How to Cut $100 Billion Without Really Crying

To listen to Democrats, they have new Republican House Speaker John Boehner right where they want him.

"The reality of governing is different than the reality of campaigning, and it's easier to throw out a number than it is to support it," David Axelrod, President Barack Obama's outgoing senior strategist, said last week.

The number, of course, is the $100 billion in cuts to federal spending that House Republicans have been discussing since they unveiled their 2010 campaign platform last September. Republicans in the House barely had time to adjust to their majority status before facing questions and skepticism about whether and how they can pull that off.

Boehner is going to win this one. Government spending has surged so much in the past two years that cutting $100 billion is a piece of cake.

First, let's understand exactly what Boehner and his team promised.

In their "Pledge to America," congressional Republicans wrote:

"With common-sense exceptions for seniors, veterans, and our troops, we will roll back government spending to pre- stimulus, pre-bailout levels, saving us at least $100 billion in the first year alone and putting us on a path to balance the budget and pay down the debt."

Would Americans really suffer if taxpayer-funded travel by federal employees was slashed? I doubt it.

Note the operative phrase, "the first year." Those now predicting defeat for Boehner--dare I say, rooting for it--make his task tougher by implying that the word "fiscal" precedes "year."

Months Gone By

The 2011 U.S. fiscal year began on Oct. 1, 2010, without a budget in effect, and with Democrats in charge. Since that time, the government has been funded by passage of continuing resolutions, maintaining expenditures at 2010 levels. When the current one expires on March 4, Republicans will have just seven months to make their mark on the 2011 budget.

But since Boehner didn't specify "fiscal year," Republicans simply can say that the starting pistol went off only last week. House Budget Committee Chairman Paul Ryan said as much: "We will be cutting $100 billion plus over this calendar year. If you think we're stopping shy of $100 billion in cuts, you got another think coming."

The budget hawks have tied a hand behind their backs by vowing not to cut spending for seniors, national defense and veterans. Still, with 12 months to accomplish it, the lift is pretty easy.

No Tears

The Heritage Foundation's Brian Riedl came up with an ambitious plan for cutting $343 billion in spending. I'll shoot for one-third of that target, with the added goal of avoiding some of his proposals--such as reducing Pell Grants and eliminating homeland-security funding to states--that would be most likely to lead to wailing in the echoing halls of the Capitol complex.

Here's how to do it.

First, it's finally time to take on farm subsidies, which topped $15.4 billion in 2009, according to the Washington-based Environmental Working Group.

Farm-state lawmakers in both parties, using the Agriculture Committee as their base, have long beaten back efforts to slash direct payments to growers. So why might now be different? Because of the unprecedented power that Boehner is investing in Ryan and the Budget Committee.

This doesn't mean America's farmers have to be left to fend for themselves.

Farmer Savings

Canada has experimented with a program that provides government matching funds for farmers' deposits into savings accounts that help them buffer their incomes against the ups and downs of farm prices. Such a program in the U.S. could achieve the objective of helping family farmers survive while enabling policy makers to withdraw billions of subsidies to big agriculture.

These changes, plus closing the U.S. Agriculture Department's Foreign Agricultural Service, would save about $19.5 billion. Not a bad start.

Next, target energy subsidies, which might make us feel good but make little economic sense. As I've written before, if Congress wants to encourage innovation in energy, it should tax carbon, not subsidize politically favored approaches such as ethanol. Riedl says cutting energy subsidies would save about $6.5 billion. (We could go after the tax-credit subsidies too, which technically aren't spending.)

Justice Department block grants--annual sums given to state and local governments, which largely get to decide how to spend them to achieve a certain goal--have also been targeted for cuts, and then saved, again and again. Here, too, it's high time to strike a blow for federalism: local law enforcement is, by definition, a local concern. That's $7.3 billion in savings.

Grounded Bureaucrats

Would Americans really suffer if taxpayer-funded travel by federal employees was slashed? I doubt it. Riedl counts $22.5 billion in savings from that and from cutting in half the cost of maintaining vacant federal properties. (How about selling some of them?)

The easiest cuts are to money not yet spent. There are various competing estimates of how much remains unspent from the great stimulus of 2009. I'll take the most conservative estimate, $12 billion--the biggest chunk of which would go toward high-speed rail, something that we all covet when visiting Europe or Asia but that would require a wholesale transfiguring of the American landscape that the U.S. simply will never do.

We're two-thirds of the way to $100 billion.

Just because we're all tired of hearing about alleged "waste, fraud and abuse" doesn't mean there isn't a lot of it. Riedl estimates that a $5 billion investment in updated computer systems could halve errors in government payments, saving $44 billion. That lifts our spending cuts to $111.8 billion: target achieved, with wiggle room to boot.

Of course, there's still the matter of my bill.

Kevin A. Hassett is a senior fellow and director of economic policy studies at AEI.

Photo Credit: iStockphoto/cogal

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About the Author


Kevin A.
  • Kevin A. Hassett is the State Farm James Q. Wilson Chair in American Politics and Culture at the American Enterprise Institute (AEI). He is also a resident scholar and AEI's director of economic policy studies.

    Before joining AEI, Hassett was a senior economist at the Board of Governors of the Federal Reserve System and an associate professor of economics and finance at Columbia (University) Business School. He served as a policy consultant to the US Department of the Treasury during the George H. W. Bush and Bill Clinton administrations.

    Hassett has also been an economic adviser to presidential candidates since 2000, when he became the chief economic adviser to Senator John McCain during that year's presidential primaries. He served as an economic adviser to the George W. Bush 2004 presidential campaign, a senior economic adviser to the McCain 2008 presidential campaign, and an economic adviser to the Mitt Romney 2012 presidential campaign.

    Hassett is the author or editor of many books, among them "Rethinking Competitiveness" (2012), "Toward Fundamental Tax Reform" (2005), "Bubbleology: The New Science of Stock Market Winners and Losers" (2002), and "Inequality and Tax Policy" (2001). He is also a columnist for National Review and has written for Bloomberg.

    Hassett frequently appears on Bloomberg radio and TV, CNBC, CNN, Fox News Channel, NPR, and "PBS NewsHour," among others. He is also often quoted by, and his opinion pieces have been published in, the Los Angeles Times, The New York Times, The Wall Street Journal, and The Washington Post.

    Hassett has a Ph.D. in economics from the University of Pennsylvania and a B.A. in economics from Swarthmore College.

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