Will the 108th Congress Fail?

This session of the 108th Congress will perhaps be remembered for its insatiable spending habits, with federal spending hitting new highs while the deficit soared to $374 billion —a jump of $216 billion over last year. At a time when both houses of Congress and the executive branch are controlled by Republicans, many have begun to wonder if this is, in fact, the party of limited government. Looking beyond the question of spending, there is scant evidence to suggest that limited government is a dominant theme in Washington.

Social Security continues on the brink of disaster, with Washington mostly choosing to avoid the $5 trillion elephant in the room. Not only is Social Security the largest federal program (accounting for 23 percent of federal spending), it is also unsustainable in its current form. Within 15 years, Social Security will begin paying out more than it collects, and it will be bankrupt in 2042. As the Baby Boom retires, the crisis only grows larger. The time for reform is now, and Washington should be working to allow personal retirement accounts for workers while protecting the benefits of retirees and near-retirees. Allowing workers to save a portion of their Social Security in accounts they own can improve retirement security and generate greater returns than the current system.

Social Security reforms have been proposed in both the House and Senate, but change will require strong leadership from the administration. There are hopeful new signs that the Bush Administration is preparing to make Social Security a key issue in 2004, including a new report by the Social Security Administration that finds a plan based on personal retirement accounts would return the program to solvency while meeting all benefit obligations.

Legal reform is sorely needed as well. A report by the Council of Economic Advisers found that lawsuit abuse costs the American economy around $180 billion per year —equivalent to 2 percent of the nation’s output. Lawsuits continue to clog our courts, leaving real people with real grievances waiting more than a year for their day in court. In fact, the civil justice system has become ineffective when it comes to the two things it was designed to do: compensating victims who have been harmed, and providing incentives to minimize harmful or dangerous behavior. At the same time, consumers pay the price for a legal system that has lost its moorings, both in higher prices for goods and services as well as reduced choice.

This session Congress had three opportunities to address legal reform—resolving the asbestos litigation morass, addressing the medical liability crisis, and enacting class action reforms that would end abusive practices such as “forum shopping,” where class actions are filed in courts with a history of large awards. To its credit, the House passed landmark class action and medical malpractice reform bills. Unfortunately, in every instance, the Senate could not muster enough support to defeat liberal opposition, and the bills are languishing.

Welfare reform is another issue imperiled in Washington. Many observers point to 1996 overhaul of America’s welfare system as the most important change to an entitlement program ever made. Rather than simply provide a right to cash assistance, the new program aimed at moving people from poverty to employment. The new approach proved successful, with the number people living in poverty dropping and caseloads reduced as individuals found work. Despite the successes, reauthorizing the program in Congress has become problematic. The House passed legislation to reauthorize the program and strengthen its job training and work requirements. However, the Senate has failed to reauthorize the program, and there have been serious discussions of easing some of the original 1996 reforms.

The one area of progress has been tax reform, with President Bush signing the Jobs and Growth Act of 2003 on May 28th. While this provided real relief for America’s taxpayers, Congress, apparently focused on its fast-paced spending agenda, balked at a larger tax cut. Taxpayers ultimately had to settle for $350 billion in tax relief, rather than the full $700 billion originally proposed by President Bush. While a sizeable tax cut, it’s important to remember that it is not permanent and that this figure represents ten years of tax relief. In that same time frame, the federal government is expected to collect $28 trillion in revenue. With a little more fiscal responsibility it seems that Congress should be able to make a tax cut that represents only 1 percent of federal revenues permanent.

Overall, Washington failed to address a number of important issues over the past year. In many ways, this is not surprising. Politicians respond to incentives, which are combination of votes and resources to ensure re-election. They constantly hear from special interests pursuing favorable legislation, but this often has more to do with government giveaways than economic freedom. Promoting limited government and economic reforms requires voters to press these issues with their representatives. That is why CSE has created the Freedom Agenda. Politicians need to hear that voters want less, not more, government. With many politicians already hitting the campaign trail, CSE activists have the perfect opportunity to raise these issues and frame the debate for 2004.