Downsizing the Federal Government, Chris Edwards, Cato Institute, 2005.
Instead of advocating tax increases in the name of fiscal responsibility, this book focuses on how the bloated federal budget ($2.5 trillion in 2005, or about 20% of gross domestic product) could be reduced if our leaders put their minds to it. Here are some important facts about this budget:
State and local government are spending an additional 11% of GDP, so the total cost of government amounts to nearly 1/3 of the economy.
Federal-nondefense: 1900 – 1.8%; 1950 – 9.0%; 2005 – 16.0%State/local: 1900 – 5.0%; 1950 – 6.6%; 2005 – 11.0%
One special problem is government grants, which are used by the federal government to influence state or local government programs. Some $426 billion in grants were paid in 2005, ranging from $186 billion for the federal share of Medicaid and the $71 billion cost of the Dept. of Education (mostly grants) to “hundreds of more obscure programs that most taxpayers have never heard of.” The result is to encourage overspending for the stated grant purposes, foster federal, state and local bureaucracies to document compliance with federal mandates, and reduce flexibility and innovation at the state level.
Another problem is duplication. Different federal programs often have overlapping objectives, resulting in “turf wars” and/or unnecessary costs to ensure coordination. Thus, the GAO has reported 50 different programs for the homeless in eight federal agencies, 23 programs for housing aid in four agencies, 26 programs for food and nutrition aid in six agencies, and 44 programs for employment and training services in nine agencies. If a program is ineffective or obsolete, the typical response is to create additional programs -- without eliminating the existing program.
Edwards lists more than 100 programs and agencies as candidates for elimination, with resultant savings of $380 billion per year. He also advocates cost-saving changes to entitlement programs. If all of his recommendations were implemented, the current federal deficit could be converted to a surplus without raising taxes.
There is no market discipline if government programs fail (unless and until the taxpayers revolt) such as applies for undertakings in the private sector.
In summary, this is a sound and useful book. Fiscal conservatives unite, it is time that we stood up and were heard!