there is no organized anti-spending NRA equivalent. Thus overspending is the issue that gets ignored.
(2) This administration has targeted the wrong metric by announcing its goal is to “cut the deficit in half.” The real measure of success is reducing spending as a percentage of the economy. This can be done by slowing spending growth and by having pro-growth tax cuts (like cutting capital taxes) create a larger economy. Both are issues conservatives dominate: spending cuts and pro-growth tax cuts. Focusing on the deficit suggests tax cuts are part of the problem, not part of the solution. And tax increases are the economic equivalent of spending cuts if you are targeting the deficit.
(3) Finally, it is politically difficult to “cut” the budget. Even reducing the growth of spending in Washington is considered a “cut.”
Within this context, there are three major areas of government spending for our federal, state and local governments. The first area of reform is retirement security such as Social Security, and federal, state and local government worker pensions. The second area of reform is health-care costs, such as Medicaid, Medicare and Veterans Affairs hospitals. And the third reform is education, K-12 and state universities. One never cuts education, pensions or health care.
The solution to the spending problem is to replace politically suicidal, or at best difficult, efforts to “cut” spending with politically profitable “reforms” of programs that will reduce their long-term costs.
The best example of this is “privatizing” or “personalizing” Social Security, moving the system from the pay-as-you-go, unfunded, Ponzi scheme to a fully funded, independently held personal savings account system. When fully phased in every American will be required to save, say, 10 percent of their income and accumulate real resources to buy an annuity at retirement that will keep one out of poverty and allow one to keep all savings beyond that minimum to be spent as one wishes. Social Security can be reformed to cost not its present 20 percent of the federal budget but rather remove it from the budget.
Medicare can be similarly financed through allowing Americans to save their Medicare tax payments. Health savings accounts can give Medicare and Medicaid programs real competitive pressures to reduce costs without voting for any “cuts.”
On education, the only reform worth enacting is real parental school choice. With private schools costing half of what government schools cost, public schools over time will have to become as cost-efficient and effective as private schools.
Pipe dream? No. We are on track to make all three key reforms a reality in the next decade.
The case for Social Security reform is politically strengthened as more and more Americans own shares of stock directly through mutual funds, individual retirement accounts and 401(k)s. When Ronald Reagan was elected, only 17 percent of adults owned stock directly. Today more than 50 percent of households and 2 out of 3 voters in the 2004 election do so. That number grows as all new companies use defined contribution retirement systems rather than defined benefit plans. And the old-line defined-benefit plans are ebbing in the airline, auto and steel industries. Even government pensions are moving to defined contribution plans in a number of states. Eight of the last 10 changes to state pension plans over the last decade have been toward defined contribution.
Health Savings Accounts have jumped from 1 million in 2004 to 3 million in 2005 and Forrester Research predicts 24 percent of all Americans will be covered by a consumer health plan by 2010.
Education choice is within spitting distance in New Hampshire, Florida, Texas, Wisconsin and steps have been made in Pennsylvania, Arizona and Minnesota. A breakthrough in one or two states is the breach of the dam we need. Scare tactics against school choice (they will sell your kids to the Arabs or harvest their organs) will fall apart with a major state’s experience for all to see.
Other reforms with real savings include expanding competitive sourcing where the private sector competes regularly to provide services now done by 800,000 government employees whose work can be found in the Yellow Pages — food services, lawn care, fixing eyeglasses, etc.
Cutting small spending programs like the National Endowment for the Arts is satisfying. But real reduction in the cost and scope of government flows from reforming government spending toward zero rather than nicking it.
”’Grover Norquist is president of Americans for Tax Reform. This commentary was adapted from an article in the Reason Foundation’s Annual Privatization Report released this week. This is reprinted from the Washington Times”’