The U.S. Postal Service is in financial trouble. Undermined by advances in electronic communication, weighed down by excessive labor costs and operationally straight-jacketed by Congress, the government’s mail monopoly is running on fumes and faces large unfunded liabilities. Socialism apparently has its limits.
As Congress and the White House continue to debate the future of Fannie Mae and Freddie Mac, one of the oft heard concerns is that if we eliminate all the various mortgage subsidies in our system, then the cost of a mortgage will increase. There certainly is a basic logic to that concern. After all, why have subsidies if they don't lower the price of the subsidized good. Of course some, if not all, of said subsidy could be eaten up by the providers/producers of that good.
The American Action Forum will host a conference on Capitol Hill this afternoon to discuss budget reform (details here). Sen. Bob Corker (R-TN) will discuss his “Commitment to American Prosperity Act,” which would cap federal spending at a declining percentage of GDP over ten years. Spending as a percentage of GDP would eventually be reduced to 20.6 percent, which is equal to the average from 1970 to 2008.
I recently discussed corruption in the Small Business Administration’s 8(a) program, which sets aside federal contracts for minority-owned or other “disadvantaged” small businesses. A ProPublica investigation into set-asides for Alaskan Native Corporations found that subcontractors and large companies in the other 49 states have been reaping the financial benefits.
A recent poll found that 60 percent of those surveyed believe that problems with the federal budget can be solved by simply eliminating waste, fraud, and abuse. In fact, 40 percent strongly agreed with this erroneous position.
Spending at the U.S. Department of Agriculture will be an estimated inflation-adjusted 43 percent higher this year compared to just a decade ago. The following chart shows the dramatic rise in USDA spending from fiscal 1970 to the president’s projection for fiscal 2011:
The federal government is approaching its legal borrowing limit, and fiscal conservatives in Congress are wondering what spending reforms they can extract in return for supporting a debt-limit increase. Various sorts of balanced budget amendments and debt limits relative to GDP are being kicked around. I support those ideas, but I fear that they may be too complicated to gain traction right now.
Last week I compared “other mandatory” spending in fiscal 2007 to the president’s proposal for fiscal 2012. Several readers requested that I produce a chart showing a similar breakdown for nondefense discretionary spending (or “domestic discretionary”).
Congressional Republicans want to reduce fiscal 2011 funding by $61 billion. The Obama adminstration and Senate Democrats believe these cuts are too large. As a result, a two-week continuing resultion was passed to allow the sides to reach an agreement on funding the government for the rest of the year.
While Congress haggles over Republican ambitions to trim $61 billion in funding for domestic discretionary programs, it’s important to remember that mandatory (or “entitlement”) spending is the main driver of recent and future budget growth.