Sunday, March 20, 2011

Reducing spending should be Congress' top priority

Published in The Tennessean, Sunday, March 20, 2011

Reducing spending should be Congress' top priority

by Richard J. Grant

The continuing resolution just passed by Congress and signed by President Barack Obama will keep the federal government funded for another three weeks. It will also cut planned spending by $6 billion. But during the previous three weeks the national debt increased by more than $109 billion.

At this rate of $6 billion every three weeks, it will take 825 weeks to reduce spending sufficiently to eliminate the deficit. That is 16 years. An increase in tax revenue will shorten the time, but if there is increased spending within entitlement programs, such as Social Security, Medicare and Medicaid, then it will take much longer. Expect entitlement spending to grow faster than revenue.

House Republicans had originally proposed cutting about $100 billion, but Democrats control the Senate and seem to believe that cutting even $6 billion is too much. This means that the national debt and our interest burden will continue to rise rapidly until voters stop it.

If Republicans propose a spending bill that appropriates $100 billion less than that requested in the president's budget, this does not "shut down'' the government. Previous administrations have functioned better on less. Voters should be intelligent enough to see that if Democrats refuse to make a reasonable deal, then they are in no way absolved from blame for the resulting government shutdown.

Given the high budget deficit, projected to be $1.65 trillion this year, as well as the high levels of constitutionally dubious spending, the Republicans should be prepared to stand firmly (with or without the Democrats) for government spending reductions. Sen. Rand Paul, R-Ky., has identified at least $500 billion worth of budget cuts that would be economically healthy and would not even touch the big entitlement programs.

If the election of 2010 meant anything, then voters are ready to place such limits onhe size of government. Voters are also willing to defund such programs as "ObamaCare,'' which goes by the wildly euphemistic name the Patient Protection and Affordable Care Act.

Normally, such program funding would have to be appropriated each year, or on a regular basis, by Congress. But hidden away by the last Congress is $105.5 billion of funding that is made automatically available. Unless the current Congress can stop it, $23.6 billion is already available, and the rest will be available over the next eight years.

Despite being declared unconstitutional in a federal court ruling in Florida and unconstitutional in part in a federal court in Virginia, and unlikely to survive U.S. Supreme Court scrutiny, "ObamaCare'' is funded and in the process of being entrenched. Given the constitutional consequences and the huge expenditures involved, Republicans should be more focused and resolute in their duty to compel Senate Democrats to agree to defund this program.

Another program set up to be funded without future congressional appropriations is the new Consumer Financial Protection Bureau created by the 2010 Dodd-Frank financial reform. This bureau will soon have widespread regulatory powers over financial institutions. Its funding is drawn from 10 percent (later rising to 12 percent) of the operating expenses of the Federal Reserve System. Defunding this new regulatory bureau would save the Treasury at least $500 million per year.

It would also save us from the insidious unintended consequences that always accompany such sweet-sounding regulatory programs.


Richard J. Grant is a professor of finance and economics at Lipscomb University and a scholar at the Tennessee Center for Policy Research. His column appears on Sundays. E-mail: rjg@richardjgrant.com

Copyright © Richard J Grant 2007-2011