The Tea Party’s Bold Plan for Budget Reform
By Matt Kibbe
America needs bold action, that much is clear. Strong, aggressive policies are the only way to restore the American economy. While some of the Republican primary candidates have put forth a courageous plan here or taken an audacious stance there, it’s clear the American people demand a comprehensive plan that pulls no punches and protects no sacred cows, even when that means taking a serious look at defense spending.
The sentiment is reflected clearly in the findings of the Nov. 17, 2011, Tea Party Debt Commission report, a bold plan to get Washington’s rampant spending under control. The Commission consisted of 12 volunteer members from all over the country, mirroring the structure of the Congressional Super Committee. Unlike the Super Committee—the bipartisan group created by Congress with a goal of slashing the budget by at least $1.2 trillion—the Tea Party Debt Commission actually accomplished its goal, slashing an amazing $9 trillion and balancing the budget in 10 years.
The Tea Party budget proposal was created to provide a grassroots solution to the budget crisis—using the novel approach of actually finding out what the people wanted. Results were gathered through an online crowd-sourcing survey that asked voters to choose between specific cuts they would like to see in the budget. Field hearings were also held across the country to gather direct input from the grassroots on budget cuts, entitlement reform, and economic freedom. This plan puts everything on the table, including the traditional Republican sacred cow of defense.
Necessity Doesn’t Justify Excess
Establishment Republicans have become entangled with a massive defense contracting network muddled by lobbying and plenty of campaign cash. For too long they’ve received a pass because national security, unlike so many of the pet programs of the left, is a clear responsibility of the federal government. Irresponsible spending has been justified by claiming that cuts to the defense budget are unpatriotic or would weaken America’s strong, global military presence. It’s true that we must protect our freedoms and all of the functions of government, not hurt them. But the debate was falsely framed as a choice between cutting military spending or keeping America’s national security strong.
However, you don’t have to be a pacifist to see, as many in the Tea Party do, that spending across the board has gone out of control and must be reined in. The Tea Party Debt Commission report acknowledges the importance of balancing responsible spending with keeping America safe. It reflects Americans’ recognition that there is an incredible amount of waste in the defense budget that must be eliminated.
About $1 trillion of the Debt Commission’s savings come from defense cuts but focusing on three approaches: 1) cut wasteful spending, such as duplicative purchases of Pentagon supplies; 2) eliminate or move from the Pentagon’s budget all programs that have nothing to do with national defense; and 3) prefer specific cuts over across-the-board reductions or sequesters.
The sequester instated by the Congressional Super Committee’s failure to reach a compromise requires across-the-board cuts, including defense. This act of Congress is a “meat-ax” approach to spending cuts that could severely weaken our defense to a dangerously unacceptable level. The Tea Party Budget Commission looked deeper and found where the cuts in defense are needed, saving the strength, size, and development of our military without compromising on fiscal responsibility.
The Sagging Social Safety Net
But the Tea Party’s proposed budget doesn’t focus exclusively on defense spending. Of course, comprehensive budget reform must include significant entitlement reforms, and the Tea Party Debt Commission showed that Americans expect our elected officials to grab the third rail with both hands to begin breaking down the Social Security, Medicare, Medicaid and ObamaCare behemoths.
Progressivism has ushered Americans into an entitlement mindset, making programs like Social Security incredibly touchy subjects, even among so-called conservatives. However, we can no longer afford for politicians to dance around the issue. In 1936, the government made a promise to American workers: “Beginning November 24, 1936, the United States government will set up a Social Security account for you... The checks will come to you as a right.”
In spite of that promise, the future looks grim for young people who will be supporting the Baby Boomer generation. The Heritage Foundation estimated that by 2017 Social Security will pay out more in benefits than payroll taxes bring in. In 1940, 42 taxpayers supported each retiree. Now, it’s only 3.3 taxpayers per retiree. That means Washington will have to raise taxes for the working class to support retiring Baby Boomers.
In fact, 25 years from now Social Security will only have enough funds to pay for 75 percent of promised benefits. Even more daunting are the future costs of the program. Social Security has upwards of 60 trillion dollars in unfunded liabilities—numbers that Washington doesn’t share with the American people. The Tea Party budget supports a private account approach that has previously been implemented by Chile and many counties in Texas. Chile adopted a private account system in the early 1980s and the results were phenomenal: people were given the freedom to shop around for a program that best fit their needs, chose their own retirement age, and received higher retirement payments than the public system. Also, the effect on the economy was enormous. GDP growth was explosive and unemployment fell below 5 percent.
The Tea Party’s budget proposal adopts a modified approach to Jeff Flake’s SMART Act. This plan allows new workers born after 1981 to invest one-half of their payroll taxes in a SMART account. These accounts build on compound interest. The funds generated to provide for retirement and health care are expected to be much greater than the current public system. This plan provides people with more control over their own accounts, provides an increase in benefits through the power of compound interest, and does not touch the retirement age. However, the option of staying in the current system is still available.
Medicare, the second-largest government program, representing 13 percent of the budget, is also on the block for reform under the Tea Party budget proposal. The program is growing at an unsustainable rate of 7 percent a year, presenting itself as one of the biggest road blocks to a future balanced budget.
The program is too bureaucratic, top-down and government-centric. Patients do not have the freedom of choice or control over their benefits. Rather than focusing efforts on patient benefits and preventing fraud, the bureaucracy focuses on controlling medical costs—and fails to do either.
Medicare has also been used as a piggy bank to create ObamaCare—another unsustainable government-provided entitlement program. President Obama’s plan is to take money from Medicare and reduce reimbursement rates to doctors, hospitals, and other health service providers. The meat-ax policy reduces access to care, decreases efficiency, and increases growth in underlying costs. The Tea Party budget provides an answer that stops Medicare’s unsustainable growth without limiting patients’ access to care or stifling medical progress and innovation.
After 2013, Americans will have the choice to stay in the current program or to opt into the successful Federal Employees Health Benefit Program—the same program enjoyed by current and former members of Congress. By relying on private, competitive insurance companies, waste and fraud problems will be eliminated—saving $450 billion in the annual budget alone. This approach also makes the system more patient-centered, giving individuals more options at lower costs.
Medicaid, the third-largest federal program, which provides health care to the poor, is leading the states to bankruptcy. The system has transformed into a middle-class entitlement program that provides low-quality care to poor families. In fact, the system is so unstable that around 40 percent of physicians will not take new Medicaid patients. The Tea Party’s proposal relieves the financial and medical burden by issuing block-grants to the states. The allocation of scarce resources gives the States the incentive to determine who truly needs help.
The professional legislators on the Congressional Super Committee failed to come up with a relatively paltry $1.2 trillion in budget cuts. The across-the-board cuts in defense and non-defense discretionary spending that are impending as a result of their failure don’t even begin to address the underlying issues of our budget crisis, and don’t put us on the right track toward reform.
In making it clear that there are no longer any sacred cows and finding $9 trillion in budget cuts, the Tea Party has once again shown the politicians of the Washington establishment how do their jobs. More importantly, it provides Washington with a clear and bold plan for getting our finances back in order and putting us on the path to recovery.
Matt Kibbe is the President and CEO of FreedomWorks. He is a well-respected national public policy expert, bestselling author and political commentator and has been called “one of the masterminds” of Tea Party politics.