What are Dick Armey and Matt Kibbe talking about?

Dick Armey and Matt Kibbe of FreedomWorks.org have recently written an article for the Wall Street Journal; in it, they discuss their (and the CATO Institute’s) proposals for radically downsizing the federal government and with it, the annual federal budget deficit.

They’ve mentioned many good proposals to significantly reduce federal spending (including a proposal to end federal farm subsidies and a proposal to repeal a costly reg known as the Davis-Bacon Act). The article is generally good, except this part:

“Defense spending should not be exempt from scrutiny. With such dramatic increases in appropriations, it is not plausible that all resources are being spent prudently. Defense Secretary Robert Gates has proposed savings of $145 billion over five years. That’s a start.”


They wrote “defense spending should not be exempt from scrutiny” as if it was exempt. It isn’t, and has never been. The Congress constantly supervises the DOD and defense budgets; these budgets must be marked and authorized by the Congress every year; the Congress organizes annual hearings on the subject; and the ACTUAL history of the United States shows that whenever there is a budget deficit, defense spending is always the FIRST (and oftentimes the only) category of spending to be significantly reduced, as was the case during the 1800s, the 1930s, the late 1940s, the 1970s, the late 1980s, and the 1990s. Similarly, the current defense budget ($525 bn) is significantly smaller than the one for FY2010 ($534 bn in nominal dollars, $546 bn in inflation-adjusted dollars). So NO ONE can honestly claim that defense spending is exempt from scrutiny or spending cuts. And although I’m not saying it should be exempt from the former, I am saying that it should be exempt from the latter.

Armey and Kibbe complain that “With such dramatic increases in appropriations, it is not plausible that all resources are being spent prudently.” But this is no justification for defense spending cuts, merely a reason to reform the DOD, which is what Secretary Gates is doing. Moreover, the post-FY2001 growth of defense spending was not “dramatic”. It amounted to $170 bn (i.e. ca. 41%) over the FY2001 level of defense spending, but over 9 fiscal years! This was not dramatic growth, merely step-by-step constant growth that brought defense spending to the minimum necessary level ($542.76 bn in FY2010). The FY2011 ConRes reduced defense spending to an inadequate level – $525 bn for FY2011. That’s unacceptable.

Moreover, Gates has actually devised savings of $178 bn, not $145 bn, over the next 5 fiscal years (FYs2012-2016). They say “it’s a start”. Isn’t $178 bn over 5 fiscal years enough? It’s a significant saving (almost $36 bn per annum). Moreover, this is not the first reform of the DOD implemented during the 21st century. The first 21st century series of reforms was instituted by Secretary Rumsfeld, who saved taxpayers over $80 bn (in 2003 dollars) over the FY2004-FY2009 period. (The source: http://www.defense.gov/speeches/speech.aspx?speechid=404)

The budget can be easily balanced if radical reductions of domestic spending (discretionary and nondiscretionary alike) are implemented. My Blueprint for a Balanced Budget shows how it can be done.


On the other hand, Armey and Kibbe have not proposed the radical spending reductions I’ve proposed, such as halving the cost of the SS program, privatizing the USPS and the CPB, privatizing the TVA, abolishing the FTA, the FRA and the Dept. of Education, abolishing all 2,001 federal subsidy programs, reducing the cost of federal welfare programs by 50%, saving the money being defrauded annually from the MC and Medicaid programs, ending foreign aid programs, and halving the budgets of the DHS and the DOS. Why? Because they, like all libertarians, want to significantly reduce defense spending and weaken the military. For them, as for Ron Paul, America is an “evil empire” that must be “reduced down to size”.

The good news is that they and the CATO Institute have also proposed certain domestic spending savings, such as:

“If Congress returned to the baseline before the supposedly “temporary” stimulus bill of 2009, $177 billion per year would be saved, according to calculations by FreedomWorks based on figures from the Office of Management and Budget and the Congressional Budget Office (CBO). If spending went back to the 2007 baseline, the beginning of the first Pelosi Congress, $374 billion would be saved. Over 10 years, that is $748 billion and $1.56 trillion in savings, respectively.

Repealing ObamaCare is another obvious source of reduced spending. The absurd claim that this government takeover of health care produces budget savings is based on budget gimmickry—such as assumed Medicare cuts that, according to estimates by the Centers for Medicare and Medicaid Services, would put 15% of our hospitals out of business, and thus will never happen. The claim also ignores the historically explosive growth in other similar programs. Medicare grew nine-fold larger than was projected during its first 25 years. In its first 10 years alone, the program experienced a 700% cost overrun.

But let’s for the moment accept CBO’s numbers on ObamaCare spending. They still mean that repealing the health-insurance exchanges and the premium subsidies, including the expansion of Medicaid, saves $898 billion over 10 years. Repealing the individual mandate alone—and thus reducing rather than eliminating these premium subsidies and Medicaid outlays—would cut $252 billion.

Still more savings can be realized by eliminating taxpayer-funded bailouts. We need to cut the cord between taxpayer wallets and Fannie Mae and Freddie Mac. As Alabama Rep. Spencer Bachus, the new chairman of the House Financial Services Committee, said last March of Fannie and Freddie, “Taxpayers have already contributed more than $127 billion to the bailout and they are on the hook for hundreds of billions more.” The CBO estimates that the cost to taxpayers could rise to $389 billion. Others estimate it will take around $1 trillion. Fannie and Freddie need to be broken up and returned to the private sector now.

There’s more, much more. Eliminating subsidies to ethanol and for unproven energy technology produces $170 billion in savings over 10 years, according to the Cato Institute’s recent “A Plan to Cut Spending and Balance the Federal Budget.” Scaling back the number of government employees to fiscal year 2008 will save $35 billion, according to calculations from the office of Wyoming’s Rep. Cynthia Lummis.

Other 10-year Cato spending cut estimates: Scrapping the departments of Commerce and Housing and Urban Development saves $550 billion; ending farm subsidies would produce nearly $290 billion. Cutting NASA spending by 50% would save $90 billion. Repealing Davis-Bacon labor rules produces $60 billion. Ending urban mass transit grants would save $52 billion. Privatizing air traffic control, as other nations have done, saves $38 billion. Privatize Amtrak and end rail subsidies and save $31 billion. Reform federal worker retirement, $18 billion. Retire Americorps, $10 billion. Shutter the Small Business Administration, $14 billion.


Entitlements—56% of the annual budget and growing—are the most difficult but also the most important programs to reform, because the total unfunded liability tops $100 trillion for Social Security and Medicare alone. The federal government does not put these liabilities on the books, but serious budgeting requires that we deal with this ominous long-term burden now.

The most complete work on entitlement reform comes from Wisconsin Rep. Paul Ryan, the new chairman of the House Budget Committee.”

URL: http://online.wsj.com/article/SB10001424052748703779704576073750780454850.html


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