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Armey, Kibbe Identify Trillions in Spending Cuts

In a Wall Street Journal op-ed this week former Republican majority leader Dick Armey and FreedomWorks‘ Matt Kibbe lay out a good number of ways to rein in government spending.

They point out that since 2007, federal spending has skyrocketed. If Congress returned to spending levels from before Democrats took control of the legislature, it would save hundreds of billions a year according to combined figures from the Office of Management and Budget and the Congressional Budget Office (CBO).

But several hundreds of billions is not enough to fix a $1.3 trillion deficit. Armey and Kibbe suggest that whole programs should be cut, starting with the president’s health care reform act.

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 percent of our hospitals out of business, and thus will never happen.

It also ignores the historically explosive growth of entitlement programs once they are enacted. Medicare, for instance, grew ninefold larger than was projected during its first twenty-five years. In its first ten years alone, the program experienced a 700 percent cost overrun.

Even if one accepts the CBO’s budget projects, repealing ObamaCare could save almost $900 billion over ten years. Repealing the individual mandate alone would cut $252 billion.

More savings can be realized by privatizing the semipublic mortgage providers Fannie Mae and Freddie Mac. “There’s more,” write Armey and Kibbe; “much more.”

  • Eliminating subsidies to ethanol and other unproven energy technology is estimated to produce $170 billion in savings over ten years.
  • Scaling back the number of government employees to fiscal year 2008 could save $35 billion.
  • 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 percent would save $90 billion.
  • Ending urban mass transit grants would save $52 billion.
  • Privatizing air traffic control saves $38 billion.
  • Privatizing Amtrak and ending rail subsidies would save $31 billion.
  • Reforming federal worker retirement would save $18 billion.
  • Retiring Americorps would save $10 billion.
  • Shuttering the Small Business Administration would save $14 billion.

It adds up to many billions more in savings but most essential is entitlement reform. With an entitlement crisis looming, Medicaid, Medicare and Social Security cannot be exempt from austerity. Armey and Kibbe estimate that the total unfunded liabilities of Medicaid and Social Security alone add up to $100 trillion.

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 two conservatives praise Congressman Paul Ryan’s market solutions to reforming entitlements. By privatizing the programs, in part, the government could save up to $370 billion a year in 2020.

“None of this will be easy,” Armey and Kibbe admit. “But the politics of spending has changed, and there is an expectation among fiscally conservative voters—Republicans, independents, tea partiers and even Democrats—that the government tighten its belt, just as American families have been forced to do.”

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