- The Washington Times - Monday, January 9, 2006

DOWNSIZING THE FEDERAL GOVERNMENT

By Chris Edwards, Cato, $20, 251 pages

The headline tells it all. In the 1988 presidential election campaign, White House speech-writer Peggy Noonan tried to lock up Vice President George H. W. Bush’s tax pledge with that “read my lips” line. The lock broke down, however, when President Bush, No. 41, and his budget director, Richard Darman, didn’t look very hard for wasteful programs to cut but instead gave in to GOP pressure to boost spending and taxes — upsizing government even more.

The rest, as is said, is history. For as Cato director of tax-policy studies Chris Edwards holds here, now the feds are bleeding red ink, spending blindly and heading for a possible financial crisis. Why? Well, in the first four Bush II years, the White House encouraged or failed to veto big jumps in outlays for agriculture, education and health care, while defense spending, especially with the Iraqi war, zooms.

Right off, Mr. Edwards performs a graphic service in measuring the size of pre-Katrina 2005 federal spending of $2.5 trillion in a pie chart with the following seven slices: 1. interest ($177 billion); 2. defense ($495 billion); 3. discretionary nondefense ($467 billion); 4. Social Security ($517 billion); 5. Medicare ($325 billion); 6. Medicaid ($186 billion); and 7. other ($284 billion).

Mr. Edwards also worries about eight “tentacles” of what he calls the 2005 federal fiscal “octopus,” which include: 1. grants to states and localities ($426 billion); 2. estimated annual cost to citizens of regulations ($877 billion); 3. loans via $1.2 trillion outstanding loan guarantees ($250 billion); 4. federal executive, legislative and judicial branches’ payroll ($281 billion); 5. taxes paid via 61,224 pages of tax laws plus IRS regulations ($2.1 trillion); 6. transfer payments to individuals ($1.1 trillion); 7. government purchases, procurement and other ($459 billion); and 8. rise/persistence of government “businesses” such as USPS, TVA, Amtrak and Corporation for Public Broadcasting (no overall figure available).

To be sure, this book focuses on spending and not taxes and regulations. Still, the author sees the feds more and more “manipulating society through these two tentacles as well.” On taxes, Mr. Edwards notes Congress and the IRS tripling the number of pages on tax rules and exceptions (loopholes) in the last 30 years. Likewise, on regulations he sees the number of employees in regulatory agencies doubling in the last 30 years.

So Mr. Edwards builds a persuasive case on why our overblown federal government must downsize, giving four reasons: First, we should see that most existing programs are not authorized by the Constitution, that they were meant to be left to the states or the people by the Ninth and 10th Amendments. Reads the 10th Amendment, for example: “The powers not delegated to the United States, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

Second, says the author, today’s huge and dizzying array of programs has overtaxed the ability of Congress to effectively oversee the executive branch, apart from hewing to priorities such as national security. Third, the surging costs of programs for the elderly require offsetting cuts throughout the budget.

And fourth, as the fiscal burden on the economy gets increasingly heavy, the cost-benefit ratio is way off, with returns on many programs in the negative column. As Mr. Edwards says: “Much of the federal government today is a burden on civilized society, not a benefit.”

The Edwards work is loaded with case-by-case of counterproductive federal setups. For example, he sees Medicare spending as a case of federal outlays getting out of control, up from $118 billon in 2000 to $186 billion in 2005, a 58 percent jump in just five years.

Too, the program is rife with waste, fraud and abuse, as the Government Accountability Office warns: “Medicaid is at risk for billions of dollars in improper payments.” Medicare is in the same fix — but that’s just before a tide of post-World War II baby boomers sweeps in with Social Security, causing mind-boggling unfunded liabilties for Uncle Sam in the tens of trillions of dollars.

As Nobel economist James Buchanan says in a rattling less-is-more book blurb: “A responsible program-by-program set of proposals to get the federal government within reasonable limits. Utopian, indeed, but only to those who are blind to the dystopia that looms.” I agree.

William H. Peterson is an adjunct scholar at the Heritage Foundation and at the Ludwig von Mises Institute.

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