Food for thought

[Advisor]

Courtesy of the Cato Institute

http://www.cato.org/new/09-05/09-14-05r-2.html#table

News Release

September 14, 2005

Media Contact: (202) 789-5200

Budget Disaster Looming
Cato scholars offer budget cuts, as requested by Majority Leader DeLay

At a briefing on Tuesday, House Majority Leader Tom DeLay declared an "ongoing victory" against bloated federal spending. Congress passed $62 billion of spending for Hurricane Katrina relief that will push the deficit back up to the $400 billion range. When asked whether Katrina relief should be offset with budget savings elsewhere, DeLay said "bring me the offsets, I'll be glad to do it."

Cato Institute scholars Steve Slivinski and Chris Edwards have the offsets that the majority leader is looking for. They have compiled $62 billion in spending cuts that would offset Katrina relief in the short-term and create savings to reduce the federal deficit over the long-term.

The attached table (which is also pasted below) lists the cuts and the rationale for each cut. The cuts are targeted at business subsidies, welfare for the well-to-do such as farm subsidies, and activities that should be funded by states and the private sector. The cuts would not affect programs for the poor, and thus could get support from reform-minded Democrats. Many of the cuts were proposed, but not realized, by House Republicans in the 1990s.

Slivinski and Edwards think that Mr. DeLay needs to sit down and reexamine the federal budget. DeLay said "after 11 years of Republican majority we've pared it down pretty good." Yet total federal spending, aside from interest, has increased 79 percent since 1995 -- much greater than the inflationary increase in prices since 1995 of 28 percent. The budget has certainly not been "pared down" by the Republicans.

Hurricane Katrina required some federal relief spending, but the huge costs also demand a rethinking of budget priorities. With entitlement costs exploding and the war in Iraq an ongoing budget drain, Congress and the administration need to make sure that the Katrina disaster doesn't become a federal budget disaster.

Stephen Slivinski is director of budget studies at Cato. Chris Edwards is director of tax studies at Cato and author of Downsizing the Federal Government, forthcoming in November. (www.downsizinggovernment.com)

Proposed Budget Cuts to Offset Katrina Spending
Annual savings in $billions
Program	Savings	Rationale
Farm subsidies	$21.1	"Wasteful, environmentally harmful, and damaging to world trade"
NASA: cut budget in half	$7.9	NASA is obsolete with the arrival of private manned space flight
Energy research and subsidies	$6.2	Private sector responsibility
Subsidies for airports/air traffic control	$5.8	Should be privatized as in other countries
Community development grants	$5.4	Projects such as parking lots and sidewalks are a local responsibility
USAID (foreign aid)	$4.7	Duplicates the Bush Millennium Challenge Corporation foreign aid agency
Foreign economic aid	$2.7	Foreign economic aid does not work
Rural subsidies	$2.5	Wasteful and unfair to urban taxpayers
Bureau of Indian Affairs	$2.4	"Tribes earn $19 billion annually from gambling, and don't need taxpayer support"
Davis-Bacon Act: repeal	$2.0	Repeal Davis-Bacon and the Service Contract Act to cut federal contracting costs
Trade adjustment assistance	$1.0	Unneeded giveaway that is in addition to unemployment insurance
Amtrak	$0.4	"Passenger rail should be privatized, as in other countries"
Total	$62.0
Source: Chris Edwards and Stephen Slivinski, Cato Institute, based on Budget of the U.S. Government, FY2006.