Introduction
Chairman Issa and distinguishedMembers of the Committee, thank you for the opportunity to testify on behalf ofthe American Taxpayer regarding the important issue of waste in our federalgovernment. My name is Andrew Moylan, and I am Vice President of GovernmentAffairs for the National Taxpayers Union (NTU), a non-partisancitizen group founded in 1969 to work for lower taxes and smaller government atall levels. NTU is America’s oldest non-profit grassroots taxpayerorganization, with 362,000 members nationwide.
Few citizen groups in Washington can match NTU’s 42-year history of principled advocacy,which is why I hope you will find these comments on waste, inefficiency, andduplication in the federal budget of value during your deliberations. You can alsofind further research into these topics on our website at www.ntu.org.
The Problem
In thepast decade, under the direction of Presidents and Congressional leadershipfrom both parties, our federal budget has expanded dramatically no matter whatmeasure one consults. At the dawn of the new millennium in 2001, federaloutlays were about $1.8 trillion, a level below post-World War II averages at18.2 percent of our economy. Through the middle of the decade, we saw anexplosion in spending driven by such factors as the creation of a newcabinet-level Department of Homeland Security as well as increased expenditureson defense and education. By 2003, the modest spending discipline of the late1990s had given way to federal outlays that now seem permanently fixed at orabove the post-war average of 19.6 percent of GDP. Add in the more recent surgein so-called “crisis response” spending, such as the $700 billion TroubledAsset Relief Program (TARP) of 2008 or the $862 billion “economic stimulus”bill of 2009, and the picture grows even bleaker.
In 2011, our budget is more than twice aslarge as in 2001, reaching about $3.8 trillion. As a percentage of our economy,2011 outlays will surpass a level unseen since the era of full-scale warmobilization in the 1940s, at over 25 percent. Perhaps most disturbing, PresidentObama’s estimate of our overspending problem at roughly $1.6 trillion in 2011is about equal, in inflation-adjusted terms, to the entire federal budget in 1982. Put another way, we will raisethrough the tax code and spend (in real terms) roughly the federal budget of2003 and throw in an amount approximating the 1982 federal budget just for goodmeasure.
Thefederal government has seen deficits during 44 of the last 50 years. This factought to give pause even to die-hard Keynesians, who believe surpluses shouldbe the norm in most economic growth cycles. While NTU’s dedication to limitedgovernment would on its own lead us to conclude that this spending spree isunacceptable, sheer mathematics tell us that it is unsustainable. As of today,we are perilously close to the point where our country’s debt exceeds itseconomic output. This sad statistic places us in rare company – just slightlybelow countries already staggered by debt crisis (like Ireland) and just abovecountries thought to be under grave threat of one (like Portugal).
Ifcorrective action isn’t taken soon, the United States could face a devastatingdebt crisis that would likely precipitate not only dramatic spending cuts but alsomassive tax hikes in very short order. If we are to have a sustainable fiscalfuture, this Congress must begin the hard work of reducing spendingimmediately. In that pursuit, no portion of federal outlays can be “off thetable.” The problems confronting us are simply too immense to allow walling offentire portions of the federal budget.
Whilethe causes of the recent spending spree are myriad and complicated, the remediesare relatively straightforward. On the discretionary side, Congress must cancelwasteful programs, root out inefficiencies, and roll back agency spending to atleast 2006 levels. With mandatory spending, Congress must take hold of theso-called “third rail” of politics with both hands and enact seriousentitlement reforms primarily focused on controlling the growth in spending onMedicare.
Low-Hanging Fruit
Congressshould begin with a thorough review of existing outlays to identify the“low-hanging fruit” of federal spending: the waste, inefficiency, andduplication that plague so many federal programs. During the deliberations ofthe President’s National Commission on Fiscal Responsibility and Reform, NTUjoined with the liberal U.S. Public Interest Research Group (U.S. PIRG) to doexactly that. Together, we released a report called “Toward Common Ground:Bridging the Political Divide to Reduce Spending,” in which we compiled morethan 30 specific recommendations to save taxpayers over $600 billion by 2015,the target date for the Fiscal Commission to reduce our publicly-helddebt-to-GDP ratio to a more sustainable level of 60 percent. I am submittingthat report along with my testimony.
Whileour two organizations have widely divergent views on the proper size and scopeof our federal government, we are steadfast in the belief that Washingtonsquanders billions of dollars every year on programs that do not serve theinterests of the American people. We authored this joint report in an attemptto identify spending reductions that could be undertaken without fundamentallyharming the core operations of the federal government, as either conservativesor liberals understand them.
Thereport laid out nine ways to save up to $62 billion just by eliminatingwasteful subsidies. These focused largely on agriculture supports, subsidiesfor energy production, and “corporate welfare” programs. For example, theMarket Access Program has been on the lists of watchdog groups for years. It consumestaxpayer dollars to fund advertising and promotion in foreign countries forproducts of American companies, including McDonald’s, Nabisco, and Fruit of theLoom. American businesses should compete abroad by making excellent products,not by drawing upon taxpayer subsidies.
Inaddition, we identified up to $353 billion in savings from six recommendationsto improve contracting and asset acquisition procedures. These items centeredon improving procedures in the Defense and Homeland Security Departments. Forexample, the Government Accountability Office found that the Army, Navy, AirForce, and Defense Logistics Agency were wasting billions of dollars byordering too many spare parts. Purchasing-process reforms and better data couldsave taxpayers over $184 billion.
Furthermore,we offered eight suggestions to eliminate payment errors, end duplicativeprograms, and sell off unused federal property that could yield up to $77billion in total savings. For example, Social Security currently faces aceiling on its ability to collect mistaken payments from the SupplementalSecurity Income program. Removing that cap would improve the agency’s abilityto recover erroneous payments and save taxpayers more than $500 million.
Finally,ten recommendations to end wasteful or outdated military programs could savetaxpayers up to $104 billion. These suggestions focused on addressing weaponsprograms that have been riddled with delays and cost overruns or that are nolonger needed. For example, according to the Government Accountability Office,the Expeditionary Fighting Vehicle is 14 years behind schedule and highlyunreliable. Canceling it could save taxpayers over $16 billion.
Inaddition to the NTU-PIRG report, the Republican Study Committee (RSC) has madeexcellent progress in highlighting areasof federal expenditures that are ripe for reduction. In theirrecently-introduced “Spending Reduction Act,” RSC members identified more than100 specific program eliminations and spending reductions totaling $330 billionover ten years. From the controversial, such as zeroing out funding for theNational Endowment for the Arts, to the common-sense, such as ending the“Historic Whaling and Trading” program, the RSC has cataloged dozens ofactionable items whose impact would be nearly immediate. . In fact, the Whalingand Trading scheme is among several items the RSC blueprint has in common withthe “Terminations, Reductions, and Savings” section of the President’s budgetproposal, demonstrating once again that quick bipartisan agreement ought to beachievable in at least some instances.
TheRSC bill also contains several eminently practical provisions to cancelineffective “stimulus” spending and to finally remove the federal governmentfrom the housing business by ending its ties to housing giants Fannie Mae andFreddie Mac. Combined, these items would generate $75 billion toward bringingdown future deficits. The SpendingReduction Act derives the bulk of its savings, however, from a non-defense discretionaryspending limit set at 2006 levels through 2021. While this is a laudable goal, taxpayerscould be saved even more by including defense within that proposal’s strictures.
Theabove recommendations would save, in total, at least $3.1 trillion over thecourse of the decade, but even that is insufficient in light of Congressional Budget Office estimates that thefederal government will spend nearly $7 trillion more than it raises in taxesover the next ten years. In order to close more of the gap and prevent enormousspending hikes in out-year budget projections, Congress will have to enactserious reforms to our entitlement programs.
Entitlement Reforms
Whileit has been clear for more than a decade that our nation’s entitlement programsare on a crash-course with disaster, it has been equally clear that mostMembers of Congress have been reluctant to right the ship. Whenever seriousreform plans are put forth, their sponsors are subjected to unfair attacksabout “gutting” the programs and taking benefits away from senior citizens andthe disadvantaged. The truth of the matter is that Medicare, Medicaid, andSocial Security are “gutting” themselves right now and we simply must act if theyare to survive in any form.
Themost powerful driver of cost growth is Medicare, which according to the CongressionalBudget Office is on track to devour about 4.2 percent of GDP in 2020, and anastonishing 14.3 percent of GDP in 2080. Meanwhile, Medicaid will grow from 2.1percent of GDP to 3.7 percent over that same time period. For its part, SocialSecurity is set to rise from 5.3 percent of GDP to 6.1 percent. If this growthgoes unchecked, our fiscal situation in 2080 will be an unmitigated disaster: federalspending at 34.4 percent of GDP, a deficit equal to nearly 43 percent of GDP,and publicly-held debt at an inconceivable 716 percent of GDP. I use the term“inconceivable,” because the nation’s finances and its economy would almost certainlycollapse before reaching such a level.
Themost ambitious plan to avert this calamity is Representative Paul Ryan’s (R-WI)“Roadmap for America’s Future.” The Roadmap would tackle spiraling entitlementcosts, restructure the tax system, and hold down discretionary spending inorder to create a sustainable federal budget.
WithMedicare, the Roadmap would provide future beneficiaries a fixed payment thatthey could apply to a list of Medicare-certified health plans. That paymentwould be allowed to grow every year by a measure that outpaces GDP growth byone percentage point. This simple yet important alteration would rein in futureMedicare outlays, preserve the program for seniors, and inject real marketforces into health services for older Americans by giving them strongincentives to seek out cost-effective care. The Medicaid reforms are similar,as the Ryan plan would transition to a system where individuals would havepersonal ownership of “health care debit cards.”
ForSocial Security, the reforms would allow younger workers to devote a share oftheir payroll taxes to personal investment accounts in order to provide themwith greater returns and individual ownership.
TheRoadmap may not be perfect and its reforms are unlikely to be achieved withoutsignificant debate, but it is the only detailed plan in Congress today that iscomprehensive in its scope and conservative in its goals.
How to Prevent Future Problems
ThoughCongress should aggressively pursue the spending reductions that have beendetailed in this testimony, they will not be enough to rectify the defects ofthe budget process itself. Some of these flaws can be addressed by applying orexpanding certain budgetary concepts that have proven successful elsewhere.These include the use of technical auditing for infrastructure projects and greaterreliance on recovery audit contracting for federal benefit programs. Anotherapproach with promise is the more aggressive use of life-cycle budgeting, whichencourages more thoughtful, disciplined, and cost-efficient planning forcapital projects. This evaluative tool has helped several states to improve thefiscal accountability of their spending initiatives.
Nonetheless,even with these worthy reforms, the built-in incentives that have fueled debtgrowth in the past will not disappear with the cancelation of wasteful programs.Thus, Congress must enact with all deliberate speed a robust Balanced BudgetAmendment (BBA) to the Constitution.
Since itsfounding in 1969, NTU’s most fundamental and enduring goal has been toestablish constitutional limits on the size and future growth of government.Throughout the 1970s and 1980s, my organization helped to launch and sustainthe movement for a limited Article V amendment convention among the states topropose a Balanced Budget Amendment for ratification, all while pursuing a BBAthrough Congress. Our members were elated over the passage of S.J. Res. 58 in1982, and the passage of H.J. Res. 1 in 1995 through the House ofRepresentatives. In both cases the measures, whose provisions varied somewhat,fell short of enactment in the other chambers of Congress.
Thishistory provides an illustration of how prescient the arguments of BBAadvocates have proven to be, and how specious those of opponents havebeen. For the better part of 40 years, we were told that fiscaldiscipline would evolve simply by “electing the right people,” all whileRepublican and Democratic Presidents and Congresses abused the nation’s goodcredit. We were told that statutory measures would bring outlays under control,even as laws such as the Gramm-Rudman Hollings Act were trampled underfoot. Wewere told that our foundational document shouldn’t be “cluttered” with mundanematters of budgeting, even as the tax and spend culture in Washington erodedthe foundations of prosperity for current and future generations.
Thenotion that limits on taxes and spending are too trivial for the Constitutionseems quaint today, as our national debt tests the ominous level of 100 percentof the nation’s economic output. As noted earlier, unsustainable entitlementprograms, whose dire condition has been known for at least 20 years now,threaten to heap unfathomable burdens on taxpayers. BBA naysayers sought toderail the constitutional budgetary discipline that could have made adjustmentsto the realities of these programs gradual and bearable, all while theycomplained that the measure would “take too long to ratify” for it to have anysalutary effect. The question now before Congress is, how could ourConstitution not be allowed to contribute toward restoring our nation’s fiscalstability? The fiscal crisis our government faces overwhelmingly demonstratesthe continued relevance of a BBA to curing the maladies that threaten thehealth of our economy.
There areseveral iterations of a Balanced Budget Amendment that have already beenintroduced in the 112th Congress. The strictest of them, S.J. Res. 5introduced by Senator Mike Lee (R-UT), would prevent outlays from exceedingreceipts with a requirement that a two-thirds supermajority vote in favor ofany attempt to override that limit or the nation’s debt ceiling. In addition,it establishes a strong spending limitation which says that our federalgovernment cannot spend more than 18 percent of GDP, roughly the historicalpost-war average for receipts.
SenatorsCornyn (R-TX) and Hatch (R-UT) have also introduced a Balanced BudgetAmendment, S.J. Res. 3, that would achieve many of the same goals, though itsspending limit is placed at a higher level of 20 percent of GDP, roughly thehistorical post-war average for outlays. In your chamber, Representative BobGoodlatte has continued his long history of leadership on this issue byintroducing H.J. Res. 1, which incorporates other supermajority requirementsand spending limitations. All of these proposals, and perhaps some others yetto be introduced, deserve consideration, but Congress must do so without delay.
ThomasJefferson once wrote, “I wish it were possible to obtain a single amendment to ourConstitution …; I mean an additional article, taking from the federal governmentthe power of borrowing.” No proposal in Congress today would guaranteesuch an outcome – an end to deficit spending. What a BBA will guarantee is amore deliberative, accountable budgeting process that avoids the rash impulseto tax or borrow and encourages consensus-building toward spending restraint.Constitutions shouldn’t make policy, but they should set rules within whichpolicymakers operate and they should safeguard the rights of citizens. If thefundamental right – of every generation – to be free of excessive federal debtcannot be protected by our Constitution, little else in that precious documentwill matter. Jefferson would certainly agree. Thus, the past, present, andfuture all speak clearly to us on behalf of this reform.
Conclusion
Thearithmetic of our budget problems is elementary; it is the political calculus that has provendifficult. NTU urges this Committee and the Congress as a whole to begin a systematicreview of our obligations with sharp eyes toward a sustainable budget future.This necessitates not just eliminating waste or tackling entitlements orenacting structural reforms like a BBA; it requires all of them, workingtogether, to effect lasting change. NTU and its members are ready to join youin these tasks – tasks whose completion will be vital to our very future as anation. Thank you for the opportunity to submit this testimony.