Our Thelma and Louise government

Members of Congress who pay attention to spending regularly inform us that federal spending is on an unsustainable course.


This conclusion is shared by the Peterson Foundation, which did a detailed analysis of the Congressional Budget Office's (CBO) long-term budget projections. Given current law and projected spending increases, within 20 years, federal spending will be largely consumed by mandatory spending programs — Social Security and Medicare — and debt service. Discretionary spending, including national defense, falls to historic lows. For some, this is a justification for raising taxes so that Congress and the administration can do what they like to do: spend.

Recently, the Richmond Times-Dispatch had an editorial about the federal budget headlined "We're not drowning in debt yet, but ...". It discussed two scenarios: One has the national debt increase by almost 50 percent over the next couple of decades. The second, labeled pessimistic, assumes that "Congress will do what it almost always does: extend tax cuts ... jack up spending and use gimmicks to mask the true extent of its profligacy." Business as usual takes the national debt to 156 percent of gross domestic product (GDP). The kicking-the-fiscal-can down the road approach is analogous to Thelma and Louise happily driving their car over the cliff — with the same consequences.

Higher economic growth combined with spending cuts and higher taxes forestall the day of reckoning, but don't solve the underlying problem. We are not under-taxed. The problem — a persistent one — is that federal expenditures exceed revenue. Persistent deficits increase the national debt, resulting in a misallocation of resources as potential private investment gets shifted to debt service.

Since 1950, based on Tax Foundation data, federal expenditures, as a percentage of GDP, have risen in every decade. In 1950, they were 15.8 percent; by 1970, 21.2 percent. Only in 2000 did expenditures dip below 20 percent, to 18.8 percent. After the great recession, they rose to 26.2 percent. While they have now declined to 20.5 percent, the CBO forecasts that they will rise to 22.4 percent by 2024 and without corrective action will continue to rise, even though revenue will increase by over 50 percent over the same timeframe. This depressing situation may help explain why the younger generation believes that they will never be better off than their parents.

Federal spending and the growing allocation of revenue to mandatory expenditures will continue to be a major problem for our economy until there are fundamental changes in the structure of mandatory programs and the role of the federal government is redefined. The question should not be what can government do, but what should government do?

Policies that help the economy return to 4 percent rates of growth — real regulatory reform, removal of barriers to investment and fundamental tax reform — are essential, but not sufficient.

In 1947, President Truman established the Hoover Commission to address the organization and administration of the executive branch. It led to the Reorganization Act of 1949. It has been almost 70 years since that serious and thorough examination of the structure and functions of the executive branch. No successful private enterprise would survive going that long without review and restructuring to keep its mission aligned with the highest valued wants of its customers. The mix of private goods and services has changed over the past 70 years, and the mix of government services should be adjusted accordingly. Today we have a government that is too big to succeed, but big enough to fail.

With a new president and Congress taking over in 2017, the time is ripe for a fundamental review of what services make sense for the government to provide. The next president will have the opportunity to lead in realigning and reengineering the executive branch to better meet near-term, legitimate priorities for government while putting in place policies that will strengthen the economy for the benefit of future generations who currently are at economic risk. Undertaking such a challenge would take immense courage and a willingness to risk being a one-term president. A truly great president would do the right thing and let the chips fall where they may.

The next president and Congress should work together in creating a 21st-century Hoover Commission using the Base Realignment and Closure Commission as a model. That means that the commission's report and recommendations would have to be voted up or down in entirety and not picked apart by special interests. The elected officials who take office in 2017 need to ask themselves the question raised by President Reagan: If not us, who; if not now, when?

O’Keefe is CEO of the George C. Marshall Institute.