On the eve of President Obama’s State of the Union speech, and as the U.S. Senate continues to deliberate on amendments to the bill to raise the Federal debt ceiling yet again, here’s a quick look at a few prudent reforms that would help bring our fiscal house in order without burdening taxpayers.
1. Enact a REAL Spending Freeze – Not a Phony One
President Obama will be proposing a 3-year freeze on non-defense non-security discretionary spending. While a nice nod to the need for fiscal restraint, the freeze comes one year too late – one year after domestic discretionary spending has increased by $101 billion, or 17.4 percent. What’s worse, CBO was actually projecting a decline in non-defense discretionary spending over the next few years (from $682 billion in FY 2010 gradually down to $640 billion in 2014). In fact, freezing this spending is actually a hike in projected spending over the next several years.
According to CBO, domestic discretionary spending in FY 2009 (which includes some stimulus spending, but is mostly pre-Obama budget decisions) was $581 billion. In FY 2010 (which is entirely an Obama-Pelosi-Reid spending decision), it’s projected to be $682 billion.
A real freeze would take domestic discretionary spending back to where it was before the spending binge happened. We should freeze domestic discretionary spending at $581 billion (which requires cutting $101 out of the FY 2010 budget), and it should stay at $581 billion for the foreseeable future—not just 3 years.
Doing that would reduce the CBO baseline (not counting interest savings) by $824 billion over the next decade. When the interest savings are included, such a real freeze should yield almost $1 trillion over the decade.
2. End the TARP Program
Congress should end the Treasury Department’s authority to spend unobligated funds under the Troubled Assets Relief Program (TARP) immediately, and prohibit further obligations of repaid funds.
Ending TARP, as previously proposed by Sen. John Thune (R-SD), would prevent TARP funds from being wasted on politically-motivated bailouts of companies and industries well-outside the original scope of the program, which have left taxpayers to bear the cost and risks associated with them. It would also prevent the revolving use of repaid funds for these purposes.
According to recent reports, approximately $545 billion in TARP funds have been committed, with $374.62 billion paid out while $165.18 billion had been repaid leaving about $319 billion of unobligated TARP authority.
3. Rescind Unobligated “Stimulus” Funds
Almost a year after its passage, the “stimulus” package has clearly failed to deliver on its promises. Not only did the package not prevent jobless numbers from going above 8%, as the Administration had claimed it would. Instead, unemployment rose to over 10 percent, with much of the spending under the package going towards dubious project.
In light of the package’s obvious failure, unobligated funds, currently still more than $250 billion according to recent reports, should be rescinded immediately.
4. Enact the CARFA Act
After rejecting the flawed Conrad/Gregg bipartisan commission proposal, the Senate will be taking up the GOP alternative, the so-called CARFA Act modeled after the successful Defense Base Closure and Realignment Commission (BRAC).
Unlike Conrad/Gregg, which – because of the way it was structured – would have led to a guaranteed tax increase, a commission modeled after BRAC which led to the successful closure of military bases that were underused, would be a prudent mechanism to address our nation’s fiscal problems.
The BRAC process, put in place by Congress in 1990, would not have worked if it had been tasked with either closing unnecessary bases or raising taxes to pay for unnecessary bases. It worked precisely because it had one job: to save taxpayer money by closing unnecessary bases, and that is the model we should follow now.
5. Adopt Sen. Coburn’s Rescission Amendment to the Debt Ceiling Resolution
Sen. Tom Coburn (R-Okla.) is offering an amendment to the debt ceiling resolution that would consolidate more than 640 duplicative government programs, cutting wasteful Washington spending, and returning billions of dollars of unspent money.
Enacting the Coburn amendment would yield at least $120 billion.
6. Enact Another Territoriality Measure in 2010
Back in 2004, Congress changed the tax law to allow companies to repatriate overseas earnings back to the United States at a low tax rate. This is money which would never come back to the United States otherwise because of our highest-in-the-world corporate income tax rate.
The result was astonishing. In that one year alone, $318 billion was repatriated. This actually increased corporate tax revenues by over $18 billion. This money was used to invest in plant and equipment, boost pension fund assets, and create jobs. Today, there is nearly $1 trillion in overseas earnings, just waiting to be brought home.
Congress should enact another territoriality measure in 2010.
7. Repeal Davis-Bacon Prevailing Wage Requirements
The Depression-era wage subsidy law of the 1930s, known as the Davis-Bacon Act, should NOT apply to any federally funded construction projects as it artificially inflates wages by 22% and adds $9 billion to the cost of projects nation-wide.
Had this outdated law been repealed earlier, it would have shaved $17 billion off the cost of the “stimulus” package.
While this may sound like a drop in the bucket, repealing Davis-Bacon prevailing wage requirements would be a simple step Congress could take to address our problems.