tangent4ronpaul
10-05-2010, 02:44 PM
http://reason.com/archives/2010/10/05/how-to-slash-the-state
14 ways to dismantle a monstrous government, one program at a time
From the November 2010 issue
Like sequels to Saw, the government just keeps coming, growing larger, more expensive, and more appalling each year. In times of economic distress, even at the increasing risk of default, the size, scope, and cost of federal, state, and local governments continue to balloon, swallowing everything in their path. For 10 solid years, and especially since September 2008, spending has boomed, the Federal Register has exploded, and Congress altered American life at an accelerating pace.
Yet loud critics of big government—especially but not only Republican politicians—are often reduced to an awkward stammer when put on the spot by the all-important question, “So what would you cut?” Well, stammer no more.
Consider the following a Halloween-themed cheat sheet for explaining who, what, where, when, and why whole swaths of government need to be cut or euthanized outright, so that taxpayer money is spent more productively, the remaining government services perform better, and the United States can finally begin its long slow climb toward solvency.
We’ve asked analysts from the nation’s capital and around the world to offer tips and tricks for fighting off the cold, cold monster that is the state. The suggestions below are intended not as a last word but as a starting point: As in any good slasher movie, the savvy viewer will soon see potential victims everywhere.
Overhaul Medicaid
Imagine a government-run health care program that limits medical access for millions of patients, is racked by uncontrollably rising costs, and in many instances produces health outcomes demonstrably worse than having no insurance at all. The program exists, and it’s called Medicaid.
Created to provide aid to the country’s poorest and sickest individuals, the joint federal-state program was initially intended as a low-cost bulwark against further government intervention in the health care system. In 1965, its first year in operation, the program cost about $9 billion in inflation-adjusted dollars. But instead of heading off further government intervention, it became the vehicle for much of the government’s expansion into the health care sector. Between 1970 and 2000, the program grew from $29 billion to $250 billion in 2010 dollars.
This year the Department of Health and Human Services expects the total cost of Medicaid to top half a trillion dollars. And according to the National Association of State Budget Officers, it will account for more than 20 percent of total state spending. Medicaid outspends all other welfare programs combined, and, if not for the Medicare prescription drug benefit, it would already be more expensive than any other entitlement.
What do we get for all that money? Not much. Recent studies at the University of Virginia, the University of Pennsylvania, and Columbia University and Cornell indicate that in cases involving colon cancer, vascular disease, and several other maladies, Medicaid’s health outcomes are frequently worse or no better than the outcomes for individuals who lack health insurance entirely. Yet 46 million Americans are enrolled in the program—a figure that is projected to increase by 16 million over the next decade, thanks to ObamaCare.
Shuttering the program remains politically infeasible, and ObamaCare’s reliance on Medicaid to expand health coverage has dimmed the prospects for reform. But states could opt out of the technically voluntary program, and the rapidly deteriorating fiscal outlook of both Medicaid and the country means an overhaul may become necessary long before politicians build up the courage to tackle it.
The first step is to stop the matching grant funding process, in which states receive federal money for each Medicaid dollar they spend—creating an incentive for ever greater spending. Instead, the program should be funded by federal block grants indexed to the rising cost of health care. Better yet, scrap the program entirely in favor of a temporary assistance program that doesn’t create long-term dependency. That may sound radical, but the alternative is to perpetuate the ugly and unsustainable status quo, in which we devote ever more resources to a program that fails both taxpayers and patients.—Peter Suderman
Bring the Troops Home
You can’t make a serious dent in government spending without tackling the military budget. And the quickest way to reduce Pentagon spending is to end, as fast as physically possible, our ongoing occupations of Iraq and Afghanistan.
So far those two wars have cost well over $1 trillion—on par with this year’s federal budget deficit—almost all of it spent through off-budget, fiscally reckless “emergency” supplemental bills that smuggled in all sorts of nonemergency weapons pork and social programs. And if the wars had never been fought we could have saved something more precious than taxpayer money—tens of thousands of human lives.
We don’t know how long the wars will last if we don’t withdraw now, so we can’t say for sure how much a swift and total deoccupation would save. President Barack Obama has promised a wind-down in Iraq that would reduce troop levels to 50,000 by 2011 and zero by 2012, but there are already signs the timetable will be pushed back. If Obama lived up to his plans, Brookings Institution analyst Michael O’Hanlon reckons, they probably would save “$50 billion to $70 billion in fiscal 2011 and perhaps $80 billion to $100 billion a year in 2012 and beyond.”
According to the government’s back-of-the-envelope numbers, deploying one warrior for one year costs about $1 million. Congressional Budget Office projections for the 2012–2020 costs of both wars range from $274 billion to $588 billion—and both estimates assume we will be winding down troop numbers significantly, which may or may not happen.
Even if we stop the wars now, the expense won’t stop. As National Bureau of Economic Research economist Ryan Edwards noted in a July study, “Historically, the peaks in total benefits [paid to war veterans] have lagged the end of hostilities by 30 years or more, meaning the maximum effect on annual budgets…might not be felt until 2040.” It’s too late to do anything about that for our thousands of already wounded vets and their families. Given the dubious benefits and indisputable costs of these continuing occupations, we should immediately stop adding to their ranks. —Brian Doherty
Erase Federal Education Spending
In August the Obama administration gave the states a $10 billion bailout to save teachers’ jobs —even though the Bureau of Labor Statistics indicates that teachers aren’t losing them. After 30 months of recession, local education employment has suffered less than a 1 percent decline. In fact, education hires rose in 21 states between 2009 and 2010. By contrast, the private sector saw a 6.8 percent decline in employment.
In addition, the president has proposed a $78 billion education budget for 2011, a whopping $18.6 billion more than in 2010. Federal education spending has increased by close to 80 percent in real terms since 2001, but test scores in reading and math among 17-year-olds have been flat since 1971, according to the National Assessment of Education Progress.
Politicians have talked for a long time about eliminating the Department of Education. While this remains an excellent idea, there is plenty of low-hanging fruit that can be plucked immediately.
The feds’ largest education program, Title I, which costs $16 billion a year, has failed to come anywhere close to its goal of helping disadvantaged kids in high-poverty schools close the achievement gap. Head Start, at $8 billion annually, duplicates many other federal, state, and local early education programs without adding to their effectiveness; a January 2010 gold-standard study by the Department of Health and Human Services found that by first grade not one of more than 114 academic and behavioral tests indicated a reliable, statistically significant effect from participating in Head Start. The $1.2 billion in funding for 21st Century Community Learning Centers that provide after-school care should be eliminated too. There are many duplicative after-school programs, and these are not a high priority to improve educational achievement.
The $2 billion for various “adult education” programs should also be cut. Community colleges can serve adult education needs and are already funded through Pell grants and federal student loans.
These are just a few examples; the federal education budget is full of cuttable programs. If eliminating the entire Department of Education is politically impossible, then the programs with the most tenuous relationships to raising student achievement need to be the first to go.—Lisa Snell
Slash State Budgets
As usual, governments have been slower to adjust to harsh economic realities than the rest of us. The private sector shed nearly 8.5 million jobs during the recession, while governments at all levels actually added more than 100,000 employees, as of December 2009. This growth ensures that state governments will be struggling to balance budgets long after any private-sector recovery is under way. And it means that they will continue to come begging to the federal government—and their own taxpayers—to cover the shortfall.
In a July report, the National Conference of State Legislators determined that the states face a collective budget gap of $84 billion for fiscal year 2011, with 24 states reporting deficits of at least 10 percent of their general fund budgets. In a June report, the National Governors Association and the National Association of State Budget Officers estimated that the cumulative state budget deficits for fiscal years 2009 through 2012 would be $297 billion. Only $169 billion of that sum has been processed to date, leaving at least $128 billion in deficits that must be tackled over the next couple of years. Yet despite a decline in federal stimulus funds and continued lagging revenues, governors’ recommended budgets for fiscal year 2011 forecast a 3.6 percent increase in general fund expenditures.
States blame the recession for their fiscal problems, and the economy certainly did not help matters, either in tax revenues or in demand for services. But the correction merely revealed that lawmakers have been living way beyond their means for far too long.
One useful metric of good fiscal stewardship is the comparison of spending growth to the increase in population plus the increase in the cost of living, as measured by the Consumer Price Index. During the comparative good times of 2000 to 2008 (the most recent date for which the necessary numbers are available), the national population increased 8 percent and CPI inflation rose 25 percent, for a baseline spending-growth number of 33 percent. Yet actual combined state spending skyrocketed 60 percent. Bringing annual spending increases down to the rate of inflation plus population growth is a minimal first step, although that probably will be impossible without defusing the public pension bomb.—Adam B. Summers
End Defined-Benefit Pensions
The funding shortfall of public employee pensions at the state and local level exceeds $500 billion. Annual pension contribution costs have grown exponentially in the last decade from coast to coast. There is a simple way out of this government-manufactured mess: bankruptcy. As the city of Vallejo, California, discovered in 2009, bankruptcy protection can provide an avenue for governments to renege on their crushing pension commitments.
Unfortunately, the bankruptcy option is available only to cities and counties, not states or the federal government. And public employee unions in California and elsewhere are working time-and-a-half to change bankruptcy laws to stop future Vallejos from declaring insolvency, or at least to rig the settlement terms to labor’s benefit.
So what are the realistic solutions? California gubernatorial candidate Meg Whitman has a good idea: end defined-benefit contributions—in which taxpayers, rather than the employees, fund retirement plans—for all new government hires. Instead, public servants of the future should be put into 401(k) plans like the rest of us, with responsibility to contribute to and manage their own retirement nest eggs.
What about existing employees? The payouts contractually promised to employees at the time of hiring are devilishly hard to roll back. But there is wiggle room at the front end, with the option of requiring public workers to fund more of their own accounts. This doesn’t get governments to parity with the private sector, where defined-benefit plans are all but extinct. But it takes some of the immediate pressure off taxpayers. As the American people grow increasingly angry at gilded public-sector compensation, California Gov. Arnold Schwarzenegger succeeded in getting a handful of unions to accept increases in the percentage that employees contribute to their own plans, and similar proposals are gaining a foothold around the country.
Neither of these solutions will solve the looming shortfall, which ultimately will be filled in with taxpayer bucks. But they are steps toward bringing the era of defined-benefit pensions to an end.—Tim Cavanaugh
Declare Defeat in the Drug War
As Sting recently observed, channeling John Stuart Mill, the war on drugs by its very nature tramples on “the right to sovereignty over one’s own mind and body.” It also squanders taxpayer money while causing far more harm than it prevents.
To enforce drug prohibition, state and federal agencies spend more than $40 billion and make 1.7 million arrests every year. This effort wastes resources that could be used to fight predatory crime. But the direct taxpayer costs are only part of the story. While imprisoned (as half a million of them currently are), drug offenders cannot earn money or care for their families, which boosts child welfare costs. After they are released, they earn less than they otherwise could have—roughly $100,000 less over the course of their working lives, according to Harvard sociologist Bruce Western. These losses add billions more to the annual drug war tab.
The Office of National Drug Control Policy estimated that Americans spent $65 billion on illegal drugs in 2000, the equivalent of more than $80 billion today. Comparisons between legal and illegal drugs suggest that as much as 90 percent of that spending is attributable to prohibition’s impact on drug prices, meaning that legalization would make tens of billions of dollars available for other purposes each year. Some of those savings probably would be sucked up by drug taxes, which Harvard economist Jeffrey Miron estimates could generate nearly $50 billion a year in government revenue.
Lower prices also would dramatically reduce the incentive for heavy users to finance their habits through theft. In a 1991 survey, 10 percent of federal prisoners and 17 percent of state prisoners reported committing such crimes. Since stolen goods are sold at a steep discount, the value of the property taken to pay for drugs is several times higher than the artificially inflated cost of drugs.
Other problems associated with prohibition are harder to quantify in dollars, including official corruption, the erosion of Fourth Amendment rights and other civil liberties, interference with religious rituals and medical practice, terrorism subsidized by drug profits, deaths and injuries from tainted or unexpectedly strong drugs, and the prohibition-related violence that has claimed 28,000 lives in Mexico since 2006. The pervasive demands of the futile crusade against an arbitrarily selected set of intoxicants have made all of us, whatever our taste in psychoactive substances, less free, less wealthy, and less safe.—Jacob Sullum
14 ways to dismantle a monstrous government, one program at a time
From the November 2010 issue
Like sequels to Saw, the government just keeps coming, growing larger, more expensive, and more appalling each year. In times of economic distress, even at the increasing risk of default, the size, scope, and cost of federal, state, and local governments continue to balloon, swallowing everything in their path. For 10 solid years, and especially since September 2008, spending has boomed, the Federal Register has exploded, and Congress altered American life at an accelerating pace.
Yet loud critics of big government—especially but not only Republican politicians—are often reduced to an awkward stammer when put on the spot by the all-important question, “So what would you cut?” Well, stammer no more.
Consider the following a Halloween-themed cheat sheet for explaining who, what, where, when, and why whole swaths of government need to be cut or euthanized outright, so that taxpayer money is spent more productively, the remaining government services perform better, and the United States can finally begin its long slow climb toward solvency.
We’ve asked analysts from the nation’s capital and around the world to offer tips and tricks for fighting off the cold, cold monster that is the state. The suggestions below are intended not as a last word but as a starting point: As in any good slasher movie, the savvy viewer will soon see potential victims everywhere.
Overhaul Medicaid
Imagine a government-run health care program that limits medical access for millions of patients, is racked by uncontrollably rising costs, and in many instances produces health outcomes demonstrably worse than having no insurance at all. The program exists, and it’s called Medicaid.
Created to provide aid to the country’s poorest and sickest individuals, the joint federal-state program was initially intended as a low-cost bulwark against further government intervention in the health care system. In 1965, its first year in operation, the program cost about $9 billion in inflation-adjusted dollars. But instead of heading off further government intervention, it became the vehicle for much of the government’s expansion into the health care sector. Between 1970 and 2000, the program grew from $29 billion to $250 billion in 2010 dollars.
This year the Department of Health and Human Services expects the total cost of Medicaid to top half a trillion dollars. And according to the National Association of State Budget Officers, it will account for more than 20 percent of total state spending. Medicaid outspends all other welfare programs combined, and, if not for the Medicare prescription drug benefit, it would already be more expensive than any other entitlement.
What do we get for all that money? Not much. Recent studies at the University of Virginia, the University of Pennsylvania, and Columbia University and Cornell indicate that in cases involving colon cancer, vascular disease, and several other maladies, Medicaid’s health outcomes are frequently worse or no better than the outcomes for individuals who lack health insurance entirely. Yet 46 million Americans are enrolled in the program—a figure that is projected to increase by 16 million over the next decade, thanks to ObamaCare.
Shuttering the program remains politically infeasible, and ObamaCare’s reliance on Medicaid to expand health coverage has dimmed the prospects for reform. But states could opt out of the technically voluntary program, and the rapidly deteriorating fiscal outlook of both Medicaid and the country means an overhaul may become necessary long before politicians build up the courage to tackle it.
The first step is to stop the matching grant funding process, in which states receive federal money for each Medicaid dollar they spend—creating an incentive for ever greater spending. Instead, the program should be funded by federal block grants indexed to the rising cost of health care. Better yet, scrap the program entirely in favor of a temporary assistance program that doesn’t create long-term dependency. That may sound radical, but the alternative is to perpetuate the ugly and unsustainable status quo, in which we devote ever more resources to a program that fails both taxpayers and patients.—Peter Suderman
Bring the Troops Home
You can’t make a serious dent in government spending without tackling the military budget. And the quickest way to reduce Pentagon spending is to end, as fast as physically possible, our ongoing occupations of Iraq and Afghanistan.
So far those two wars have cost well over $1 trillion—on par with this year’s federal budget deficit—almost all of it spent through off-budget, fiscally reckless “emergency” supplemental bills that smuggled in all sorts of nonemergency weapons pork and social programs. And if the wars had never been fought we could have saved something more precious than taxpayer money—tens of thousands of human lives.
We don’t know how long the wars will last if we don’t withdraw now, so we can’t say for sure how much a swift and total deoccupation would save. President Barack Obama has promised a wind-down in Iraq that would reduce troop levels to 50,000 by 2011 and zero by 2012, but there are already signs the timetable will be pushed back. If Obama lived up to his plans, Brookings Institution analyst Michael O’Hanlon reckons, they probably would save “$50 billion to $70 billion in fiscal 2011 and perhaps $80 billion to $100 billion a year in 2012 and beyond.”
According to the government’s back-of-the-envelope numbers, deploying one warrior for one year costs about $1 million. Congressional Budget Office projections for the 2012–2020 costs of both wars range from $274 billion to $588 billion—and both estimates assume we will be winding down troop numbers significantly, which may or may not happen.
Even if we stop the wars now, the expense won’t stop. As National Bureau of Economic Research economist Ryan Edwards noted in a July study, “Historically, the peaks in total benefits [paid to war veterans] have lagged the end of hostilities by 30 years or more, meaning the maximum effect on annual budgets…might not be felt until 2040.” It’s too late to do anything about that for our thousands of already wounded vets and their families. Given the dubious benefits and indisputable costs of these continuing occupations, we should immediately stop adding to their ranks. —Brian Doherty
Erase Federal Education Spending
In August the Obama administration gave the states a $10 billion bailout to save teachers’ jobs —even though the Bureau of Labor Statistics indicates that teachers aren’t losing them. After 30 months of recession, local education employment has suffered less than a 1 percent decline. In fact, education hires rose in 21 states between 2009 and 2010. By contrast, the private sector saw a 6.8 percent decline in employment.
In addition, the president has proposed a $78 billion education budget for 2011, a whopping $18.6 billion more than in 2010. Federal education spending has increased by close to 80 percent in real terms since 2001, but test scores in reading and math among 17-year-olds have been flat since 1971, according to the National Assessment of Education Progress.
Politicians have talked for a long time about eliminating the Department of Education. While this remains an excellent idea, there is plenty of low-hanging fruit that can be plucked immediately.
The feds’ largest education program, Title I, which costs $16 billion a year, has failed to come anywhere close to its goal of helping disadvantaged kids in high-poverty schools close the achievement gap. Head Start, at $8 billion annually, duplicates many other federal, state, and local early education programs without adding to their effectiveness; a January 2010 gold-standard study by the Department of Health and Human Services found that by first grade not one of more than 114 academic and behavioral tests indicated a reliable, statistically significant effect from participating in Head Start. The $1.2 billion in funding for 21st Century Community Learning Centers that provide after-school care should be eliminated too. There are many duplicative after-school programs, and these are not a high priority to improve educational achievement.
The $2 billion for various “adult education” programs should also be cut. Community colleges can serve adult education needs and are already funded through Pell grants and federal student loans.
These are just a few examples; the federal education budget is full of cuttable programs. If eliminating the entire Department of Education is politically impossible, then the programs with the most tenuous relationships to raising student achievement need to be the first to go.—Lisa Snell
Slash State Budgets
As usual, governments have been slower to adjust to harsh economic realities than the rest of us. The private sector shed nearly 8.5 million jobs during the recession, while governments at all levels actually added more than 100,000 employees, as of December 2009. This growth ensures that state governments will be struggling to balance budgets long after any private-sector recovery is under way. And it means that they will continue to come begging to the federal government—and their own taxpayers—to cover the shortfall.
In a July report, the National Conference of State Legislators determined that the states face a collective budget gap of $84 billion for fiscal year 2011, with 24 states reporting deficits of at least 10 percent of their general fund budgets. In a June report, the National Governors Association and the National Association of State Budget Officers estimated that the cumulative state budget deficits for fiscal years 2009 through 2012 would be $297 billion. Only $169 billion of that sum has been processed to date, leaving at least $128 billion in deficits that must be tackled over the next couple of years. Yet despite a decline in federal stimulus funds and continued lagging revenues, governors’ recommended budgets for fiscal year 2011 forecast a 3.6 percent increase in general fund expenditures.
States blame the recession for their fiscal problems, and the economy certainly did not help matters, either in tax revenues or in demand for services. But the correction merely revealed that lawmakers have been living way beyond their means for far too long.
One useful metric of good fiscal stewardship is the comparison of spending growth to the increase in population plus the increase in the cost of living, as measured by the Consumer Price Index. During the comparative good times of 2000 to 2008 (the most recent date for which the necessary numbers are available), the national population increased 8 percent and CPI inflation rose 25 percent, for a baseline spending-growth number of 33 percent. Yet actual combined state spending skyrocketed 60 percent. Bringing annual spending increases down to the rate of inflation plus population growth is a minimal first step, although that probably will be impossible without defusing the public pension bomb.—Adam B. Summers
End Defined-Benefit Pensions
The funding shortfall of public employee pensions at the state and local level exceeds $500 billion. Annual pension contribution costs have grown exponentially in the last decade from coast to coast. There is a simple way out of this government-manufactured mess: bankruptcy. As the city of Vallejo, California, discovered in 2009, bankruptcy protection can provide an avenue for governments to renege on their crushing pension commitments.
Unfortunately, the bankruptcy option is available only to cities and counties, not states or the federal government. And public employee unions in California and elsewhere are working time-and-a-half to change bankruptcy laws to stop future Vallejos from declaring insolvency, or at least to rig the settlement terms to labor’s benefit.
So what are the realistic solutions? California gubernatorial candidate Meg Whitman has a good idea: end defined-benefit contributions—in which taxpayers, rather than the employees, fund retirement plans—for all new government hires. Instead, public servants of the future should be put into 401(k) plans like the rest of us, with responsibility to contribute to and manage their own retirement nest eggs.
What about existing employees? The payouts contractually promised to employees at the time of hiring are devilishly hard to roll back. But there is wiggle room at the front end, with the option of requiring public workers to fund more of their own accounts. This doesn’t get governments to parity with the private sector, where defined-benefit plans are all but extinct. But it takes some of the immediate pressure off taxpayers. As the American people grow increasingly angry at gilded public-sector compensation, California Gov. Arnold Schwarzenegger succeeded in getting a handful of unions to accept increases in the percentage that employees contribute to their own plans, and similar proposals are gaining a foothold around the country.
Neither of these solutions will solve the looming shortfall, which ultimately will be filled in with taxpayer bucks. But they are steps toward bringing the era of defined-benefit pensions to an end.—Tim Cavanaugh
Declare Defeat in the Drug War
As Sting recently observed, channeling John Stuart Mill, the war on drugs by its very nature tramples on “the right to sovereignty over one’s own mind and body.” It also squanders taxpayer money while causing far more harm than it prevents.
To enforce drug prohibition, state and federal agencies spend more than $40 billion and make 1.7 million arrests every year. This effort wastes resources that could be used to fight predatory crime. But the direct taxpayer costs are only part of the story. While imprisoned (as half a million of them currently are), drug offenders cannot earn money or care for their families, which boosts child welfare costs. After they are released, they earn less than they otherwise could have—roughly $100,000 less over the course of their working lives, according to Harvard sociologist Bruce Western. These losses add billions more to the annual drug war tab.
The Office of National Drug Control Policy estimated that Americans spent $65 billion on illegal drugs in 2000, the equivalent of more than $80 billion today. Comparisons between legal and illegal drugs suggest that as much as 90 percent of that spending is attributable to prohibition’s impact on drug prices, meaning that legalization would make tens of billions of dollars available for other purposes each year. Some of those savings probably would be sucked up by drug taxes, which Harvard economist Jeffrey Miron estimates could generate nearly $50 billion a year in government revenue.
Lower prices also would dramatically reduce the incentive for heavy users to finance their habits through theft. In a 1991 survey, 10 percent of federal prisoners and 17 percent of state prisoners reported committing such crimes. Since stolen goods are sold at a steep discount, the value of the property taken to pay for drugs is several times higher than the artificially inflated cost of drugs.
Other problems associated with prohibition are harder to quantify in dollars, including official corruption, the erosion of Fourth Amendment rights and other civil liberties, interference with religious rituals and medical practice, terrorism subsidized by drug profits, deaths and injuries from tainted or unexpectedly strong drugs, and the prohibition-related violence that has claimed 28,000 lives in Mexico since 2006. The pervasive demands of the futile crusade against an arbitrarily selected set of intoxicants have made all of us, whatever our taste in psychoactive substances, less free, less wealthy, and less safe.—Jacob Sullum