Chicago, Puerto Rico and Greece show what will happen if Washington politicians continue to put pork and crony capitalism above fiscal responsibility. For seven years now, the U.S. economy has been built on a quicksand of historically extreme monetary and fiscal stimulus. Massive federal debt and zero interest rates have squeezed the middle class, stifled investment in job-producing research and productive assets, and pumped up extraordinary bubbles in bonds, stocks and trophy real estate.
Compounding these policy distortions is the federal governmentโs radically unsustainable future fiscal path. Weโve racked up over $19.2 trillion in debt on the books, and over $100 trillion ($1 million per household) when fairly accounting for unfunded future social insurance obligations such as Social Security, Medicare and veteransโ services. Over the next ten years, the Congressional Budget Office projects deficits of nearly $1 trillion per year.
Even when controlled by Republicans, Congress puts incumbent re-election ahead of the national interest, routinely capitulating to campaign donors who want debt-financed pork and tax loopholes, our future be damned. Our national credit card is maxed out and we are eating our seed corn. Former Chairman of the Joint Chiefs of Staff Mike Mullen has repeatedly warned that the โsingle, biggest threat to our national security is our debt.โ
To protect our nation and take the brakes of uncertainty off our economy, Congress must act next year to gradually bring federal debt permanently down to about half the current 105 percent of GDP. Congress must phase in some combination long-term spending cuts or tax increases equal to about $1 trillion per year. This means cutting one-quarter of federal spending or increasing income taxes by about 65 percent. I oppose net tax increases, given that federal revenues are already about one percent above the past 50-year average of 17.4 percent of GDP.
Massive numbers like these mean substantial spending reductions across almost the entire budget. There is no credible support for claims that we can grow our way out of the problem. Washington incumbents like Kelly Ayotte, who promised in 2010 to be a fiscal conservative and then voted over the past two years for budgets that added $1.5 trillion in debt, must be replaced by senators with the backbone to say no to powerful lobbyists and campaign donors. The acid test for conservative candidates is willingness to show backbone and get specific on big dollar spending cuts.
Balancing the budget will be impossible until America reduces our highest in the world health care costs. Compared with other advanced nations, we spend more than twice per person, yet our medical outcomes and health status rank nowhere near the top. Federal health care spending tops $1 billion per year, about one-quarter of the budget.
Among about two dozen government health care cost-saving measures I have proposed: allow Medicare to negotiate drug costs, speed FDA approval the 6,000 generic drug application backlog, repeal the hospital Group Purchasing Organization anti-trust exemption, pass medical tort reform, crack down on Medicare fraud, increase insurance options, replace fee for service with flat-fee and outcome-based payments, expand community health clinics, improve chronic disease management, and end health care funding for illegal aliens. These measures will save about $150 billion annually.
Since the early 1970s, the U.S. has spent over one trillion dollars on drug prohibition and incarceration. Yet, illegal drugs are cheaper and more widely available than ever. Nearly ten percent of Americans used illegal drugs last year. Domestic consumption exceeds $100 billion, and crime, lost productivity and health care cost almost $200 billion annually across the economy. Letโs free up our thinking and shift to a treatment on demand strategy to curb drug use on the demand side. Congress should allow the states as they see fit to legalize, regulate and tax marijuana as a source of funding for addiction treatment. Across the entire economy, treatment on demand would cost about one-quarter the cost of prohibition-incarceration.
There is no credible means to balance the budget without cutting pork and crony capitalism from the $900 billion national security budget. Fiscal responsibility demands that Congress require the Pentagon budget to be audited for the first time in 25 years. We must require that our allies contribute more of their own resources for the war on terror and for NATO operations. And Congress must end weapons systems pork, starting with the failed $1.4 trillion F-35 fighter program. The cost-saving approach which will better guarantee U.S. air superiority is to kill the F-35 program and to upgrade existing F-15, F-16, F-18, and A-10 aircraft.
To reduce risk of nuclear war and to reduce the cost of the pending $700 billion program to modernize the nuclear weapons triad, I propose that all land-based nuclear missiles be eliminated, rather than upgraded, for a long-term savings of up to $120 billion. Our remaining 2,000 survivable submarine- and bomber-based nuclear weapons would be more than sufficient to guarantee annihilation of any enemy.
Procedurally, there are three means to achieve long-term fiscal sanity:
A Congressionally-proposed balanced budget amendment, unlikely until some Democrats see the light. Fortunately 28 of the needed 34 states (including New Hampshire) have called for a state-led convention to propose BBA language.
A process similar to that used to cut through parochialism and close unneeded military bases, where a House-Senate select committee is charged with crafting a long-term budget sanity plan, subject to a no amendments and an up or down supermajority vote by Congress.
The election of sufficient numbers of members to Congress willing to use the constitutional power of the purse and vote no on reckless budgets and force Democrats and the President to the bargaining table. Under Newt Gingrichโs leadership in the 1990s, Republicans had the backbone to do this and achieved four years of budget surpluses and robust economic growth.
Jim Rubens lives in Hanover and is a Republican candidate for U.S. Senate.