At last, after politicians and pundits continue to say that tax hikes 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 South Carolina’s Jim DeMint, would reduce federal spending by $2.5 trillion over 10 years. Coincidentally, on Wednesday the Congressional Budget Office came out with its new budget and economic outlook, projecting that the federal deficit for fiscal year 2011 will hit $1.5 trillion, a new high equivalent to 9.5 percent of GDP. That’s $400 billion more than CBO’s August estimate.
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 Barack Obama’s proposed spending cuts, announced in his State of the Union address on 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, environmental protection, but not for benefits such as food stamps, Social Security and Medicare. This would save $2.3 trillion in the years 2012-2021.
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.
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?
Jordan should be congratulated for identifying specific cuts, with more than 100 such programs slated for elimination or reduction.
The question is, will Republicans pass the bill through the House, 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.