Federal spending

The first wave of baby boomers is scheduled to begin claiming their Social Security benefits before the end of the next presidential term, dramatically focusing attention on the long-term funding crises afflicting the nation’s three-largest entitlement programs — Social Security, Medicare and Medicaid. Meanwhile, as the current year’s budget deficit approaches half a trillion dollars, the federal government has busily engaged itself in a spending explosion that will see annual federal spending rise by more than $500 billion, or nearly 30 percent, over a four-year period. Measured over a 40-year period, the 2002-04 fiscal years account for three of the five years that have experienced the largest percentage increases in inflation-adjusted federal discretionary spending.

While some of the recent spending explosion is related to the fight against terrorism, it is worth noting that inflation-adjusted nondefense discretionary spending during the Bush administration will have risen by more than 25 percent through fiscal 2005. And that assumes a virtual freeze in such spending for fiscal 2005, which begins Oct. 1. By way of contrast, comparable nondefense spending during the first Reagan administration actually declined by nearly 10 percent.

In recognition of such Reaganesque restraint and in anticipation of the coming retirement-related entitlement spending explosion, Chris Edwards of the Cato Institute outlined a plan to downsize the federal government over a five-year period that would eventually produce annual discretionary savings of $300 billion. The plan would terminate some programs (e.g., farm subsidies, $17 billion per year; Small Business Administration, $4 billion; Employment and Training Administration, $5.6 billion; excess military bases, $5 billion); privatize others (National Institutes of Health applied research, $12 billion; Amtrak and related subsidies, $1.5 billion; air traffic control and airport grants and subsidies, $9.3 billion); and devolve the remaining ones to the states (Temporary Assistance for Needy Families, $19 billion; law enforcement grants, $2.8 billion; Head Start, $6.8 billion; elementary, secondary and special education programs, $37 billion).

The Cato plan would require the Republican-controlled Congress, which has overseen a nearly $200 billion increase (more than 85 percent over nine years) in annual federal grants to state and local governments, to exercise some restraint in that regard. Reversing direction is hardly impossible. Between 1980 and 1985, for example, President Reagan reduced inflation-adjusted federal grant spending by 15 percent, Cato reports.

Clearly, many of the cuts proposed by Cato will be politically difficult, but reversing direction is hardly impossible.