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Press Release

Trim the Fat

10/16/2003

With the end of the fiscal year, the Congressional Budget Office concluded that the federal deficit is actually $27 billion lower than was forecast in August, totaling $374 billion for 2003. Unfortunately, the shrinking deficit is not an indication of renewed fiscal restraint by the federal government. In fact, this year’s deficit is more than double the 2002 deficit of $158 billion. The main reasons for the drop in this year’s deficit are corporate revenues that are increasing as the economy strengthens and smaller than forecast outlays on defense and education. Discretionary spending, however, continues to be problematic, and mandatory spending on entitlement programs will skyrocket under a huge Medicare drug benefit currently being negotiated.

Democratic presidential candidates have targeted the administration’s tax cuts as the source of the problem, claiming that they only benefited the rich, while draining necessary resources from the federal government. As the president seeks an additional $87 billion to support ongoing activities in Iraq, Democrats have proposed repealing upper income tax cuts to fund the supplemental. Sadly, this approach again ignores the more fundamental need to restore fiscal discipline in favor of expanding federal resources at the expense of the private sector. Yet the supplemental budget request amounts to just over 4 percent of the more than $2 trillion in federal spending. Rather than seeking more tax revenues or increasing the deficit, a more appropriate response would require the federal government to establish fiscal priorities within the given budget. The nation cannot afford programs that are ineffective, wasteful, or redundant, yet Congress has done little to resolve these problems.

Troubles with the federal budget have been well documented. The General Accounting Office (GAO) continually monitors “high risk” federal programs with poor financial accountability and the Office of Management and Budget has identified over $33 billion in erroneous payments made by federal agencies (more than a third of the cost of the $87 billion budget request). Yet not enough has been done to address such concerns, which, as the GAO notes, will only increase as the baby boom generation begins to retire and place more strains on federal programs and outlays.

Reforms are required, and the longer they are delayed, the more difficult it will be. As the GAO notes, “If government is to be able to deal with these trends, it cannot accept as “givens” all of its existing major programs, policies, and operations. Rather, the relevance or “fit” of particular federal programs, policies, or activities to today’s world and the future must be re-examined.” (p. 8.)

In Congress, Rep. Jo Ann Davis (R-Va.) has proposed the “Government Accountability and Streamlining Act” as a means to eliminate unnecessary redundancies within the federal government. She cites a recent report by the National Commission on the Public Service that found problems and inefficiencies throughout the federal government. For example there are 541 clean air, water, and waste programs in 29 agencies, 50 programs providing aid to the homeless in 8 different agencies, and 90 early childhood programs in 11 federal agencies. The legislation proposed by Rep. Davis would require the General Accounting Office to evaluate all new legislation to determine if it created new federal programs. When new programs are identified, the GAO would issue a determination on whether the programs were redundant or could be more efficiently addressed by a different program.

Such legislation provides an important check on the creation of new federal burdens on the economy. Unfortunately, it cannot address the pre-existing scope of government activity. Brian Reidl of the Heritage Foundation more directly addresses the need to eliminate unnecessary programs already in existence. He notes that the 2004 Congressional Budget Resolution called for each congressional committee to identify ways to reduce spending in mandatory programs by 1 percent. According to Reidl, this would save taxpayers $132 billion over the next ten years.

Waste and poor fiscal management is a serious concern for the federal government that goes well beyond trimming 1 percent in waste for all mandatory spending programs. Literally billions are unaccounted for by the federal government. Taxpayers should be wary of calls for more revenue to finance bigger government in light of these shortcomings. At the same time, the continued demand for more spending and higher deficits is an indication of poor fiscal management that allows Washington to spend without making tough choices about what it is buying.