Cato Institute

 Cato's Chris Edwards is correct.  Republicans are playing small-ball.  They have no real vision, so they've ended up with policy paralysis.  - Jon Henke

As I note in a recent New York Post op-ed Republicans are fond of implying that President Obama is a big-spending socialist. But the House GOP recently offered a spending cut plan that was able to find savings worth less than one percent of Obama’s budget.

As Tad DeHaven and Brian Riedl have also pointed out, the GOP spending reform effort is rather pathetic. It proposed specific annual budget cuts of about $14 billion per year.

Consider that the center-left budget wonks at the Brookings Institution put their heads together a few years ago and came up with a “smaller government plan” that proposed about $342 billion in annual spending cuts (by 2014). The Brookings authors note:  

These cuts are achieved by reducing government subsidies to commercial activities ($138 billion); by returning responsibility for education, housing, training, environmental, and law enforcement programs to the states ($123 billion) . . . by cutting entitlements such as Medicaid, Social Security, and Medicare ($74 billion); and by eliminating some wasteful spending in these entitlement programs ($7 billion).

Thus, the Brookings scholars found cuts more than twenty times larger than the House GOP leadership cuts, and Brookings proposed its plan back when the deficit was about one-fifth of the size it is today. (Note that both the Brookings and GOP plans would also put a cap on overall nondefense discretionary spending, in addition to these specific cuts).

My point in the New York Post piece is that the GOP needs to challenge Obama’s big spending agenda at a more fundamental level. They need to do some careful research, pick out some big spending targets, and go on the offense. Why not propose to eliminate the Departments of Education and Housing and Urban Development? Why not sell off federal assets, such as the Tennessee Valley Authority, in order to help pay down the federal debt? Why not open up the U.S. Postal Service to competition?

Obama won’t agree to these reforms at this point, but they would hopefully open a serious national debate about reforming our massive and sprawling federal government. Ronald Reagan in 1980 and the congressional Republicans in 1994 didn’t win by splitting hairs with the Democrats over 1% of spending. They offered a more fundamental critique.

At least, GOP leaders need to offer up spending reforms as bold as those of the Brookings Institution.

Chris Edwards is the director of tax policy studies at The Cato Institute

Cato Budget Analyst Tad DeHaven says Republicans still aren't serious about the budget.  This is a major problem.  I don't think it's so much a lack of "courage" as it is a lack of ideas.  Republicans just don't have a vision for how a smaller government could be better, and how to get from here to there through the political process.  DeHaven's points are correct. - Jon Henke

A month ago, President Obama issued a list of proposed spending cuts that I dismissed as “unserious” due to the fact that they were trivial when compared to his proposed spending and debt increases.  Yesterday, the House Republican leadership released a list of proposed spending cuts.

I’d love to say I’m impressed, but I can’t.

Both proposals indicate that neither side of the aisle grasps the severity of the country’s ugly fiscal situation, or at least has the guts to do anything concrete about it.

The GOP proposal claims savings of more than $375 billion over five years, the bulk of which ($317 billion) would come from holding non-defense discretionary spending increases to no more than inflation over the next five years.

First, it should be cut — period.  Second, non-defense discretionary spending only amounts to about 17% of all the money the federal government spends in a year, so singling out this pot of money misses the bigger picture.  At least, defense spending, which is almost entirely discretionary, should be included in any cap.  But it has become an article of faith in the Republican Party that reining in defense spending is tantamount to putting a white flag in the Statue of Liberty’s hand.

The second biggest chunk of savings would come from directing $45 billion in repaid TARP funds to deficit reduction instead of allowing the money to be used for further bailing out.  That’s a sound idea as far it goes, but I can’t help but point out that the signatories to the document, House Republican Leader John Boehner and Minority Whip Eric Cantor, voted for the original $700 billion TARP bailout. Proposing to rescind the Treasury’s power to release the remaining funds, about $300 billion I believe, should have been included.

According to the proposal, the rest of the cuts and savings comes out to around $25 billion over five years.  Like the specific cuts in the president’s proposal, they’re all good cuts.  But the president detailed $17 billion in cuts for one year and I generously called it “measly.”  What am I to call the House Republican leadership specifying $5 billion a year in cuts?

 Take for example, proposed cuts to the Department of Housing and Urban Development (HUD), which is likely to spend around $65 billion this year.  Having recently spent a couple months analyzing HUD’s past and present, I can state unequivocally that it’s one of the sorriest bureaucracies the world has ever seen.  Yet, the House Republican leadership comes up with only one proposed elimination: a $300,000 a year program that gives “$25,000 stipends for 12 students completing their doctoral dissertation on issues related to housing and urban development.”  The only other proposed cut to HUD would be $1.7 billion over five years to the Community Development Block Grant (CDBG) program.  This notoriously wasteful program is projected to spend over $8 billion this year alone.  Eliminate it!

The spending cuts the country needs must be substantial, serious, and put forward in the spirit of recognizing that the federal government’s role in our lives must be downsized.  Half-measures are not enough, and from the Republican House leadership, wholly insufficient for winning back the support of limited-government voters who have come to associate the GOP with runaway spending and debt.  For a more substantive guide to cutting federal spending, policymakers should start with Cato’s Handbook chapter on the subject.

Tad DeHaven is a budget analyst at The Cato Institute.

C/P Cato@Liberty

Bill Smith, ARRA Editor: The Cato Institute has been following the Citizens United v. FEC case, in which the Supreme Court is set to rule on whether an organization can use speech about a political candidate in the days leading up to an election. The Federal Election Commission banned Citizen United from showing a film against Hillary Clinton on a pay-per-view basis shortly before the last year’s election.

The so-called Citizens United case offers the Supreme Court a chance to severely curtail the free speech abuses of the Federal Election Commission. If the government can ban broadcasts under federal law, that else can they ban? Books? Commercials? In the following CATO video, campaign finance law and free speech experts discuss the case, and what it means for the future of free speech. The Supreme Court is set to rule on it in the next few weeks. John Samples, Director of the Cato Institute's Center for Representative Government, Institute for Justice Senior Attorney Steve Simpson and George Mason University law professor Allison Hayward weigh in.

While the media and the new administration would like to have us believe there is no dissagreement among economists that President Obama's massive stimulus plan is absolutely necessary, here are 200 leading economists, which include Nobel laureates and other very respectable scholars from across the country, who beg to differ.

The Cato Institute is running a full page ad in the Washington Post, New York Times and Roll Call this week with a letter showing that whoever says, "all economists agree on stimulus" is wrong.

The letter, which is signed by 200 economists, reads:

Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we the undersigned do not believe that more government spending is a way to improve economic performance.More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s.  More government spending did not solve Japan’s “lost decade” in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policymakers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.

Full disclosure: Chris Moody is the Manager of New Media at the Cato Institute.