by Matt Kibbe
End farm subsidies ($290 billion). Washington should never have gotten into the business of trying to manipulate crop prices and output.
Repeal Davis-Bacon labor rules ($60 billion). These Depression-era rules require that federal contractors be paid exorbitant, union-scale wages.
End urban mass transit grants ($52 billion).
Privatize air traffic control, as other nations have done ($38 billion).
Privatize Amtrak and end rail subsidies ($31 billion).
Reform federal worker retirement ($18 billion).
Retire AmeriCorps ($10 billion). Why are we paying people to volunteer?
Shutter the Small Business Administration ($14 billion).
Defense, which represents a fifth of the budget, also needed to be on the table. Having been doubled in size during the Bush years, the Pentagon undoubtedly suffers from significant waste and duplication that should be cut. Our suggestion: implement the savings of $145 billion, over five years, proposed by Defense Secretary Robert Gates, who served in that capacity under Presidents Bush and Obama.
Not having room in 900 words for a comprehensive approach to entitlements (I attempt to take such an approach in the following chapters of this book)—56 percent of the annual budget and growing—we simply accepted reforms based on Paul Ryan’s pathbreaking “Roadmap for America’s Future.” By moving toward a powerful, consumer-driven approach, we estimated that taxpayers could save $370 billion a year by 2020.
“We’ve identified almost $3 trillion in real spending cuts over a decade,” we wrote, “and have only scratched the surface.” What an understatement that turned out to be. It wasn’t long before our $3 trillion in “bold” cuts was looking downright timid, next to the budget plans emanating from the eager entrepreneurs on the Hill, such as Senator Rand Paul.40 Never having been outflanked by a sitting U.S. senator when it comes to questions of fiscal responsibility, I was slightly stunned. But I was more proud than stunned. Once again, the men and women of grassroots America, along with their new proxy representation seated at the table, had beaten expectations and Washington, D.C.
First out of the chute was the Paul Ryan budget plan, which would balance the budget over thirty years mostly by capping annually appropriated spending and reforming Medicare and other entitlements. Meanwhile, freshman Mick Mulvaney—who had just knocked off the longtime Democratic incumbent and revered Budget Committee chairman, John Spratt—was working to compile an even bolder alternative plan for the House conservative caucus, the Republican Study Committee. The RSC Plan would reach balance a full twenty years sooner than Ryan’s, mostly because it cut more deeply and would slowly raise the Social Security retirement age to seventy.
Over in the Senate, Pat Toomey soon put out a plan very similar to Mulvaney’s, while his fellow freshman, Rand Paul, trumped everyone with a plan to balance the budget in just five years. What distinguishes Paul’s approach is that, alone among these plans, it specifies whole cabinet departments for elimination, specifically, HUD, Commerce, Energy, and Education.
All these plans would repeal Obamacare, reform Medicare, block-grant Medicaid, reduce the top tax rate to 25 percent (from the current 35 percent), shrink the government as a share of the economy, and stop the growth of the national debt. In terms of ten-year savings, the plans stacked up roughly as follows: Ryan: $6 trillion; Mulvaney: $9 trillion; Toomey: $7 trillion; and Paul: $10 trillion. Recall where we began this conversation: $3 trillion.
In April, the House passed Paul Ryan’s budget after rejecting several alternatives, including Mulvaney’s (narrowly). And while Harry Reid’s Senate couldn’t pass a budget, Paul Ryan’s at least garnered forty Senate votes. Compare that to the zero that went to President Obama’s. Not one Senate Democrat would vote for the Obama plan, which would have increased ten-year spending by $2.3 trillion and taxes by more than $1 trillion. By May, President Obama was demanding a massive, $2 trillion increase in the debt ceiling, without any real spending reforms.
I know what you are thinking. No one’s plan was passed. So what was accomplished, exactly? Two things. First, we stopped $2.3 trillion in new spending. Second, we created a Republican consensus to fully repeal Obamacare, something that seemed implausible prior to the 2010 elections. Both accomplishments were inconceivable back in 2008 after the passage of TARP, or in the days after the Obama inauguration in 2009.
We were slowly turning the ship of state. But not quickly enough. Like the Titanic, we were still headed full steam toward an iceberg that could sink us all.
BUDGETING FROM THE BOTTOM UP
THAT’S ABOUT THE TIME WHEN A MEETING OF GRASSROOTS LEADERS came up with the idea of a Tea Party Debt Commission—a panel of citizens that would go out and listen to the American people and give them a sounding board on the budget and debt crises.41 The commission’s report would put to rest the argument that our movement isn’t serious about specific spending cuts or that we “have no plan.” The only way we will ever reduce the debt and balance the budget, we had concluded, is when America beats Washington and Tea Party activists take over the process. Real reform will only happen from the bottom up.
In late June 2011, at a Washington gathering of about 150 Tea Party leaders, we developed the commission concept. By late August, we had found a dozen volunteers to serve on the commission, at their own expense. We were in business.
The Tea Party Debt Commission was, in a sense, our answer to the “supercommittee,” that unique and remarkable creature of the Beltway debt ceiling deal. While the supercommittee was composed of twelve powerful Washington insiders charged with trimming the budget around the edges, the Tea Party commission would be a dozen shirtsleeve Americans—volunteer activists and leaders from across the country—who would come together to help save our country from a Greek-style debt collapse. Whereas the supercommittee would be superprivileged—its work product would receive fast-track consideration, a guaranteed up-or-down vote in both houses, no amendments, no extended debate, and no filibusters (in other words, it would be one of the most powerful congressional committees in the history of the republic)—the Tea Party Debt Commission would succeed or fail based solely on the merits and appeal of its ideas.
As we noted earlier, the supercommittee failed to reach any agreements, and quietly slipped into obscurity. Even if it had succeeded, it would have reduced spending by a mere drop in the bucket, just $1.2 trillion over ten years, from a steeply rising baseline. The Tea Party Debt Commission, by contrast, had set for itself the much more ambitious goal of reducing spending by $9 trillion—nearly eight times as much. Why that particular target? Because that’s the amount that lets you balance the budget in less than ten years while also stopping the national debt from growing as a share of the economy. Right now, the nation’s accumulated debt is equal to nearly 100 percent of one year of economic output. Merely $1.2 trillion in savings does nothing to keep the debt from growing to disaster levels (for Greece, it was around 150 percent of the economy) within the next decade. Or, to put it another way, the supercommittee would have merely reduced ten-year spending from $44 trillion to $43 trillion, a mere 2.3 percent. Our $9 trillion goal, by contrast, would reduce ten-year spending from $44 trillion to $34 trillion, a 23 percent reduction.
After four months of field hearings around the country and a massive online survey, the TPDC released its proposal, which it dubbed the “Tea Party Budget.”42 The plan achieves all its goals, and then some, incorporating good ideas from thousands of activists and survey participants, as well as some of the best ideas in the budget plans of Mulvaney, Ryan, Toomey, and Paul.
The Tea Party Budget builds on a compellingly simple framework popularized by Representative Connie Mack of Florida, who saw that by cutting federal spending by 1 percent a year in real terms, we can balance the budget within a decade. Mack’s “One Percent Spending Reduction Act,” also known as the “One Cent Solution” or the “Mack Penny Plan,” does just what its name implies. It reduces overall federal outlays minus inte
rest by 1 percent a year until the budget is balanced, and then caps total spending at 18 percent of national output.
Building on this simple framework, the Tea Party Budget spells out a detailed, year-by-year path to balance. The plan:
Reduces federal spending by $9.7 trillion over ten years, as opposed to the president’s plan to increase spending by $2.3 trillion.
Closes a historically large budget gap, equal to almost one-tenth of our economy.
Balances the budget in just four years, and keeps it balanced, without tax hikes.
Shrinks the federal government from 24 percent of the economy—a level exceeded only in World War II—to about 16 percent, in line with the postwar norm.
Stops the growth of the debt, and begins paying it down, with a goal of eliminating it within this generation.
To achieve those goals, the plan:
Repeals Obamacare in total.
Eliminates four cabinet agencies—Energy, Education, Commerce, and HUD—and reduces or privatizes many others, including EPA, TSA, Fannie Mae, and Freddie Mac.
Ends farm subsidies, returns student loans to the private sector, and stops foreign aid to countries that don’t support us.
Saves Social Security and greatly improves future benefits by shifting ownership and control from government to individuals, through new personal saving accounts.
Gives Medicare seniors the right to opt into the congressional health care plan.
Suspends pension contributions and COLAs for members of Congress whenever the budget is in deficit.
“In short,” write the citizen commissioners, “the Tea Party Budget enables us to end chronic deficits and pay down debt, while moving us back toward the kind of limited, constitutional government intended by our Founding Fathers. And it does all this without raising taxes. With these reforms,” they continue, “we can unburden the productive sector and get back to robust economic growth and rising living standards for all. With this plan, everyone benefits.”
How far we’ve come from 2009.
But for all these successes, it is painfully clear that the fight is before us, that the forces of centralized government are still playing the game in Washington from a position of strength.
All the solutions laid out in the following chapters share a common foundation: they reflect the philosophy of decentralization that will restore America as an exceptional nation based on free individuals. We need to replace top-down dictates with bottom-up control. But beating Washington is not a onetime event. If you understand and believe in the power of smaller government and more individual freedom, you know that the hostile takeover of Washington requires continued vigilance of the people, for the people.
CHAPTER 7
LOOTERS AND MOOCHERS
When you see that money is flowing to those who deal, not in goods, but in favors—when you see that men get richer by graft and by pull than by work . . . you may know that your society is doomed.
—Ayn Rand, Atlas Shrugged
ONE OF THE MOST PERSISTENT MYTHS IN MODERN POLITICS, CONSIDERED by the mainstream media to be as reliable as the laws of gravity, is the belief that corporate America is a staunch defender of free markets and unfettered entrepreneurship. A corollary of this lie is a second one: Republicans, as advocates of limited government, are “pro-business,” and Democrats, as defenders of the common man, are populist watchdogs against corporate greed.
These lies may be politically convenient to those who employ them, but they are lies nonetheless.
Do you believe these lies? I wouldn’t really blame you if you did, because they are reinforced daily in the news. Today, this preconceived storyline substitutes for hard-earned investigative journalism. Likewise, you would be hard-pressed to find a single speech by Barack Obama that did not set up these caricatures and then knock them down. For our progressive president, public policy always involves more benevolent government, selflessly implemented by better bureaucrats, to stop the greed and excesses of corporations in unregulated markets. But for Republicans in bed with business interests, the story goes, President Obama would lead us to the promised land of limited corporate power and honest government guardians of “the little guy.”
Great story, but it’s never true.
I learned the hard way about my own naïveté when I worked as a budget economist at the U.S. Chamber of Commerce in the early 1990s. When I took the job, I assumed that the world’s largest business organization, with “The Spirit of Enterprise” emblazoned across the top of its logo, was just that: an unwavering defender against the encroachments of big government on free enterprise. I suppose I knew better going in, but conventional wisdom sometimes gets the best of all of us. I left the Chamber several years later with a more realistic view of how the world works, soon after that supposedly staunch defender of free enterprise endorsed President Bill Clinton’s attempted government takeover of the health care system. As I watched in disbelief, many of the biggest member corporations saw an opportunity to shift their costs onto someone else—consumers, taxpayers, and smaller upstart competitors. Pharmaceutical interests and health insurance companies saw a competitive advantage in rewriting the rules of the game to their advantage. All this was a noxious stew of “rent protection” and shameless “rent-seeking.” These interests dominated the Chamber’s health care policy-making process, pushing the “spirit of enterprise” to endorse a government takeover of one-sixth of the U.S. economy.
In 2009, those same corporate interests would shift their policy-making influence from 1615 H Street, the Chamber of Commerce headquarters, and migrate across Lafayette Park to 1600 Pennsylvania Avenue, where they would help a Democratic president write the provisions in Obamacare to their own benefit.
In truth, the struggle of individual freedom against the power of big government has never been about Republicans versus Democrats or big corporations versus the public good. It has always been about Them versus Us: insiders in charge, ensconced behind closed doors, versus the shareholders, outside. From the time of the East India Company and entrenched New York business interests in bed with the British Empire in the 1770s, it has been a struggle between the insiders who conspire against our freedoms, and the working folks on the streets of Boston, who will always pay the price.
The Founders were keenly aware of these facts of life. Sam Adams had targeted the New York delegation of the Continental Congress with grassroots pressure from their constituents, literally goading them into signing the Declaration of Independence. They didn’t want to, because New York had made its comfortable accommodations with the British Parliament, but grassroots power from the bottom up made them feel the heat of accountability. They were the crony capitalists of the day, growing fat on government-granted monopoly power.
Adam Smith, ably representing the ethos that defined America’s founding in 1776’s The Wealth of Nations, wrote of the tendency of those in business to conspire. It’s human nature. But the real danger, he warned, was the potential of “the law” to “facilitate” the collusion of businesses:
People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty or justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.1
AN OFFER YOU CAN’T REFUSE
WASHINGTON, D.C., IS THE TOWN OF “GRAFT AND PULL,” AND ITS reach is expanding. What Ayn Rand understood, and what the Left would rather have the masses forget, is that when government becomes a favor factory—doling out exemptions, stimulus funds, and tax breaks—the private sector will come. As long as government remains in the business of redistributing wealth—hurting other people and taking their stuff—business interests will find it irresistible to come to the s
eat of power, find “a man in Washington,” and compete through the political process instead of delivering the best product to consumers.
Rand called those who engaged in these cozy relationships “looters and moochers.” The moochers are the corporate bigwigs who feed from the public trough of political largesse that the looters in government have stolen from the people. In other words, while the heroes in Atlas Shrugged are indeed the entrepreneurs who “carry the world,” the villains are also industrialists who know that the best way to beat their competition when they fail to meet the demands of consumers is to go to Washington.
Like characters in Rand’s novel, modern-day corporate executives ply their trade in the political arena, beating a path to Washington, D.C. Once inside the Beltway, CEOs and their armies of lobbyists collude with committee chairmen for mutual gains, writing regulatory barriers to entry to boost both the bottom line and government power. And while I’m about to blast them for doing so, why shouldn’t they? Washington politicians—in both parties—have essentially put up an Open for Business sign to companies willing to deal. There are strings attached. A partner in Washington is like a business partnership with Don Vito Corleone in The Godfather: sometimes the committee chairman comes calling on you and sometimes you go, hat in hand, to see the chairman. Either way, expect someone to make an offer you can’t refuse.
IMAGINATIVE MOOCHING AT WORK
EXHIBIT 1: JEFF IMMELT, CEO OF GENERAL ELECTRIC, PRESIDENT Obama’s “jobs czar,” and corporate rent-seeker. Soon after Barack Obama was sworn in as president in 2009, Immelt informed his shareholders that the economics of the future had shifted fundamentally, away from freedom and the accountability of competition to serve consumer needs, toward something else entirely. “The interaction between government and business will change forever,” said the CEO. “In a reset economy, the government will be a regulator; and also an industry policy champion, a financier, and a key partner.”2 This from the storied American company founded by Thomas Edison, inventor of the incandescent lightbulb. In 2007, the struggling corporation had successfully lobbied for a government ban of that ubiquitous bulb. The company wanted to shift consumer demand to its compact fluorescent bulbs made in China, which was part of its big political bet on green energy—or as its message shop put it, GE’s “ecomagination.” Eventually, the company hoped to force consumers to buy a far more expensive, higher efficiency incandescent bulb.3