How Not to Cut Federal Spending
Former congressman, governor of Indiana, and vice president Michael “Mike” Pence is struggling to regain relevancy. He is probably the most prominent Republican in the country to not endorse his former boss Donald Trump for president, after dropping out of the 2024 Republican presidential race before a single caucus or primary took place. Pence said he had not spoken to Trump “for a long time” and said in a recent interview: “The role I want to play is to be a champion for a broad, mainstream conservative agenda that’s defined the Republican Party since the days of Ronald Reagan. I see some evidence that some voices in and around our party are departing from that — I want my voice, my organization, to be an anchor to windward.”
Pence’s organization is Advancing American Freedom (AAF), “a 501(c)(4) organization advocating for Conservative values and policy proposals.” AAF
promotes and defends the successful policies of recent years that yielded unprecedented prosperity at home and restored America’s strength abroad, while elevating traditional American values. AAF serves the Conservative Movement by developing innovative policy solutions, strategies, coalitions, and messaging that builds upon those accomplishments, expands freedom for all Americans, and hampers anything that would threaten America’s standing as the greatest nation on the face of the Earth.
It is “conservative values that have made our country great.” But these values “are under attack by the radical Left and liberal media,” hence the need for AAF.
The AAF website promotes Pence as a stalwart conservative:
On Capitol Hill he established himself as a champion of limited government, fiscal responsibility, economic development, educational opportunity, and the U.S. Constitution. His colleagues quickly recognized his leadership ability and unanimously elected him to serve as Chairman of the House Republican Study Committee and House Republican Conference Chairman. In this role, the Vice President helped make government smaller and more effective, reduce spending, and return power to state and local governments.
Yet, according to “The Freedom Index: A Congressional Scorecard Based on the U.S. Constitution,” a scorecard published by The New American magazine that “rates congressmen based on their adherence to constitutional principles of limited government, fiscal responsibility, national sovereignty, and a traditional foreign policy of avoiding foreign entanglements,” Pence has a pathetic lifetime score of just 62 percent based on his time in the U.S. House of Representatives during the 107th Congress (2001–2002) to the 112th Congress (2011–2012).
Another conservative guide
For many years now, we have been inundated with guides issued by conservative think tanks offering proposals to balance the federal budget, eliminate government waste, reduce government spending, limit the growth of government, shrink the national debt, and cut taxes. In 2023, the American Enterprise Institute (AEI) issued American Renewal: A Conservative Plan to Save the Nation’s Finances and Strengthen the Social Contract. It was a proposal for a conservative cradle-to-grave welfare state beginning with a national paid family leave policy and ending with a minimum benefit for Social Security. In 2022, the Heritage Foundation issued Budget Blueprint for Fiscal Year 2023. It turned out to be a budget blueprint for the welfare/warfare state that “strengthens Social Security” and “modernizes Medicare” while increasing defense spending every year to over $1 trillion by 2032.
The AAF’s conservative guide is titled Confronting Our Debt Crisis: A Guide to Cutting Federal Spending. It correctly recognizes America’s debt problem and its cause:
By 2034, interest on our debt alone will account for roughly one-sixth of all federal spending.
After decades of ignoring the significance of profligate federal spending, the consequences are finally starting to catch up to us. As has been the case, the problem is not a lack of revenue, but rather a lack of willingness to make hard choices to rein in spending and have the courage to say ‘no’ to wasteful programs.
A sustainable federal budget is impossible to achieve without addressing the root cause of our spiraling debt and deficit: unchecked spending.
America faces a bleak future as interest payments crowd out spending on basic government functions, our economy stagnates under the drag of an unsustainable burden, and we’re put at a strategic disadvantage internationally. Those problems will only compound on themselves the longer we fail to address the drivers of our debt and cut spending, including mandatory, discretionary, and tax expenditures.
AAF “believes it is critical to name and explain specific spending cuts.” AAF “will continue to lead the way by identifying credible ways to reduce U.S. debt.”
The spending cuts
To guide Congress “to reduce or eliminate spending on unnecessary government programs” and “help Congress make those reforms,” AAF has put forth a “living tracker of spending cuts that could save America.” The spending cuts are organized under three headings: Reducing Mandatory Spending, Eliminating Tax Expenditures, Discretionary Spending Reforms and Cuts.
Mandatory spending, which accounts for about two-thirds of the federal budget, refers to the portion of the budget that Congress legislates outside of the annual appropriations process. Mandatory spending includes spending on Social Security, Medicare, Medicaid, welfare, subsidies, food stamps, unemployment benefits, and refundable tax credits like the Earned Income Tax Credit (EITC) and the Obamacare Premium Tax Credit (PTC). Confronting Our Debt Crisis correctly says that “because mandatory spending is not subject to annual review, it often includes rampant waste, fraud, and abuse,” and may include programs that “benefit the wealthy or people who can work and do not need government assistance.” Out of the “literally hundreds of policy options to reduce mandatory spending in responsible ways that will not put vulnerable Americans at risk,” Confronting Our Debt Crisis provides a “non-exhaustive list of options,” including:
- Institute better work requirements
- Stop Medicare overpayments
- Stop student loan cancellation
- Reduce agricultural subsidies
- Means-test Social Security COLAs
- Stop means-tested benefits for illegal immigrants
- Let ACA subsidies expire for the wealthy
(The ACA is the Affordable Care Act, otherwise known as Obamacare.)
Tax expenditures, as defined by the Congressional Budget Act of 1974, are “revenue losses attributable to provisions of the Federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability.” According to Confronting Our Debt Crisis: “Not only are these tax provisions costly to taxpayers, but they distort the tax code by picking winners and losers based on behavior or characteristic.” The deduction for state and local taxes (SALT), “which allows residents of high-tax states to write off the first $10,000 of state and local taxes paid from their federal taxable income,” is singled out as one of the worst tax expenditures because it “incentivizes those states to keep their own taxes high.” Confronting Our Debt Crisis provides “an outline of some of the largest corporate tax expenditures,” including:
- Energy Production Credit
- Energy Investment Credit
- Clean Fuel Production Credit
- Clean Hydrogen Production Credit
- Advanced Manufacturing Production Credit
- Advanced Manufacturing Investment Credit
- Credit for Low-Income Housing Investments
Individuals can also receive a tax credit if they purchase a qualifying electric vehicle.
Discretionary spending, which accounts for about one-third of the federal budget, refers to the portion of the budget that is decided by Congress through the annual appropriations process. Discretionary spending includes spending on the military, education, NASA, foreign aid, job training, and Head Start, as well as scientific research grants, and the Women, Infants, and Children (WIC) program. Confronting Our Debt Crisis correctly says that “many discretionary programs are wasteful, duplicative, or unnecessary and should be eliminated.” Lawmakers “should use the appropriations process to end wasteful agency spending, reform the process, and slash ineffective or politicized programs.” Confronting Our Debt Crisis provides numerous “suggestions” on where Congress should start, including:
- Freeze nondefense spending
- End earmarks
- Rescind additional IRS funding
- Rescind COVID money
- Rescind Amtrak windfall
- Cut politicized agencies
- Zero out programs
- Defund DEI
(DEI refers to diversity, equity, and inclusion antidiscrimination policies.) Some of the programs suggested to zero out include the Export-Import Bank, the National Endowment for the Arts (NEA), and Appalachian Regional Commission.
How not to cut spending
On the surface, Confronting Our Debt Crisis seems to provide some good guidance to cutting federal spending. People should be required to work or be looking for a job as a prerequisite to receiving welfare benefits. Medicare overpayments should be stopped. Student loans should not be cancelled. Agricultural subsidies should be reduced. Social Security COLAs should be means-tested. Illegal immigrants should not receive welfare benefits. ACA subsidies should be allowed to expire. Nondefense spending should be frozen. Earmarks should be ended. Additional IRS funding, COVID money, and additional Amtrak subsidies should be rescinded. Politicized agencies should have their funding cut. Federal funding for DEI programs should be prohibited. Many discretionary programs should be zeroed out.
Yet, Confronting Our Debt Crisis is a lesson in how not to cut federal spending.
First of all, the proposed cuts are miniscule when you are talking about a federal budget that now exceeds $7 trillion each fiscal year — an amount greater than the combined budgets of all 50 states — and a budget deficit that is on track to top $2 trillion a year.
Second, the largest items in the federal budget are Social Security, Medicare, Medicaid, the military, and interest on the national debt. Confronting Our Debt Crisis lacks the willingness to make the real “hard choices to rein in spending” by proposing cuts to Social Security, Medicare, Medicaid, and military spending. In fact, when it comes to military spending, AAF calls for “continued rebuilding of the American military and a growing role for the new branch of the Armed Forces, the Space Force, to protect American interests in space.”
Third, Confronting Our Debt Crisis advocates reforms, reallocations, and reductions instead of repeals and eliminations. Instead of just increasing welfare work requirements, why not eliminate welfare? Instead of just letting ACA subsidies expire, why not repeal the ACA? Instead of just reducing agricultural subsidies, why not eliminate the Department of Agriculture? Instead of just stopping student loan cancellations, why not eliminate the Department of Education? Instead of just freezing nondefense spending, why not freeze defense spending? Instead of just rescinding additional Amtrak subsidies, why not eliminate Amtrak? Instead of just reducing the budget of politicized agencies, why not eliminate the agencies?
Even when Confronting Our Debt Crisis calls for eliminating something, it is not really saying that something should be eliminated. For example, Confronting Our Debt Crisis calls for the elimination of the Environmental Protection Agency, but also wants to “shift its authorities to other relevant agencies.” The problem with Confronting Our Debt Crisis is not that “it does not call for some of the reforms (such as block-granting Medicaid and modernizing Medicare to be
a choice-based, premium-support system) that made the Ryan budgets so impressive,” as one prominent libertarian said about it.
And fourth, the one thing that Confronting Our Debt Crisis actually wants to eliminate is not a government spending program at all. Tax expenditures are misnamed. Tax expenditures may take the form of credits, deductions, exceptions, allowances, exclusions, exemptions, preferential tax rates, or deferral of tax liability. They reduce the income tax liabilities of individuals or businesses that undertake certain activities.
Tax expenditures are not expenditures, subsidies, outlays, spending programs, or transfer payments. Rather, they simply allow Americans to keep more of their money in their pockets and out of the hands of Uncle Sam. Eliminating tax expenditures gives the federal government more money to spend, which means that their elimination is a form of raising taxes. No conservative guide to reducing or eliminating “spending on unnecessary government programs” should advocate raising taxes by any means.
How to cut spending
So, if Confronting Our Debt Crisis is a lesson in how not to cut federal spending, if the miniscule spending cuts it proposes won’t “save America” or “safeguard the American Dream,” if it lacks the willingness to make the real “hard choices to rein in spending,” and if it does not have the courage to say “no” to the most “wasteful programs,” then what is there to guide us to actually balance the federal budget, eliminate government waste, reduce government spending, limit the growth of government, shrink the national debt, and cut taxes?
Democrats and progressives have no such plan, have never had any such plan, and are never going to issue any such plan. In fact, they want to do the very opposite of most of these things. Republicans and conservatives say they know what the problem is and have issued plenty of plans to, they think, fix the problem, but in the end, their plans always maintain the welfare state, increase the warfare state, and kick the can down the road by promising to balance the budget in 10 years.
No new plan needs to be written to guide members of Congress “to reduce or eliminate spending on unnecessary government programs” and “help Congress make those reforms.” There was a plan written over 235 years ago, and it is still relevant today. It is called the Constitution. It was drafted in 1787, ratified in 1788, and took effect in 1789. It established the United States as a federal system of government where the states, through the Constitution, granted a limited number of powers to a central government. As James Madison, the father of the Constitution, so eloquently explained in Federalist No. 45,
The powers delegated by the proposed Constitution to the Federal Government, are few and defined. Those which are to remain in the State Governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce; with which last the power of taxation will for the most part be connected. The powers reserved to the several States will extend to all the objects, which, in the ordinary course of affairs, concern the lives, liberties and properties of the people; and the internal order, improvement, and prosperity of the State.
There are about 30 enumerated congressional powers listed through- out the Constitution, most of which are found in the 18 paragraphs of Article I, Section 8. The Bill of Rights (the first 10 amendments to the Constitution) was added to the Constitution in 1791. The first eight amendments protect civil liberties and fundamental rights against federal encroachment. The ninth and tenth amendments make it clear that all rights and powers not delegated to the federal government are retained by the people and the states.
Yet, the Constitution is nowhere mentioned in Confronting Our Debt Crisis, and neither are the concepts of federalism or the proper role of government. There is, in fact, no foundation or basis in Confronting Our Debt Crisis for saying that any particular federal spending, program, or agency should be cut other than if something is “wasteful, duplicative, or unnecessary.”
Now, I would be among the first to agree that the Constitution is an imperfect document. Not only does it contain ambiguous clauses (general welfare, commerce, necessary and proper) that are still argued over, it also increased the power of the national government, countenanced slavery, assumed the right of eminent domain, and allowed for federal taxation. But regardless of any issues that libertarians may have with the Constitution, it is the supreme law of the land that members of Congress are supposed to support, defend, and bear faith and allegiance to.
The Constitution nowhere authorizes the federal government to have anything to do with education, health care, insurance, agriculture, labor, discrimination, welfare, drugs, food, drink, retirement, disability, housing, poverty, school lunches, foreign aid, gun control, broadcasting, aviation, exploration, science, the arts, or culture. Letting the Constitution be our guide immediately — not in 10 years — shrinks the federal government by 90 percent.
Limiting the federal government to what it is authorized by the Constitution is the only way to institute “spending cuts that could save America.”
This article was originally published in the December 2024 issue of Future of Freedom.
The post How Not to Cut Federal Spending appeared first on The Future of Freedom Foundation.
