Simple ways to cut the federal budget

Dustin Siggins Contributor

Last week, Real Clear Politics linked to an excellent National Affairs piece about solving the national debt. The Heritage Foundation’s Bill Beach and I are working on a project regarding the national debt, and I felt the article was extraordinarily practical for both America’s public officials and the voting public. Congress has been pushing off hard decisions on everything from Social Security, Medicare and Medicaid to effective energy policy for years, and it’s time for the voting public to hold them responsible.

The National Affairs column noted that there are three factors in cutting the national debt: tax increases, spending cuts and economic growth. The calculations have to be very precise regarding all three; otherwise you have an economic imbalance. While the project will tackle how to lower the overall debt, I feel it is most important to cut spending. After all, tax increases have a direct negative impact on economic growth, and decreasing the federal deficit and debt has a directly positive impact on economic growth. There are a couple of areas I will touch on— decreasing the size of government and decreasing the cost of government.

First, a look at the size of the public sector in America. There are a variety of resources to use to find these numbers, but I’ll stick with extrapolation from the Bureau of Labor Statistics report on unions that came out in late January. It estimates that there are 21.1 million public employees, which is one-sixth of the entire working public- in short, 126.9 million people were working in America in January 2010.

While some government may be necessary teachers, police, fire departments, military, etc.- the number we have is far too large. We could do without hundreds of thousands of federal jobs, including Pentagon positions; the Department of Education; massive portions of the Departments of Interior, Energy, and the EPA; most of the Social Security Administration and the Health and Human Services Department; and any jobs related to TARP, the stimulus and subsidies to farmers, etc. The same applies to most states, though obviously on a smaller scale. According to Reason TV, unfortunately, while eight million private sector jobs have been lost since the start of the recession, the government has added 100,000 employees to its rolls.

If we could cut federal government employment by even ten percent, we would bring many of these oversized and unnecessary departments back to a manageable level. After all, Medicare, Medicaid, CHIP and Social Security took up about 41% of the federal budget in FY 2008. If we cut them and the defense/security budget (another 21% of the total federal budget) by 10%, we would have another 6.2% of the federal budget to go towards paying back our national debt. Putting unused TARP and stimulus funds, as well as all federal subsidies towards the national debt, would not only eliminate unnecessary jobs, it would put the monies towards good use. This would equate to hundreds of billions put against the federal debt. Added to the approximately 6.2% we would save on the president’s proposed budget, we save well over half a trillion dollars in the first year alone.

Related to the size of government is the cost of government. Let’s start with the fact that union employees earn far more than non-unionized workers, to the tune of 25%, according to the BLS. Since over one in three federal employees is unionized, this is a massive cost to the taxpayer, who is both being paid less and being hurt more in this recession than federal employees. Consider, too, that the average federal employee makes nearly $8,000 more than his or her private sector equivalent, and far more than that when health, pensions and other benefits are included.

Even worse, according to the BLS, unionized employees make slightly over $190 more per week than a non-unionized person. If we take just seven million unionized workers and made them non-unionized, we could save the taxpayers $13.3 billion every year. If we took one million of those  unionized workers and eliminated a need for their jobs from the government, we would save about $46.8 billion. ($900 weekly paycheck * 1,000,000 workers * 52 weeks) This would be less than a five percent reduction in manpower, but a huge savings for the taxpayer.

One last series of easy ways for Congress to cut the federal budget: last October, according to Brian Reidl of The Heritage Foundation, fifty ways to cut the “low-hanging fruit” of the federal budget included the following, worth hundreds of billions by themselves:

  • The federal government made at least $72 billion in improper payments in 2008.[1]
  • Washington spends $92 billion on corporate welfare (excluding TARP) versus $71 billion on homeland security.[2]
  • Washington spends $25 billion annually maintaining unused or vacant federal properties.[3]
  • Government auditors spent the past five years examining all federal programs and found that 22 percent of them — costing taxpayers a total of $123 billion annually — fail to show any positive impact on the populations they serve.[4]
  • Health care fraud is estimated to cost taxpayers more than $60 billion annually.[13]
  • A GAO audit found that 95 Pentagon weapons systems suffered from a combined $295 billion in cost overruns.[14]
  • More than $13 billion in Iraq aid has been classified as wasted or stolen. Another $7.8 billion cannot be accounted for.[22]

The fact is that our fiscal situation is dire. Steven Pearlstein wrote about it in The Washington Post last week, asking if Americans are tough enough to take what is coming, and the Treasury and GAO released reports this year that are truly terrifying – to the tune of trillions of dollars just waiting to crush our nation.

There are many ways to decrease the federal deficit and debt. As the National Affairs piece outlined, our public officials must be very careful in how they proceed. Stopping the growth of government would be a good start, as would streamlining what we already have.