Project Report:
Getting Spending and Taxes under Control
Purpose
- Investigates causes tending to destroy or impair the free-market system.
- Explores and develops market-based solutions.

Summary

Thanks to excessive long-term spending obligations, the U.S. Federal Government’s budget is projected to swell to nearly 50 percent of the economy by 2050. To prevent such a drastic rise in federal spending, The Heritage Foundation seeks to show Americans the full picture of the federal budget – including long-term obligations from entitlement programs like Social Security, Medicare and Medicaid – in order to generate public pressure for spending control. We’ll work to change the public’s view of entitlements and intergenerational obligations in the context of the long-term budget crisis, so that Americans embrace the need for structural changes to curb spending. In addition, we’ll strive to convince Americans that raising taxes harms growth and jobs and is not the solution to uncontrolled spending. Finally, we’ll work to change the congressional dynamics of entitlement reform to one of bipartisan support for serious restructuring and control of entitlements.

Description

Since the Alex C. Walker Foundation’s $3,000 grant to Heritage in August 2009, most of Washington seems to have focused on “gotcha” partisanship and health care – and the recent health care debate combined these two elements. Thus, the climate for progress on entitlement reform was a difficult one. Despite this, Heritage was able to take some significant, strategic steps toward our goal of bipartisan entitlement reform. Our campaign to promote entitlement reform is proceeding in overlapping stages. Stage one of our campaign has focused on getting the American people to recognize that we face the biggest budgetary crisis in our history and to consider the range of solutions; stage two has focused on persuading Congress to enact reforms that will lead to a more honest and transparent budgetary process; stage three has concentrated on getting liberal, moderate, and conservative stakeholders (business associations, labor unions, patients’ groups, retirees, etc.) to agree on a “grand bargain” that will bring Social Security, Medicare, and Medicaid spending under control. This final report highlights our progress on each of these stages from September 2009 to August 2010.

Purpose

Educating the American People: In the current reporting period, Heritage participated in three stops of the Fiscal Wake-Up Tour, our joint effort with liberal and conservative think tanks to inform America about the coming entitlement crisis. We made stops in Portland, ME (Aug. 25, 2009), Oklahoma City, OK (Sept. 22, 2009), and Longwood University in Virginia via videoconference (Nov. 16, 2009). Sen. Susan Collins, R-ME, participated in the Portland Fiscal Wake-Up Tour. In addition, Stuart Butler, former Heritage vice president for Domestic and Economic Policy Studies, spoke in Ft. Lewis College in Colorado on April 13, 2010, via video link-up, and Alison Fraser, director of Heritage’s Roe Institute for Economic Policy Studies, spoke to the North Dakota Farmers’ Bureau in Bismark, ND (Nov. 19, 2009), to the Southwest Speakers’ Bureau in Bonita Springs, FL, in December, and to the Southern Motors Carriers Association Summer Conference (June 24, 2010).

On June 26, 2010, AmericaSpeaks – a non-partisan organization that seeks to promote “national conversations” on critical issues – convened an “electronic town hall” linking 3,500 Americans in 60 sites across the country to identify common ground on entitlement reform. With a small group of budget experts, Butler and Fraser worked with AmericaSpeaks to help prepare the content for the exercise, and the Heritage Coalition Relations team worked with the National Taxpayers Union, Americans for Prosperity, and other organizations to publicize this event. Of note, participants agreed to work across political differences in order to reduce the deficit in 2025 by $1.2 trillion. They also agreed that cutting health care costs was an essential component of entitlement reform, despite the fact that this would impact their access to health care.

Educating Congress: On Jan. 27, 2010, Rep. Paul Ryan, R-WI, re-introduced an updated “Roadmap for America’s Future” bill that would return our nation to a sustainable fiscal path without raising taxes. Following our continuing conversations with Rep. Ryan and his staff, this version contained both Heritage and Brookings Institution budget reform proposals. Heritage’s Center for Economic Data Analysis calculated the economic impact of the plan for Rep. Ryan. Heritage has encouraged Rep. Ryan to present his “Roadmap” to non-conservative audiences. In July, for example, we arranged for him to address a sell-out crowd at the Brookings Institution. Should Republicans win in November, Rep. Ryan will become the Chairman of the House Budget Committee.

Heritage experts also provided technical advice for the March 4, 2010, proposal put forward by Reps. Jeb Hensarling, R-TX, Mike Pence, R-IN, and John Campbell, R-CA, for a constitutional amendment capping federal spending at 20 percent of the Gross Domestic Product.

Heritage ideas contributed to the effort by Sens. Jeff Sessions, R-AL, and Claire McCaskill, D-MO, to place a relatively modest cap on discretionary spending. The Sessions-McCaskill bill to accomplish this was originally introduced in the Senate on Jan. 28, and received 56 votes. A revised version was introduced on March 5, and received 59 votes, one vote shy of passage.

Additionally, on Feb. 5, Butler and Fraser met directly with Sen. Mark Begich, D-AK, leading member of a bi-partisan group of junior senators concerned about the debt situation. They followed up by providing information for Begich’s staff, including a memo he requested on how the president’s Commission on entitlement reform could be altered to meet the concerns we raised with an earlier proposal introduced by Sens. Kent Conrad, D-ND, and Judd Gregg, R-NH. And in early March, Butler met with Joe Gaeta, senior counsel to Sen. Conrad, who chairs the Senate Budget Committee. Gaeta is keen to work with Heritage, as is his boss, since they see us as the most thoughtful of the conservative institutions focusing on America’s long-term fiscal situation.

Heritage has identified seven Senators to serve as a core group promoting bipartisan entitlement reform: Bob Corker, R-TN, Tom Coburn, R-OK, Joe Lieberman, I-CT, Jeanne Shaheen, D-NH, Chuck Grassley, R-IA, Ron Wyden, D-OR, and Ben Nelson, D-NE. We plan to hold frequent briefings for their staffers starting after Labor Day.

Creating A National Commission: Because Congress has proven incapable of solving the entitlement crisis, Heritage has long championed the establishment of a bi-partisan entitlement commission that would create the necessary dynamics for reform. We supported the Cooper-Wolf SAFE Commission Act, (introduced by Reps. Jim Cooper, D-TN, and Frank Wolf, R-VA) which reflected Heritage’s ideas. As the winter votes on the debt limit approached, our work created tremendous pressure for process reform. Though a flawed bill was voted down, this pressure helped convince President Obama to issue an Executive Order on Feb. 18, creating a National Commission on Fiscal Responsibility and Reform. While Heritage has been publicly critical of this executive commission, we have reached out to co-chairman Alan Simpson, the former U.S. senator from Wyoming, and other members of the Commission, to help inform the content and process.

On May 10, Stuart Butler from Heritage, and Isabel Sawhill from Brookings, co-hosted a briefing for the staffs of House and Senate members of President Obama’s National Commission on Fiscal Responsibility. Rudy Penner, from the Urban Institute (a former director of the Congressional Budget Office), explained why it was urgent to act now, if we are to avoid an impending catastrophe. Attendees included the top staffers of the House Budget Committee’s Majority and Ranking members. On May 14, basically the same briefing was held for Senate staff.

On June 17, Butler met with Bruce Reed, executive director of President Obama’s Deficit Commission, to discuss Heritage’s proposals for budget process and entitlement reforms. As a result of this meeting, on June 30 Brian Riedl testified before the Deficit Commission on budget cuts.

Heritage-Brookings Fiscal Seminar project: Over the past several years, experts from The Heritage Foundation, the Brookings Institution and other organizations have met in a “Fiscal Seminar” to formulate constructive remedies to our nation’s budget crisis. The Seminar achieved a breakthrough on Dec. 3, when it issued a “Statement on Health Care Reform,” which called for separate federal health care budget, and warned that, “If we fail to get America’s fiscal house in order, more of our nation’s wealth will be siphoned off to finance a crushing national debt.” The Statement was signed by budget experts from The Heritage Foundation, the Brookings Institution, the Progressive Policy Institute, the Urban Institute, the Concord Coalition, the Committee for a Responsible Federal Budget, and the American Enterprise Institute.

Both Heritage and Brookings are holding off-the-record meetings with conservative and liberal budget experts to seek out common ground on entitlement reform. Thus far, Heritage has held two meetings, and others are being scheduled for the fall.

New Strategies: In the current political climate, progress on entitlement reform is at a standstill. Unless we achieve a bi-partisan consensus on what steps to take to curb spending, today’s gridlock will continue. That is why Heritage undertook a number of trust-building projects, focusing first on the ground-rules of the negotiations process rather than on the negotiations themselves. The idea behind our approach is that liberals and conservatives will only enter into serious negotiations on entitlement reform after they develop trust in the negotiating process – and it’s this trust that we’ve set out to create. In a June 30 speech to the Raben Group (a Democratic consulting group), Butler explained Heritage’s approach. He pointed out that the problem with addressing out-of-control federal spending may not simply be a question of policy, but rather of politics – in other words, it’s the process, not the ideas, that’s obstructing progress. “It’s an issue of how we make decisions in this country,” Butler explained. “Somehow, the process has not delivered a solution.” The Hill quoted extensively from Butler’s presentation in a July 1 blog post.

On June 24, Butler participated in a Convergence Leadership Council meeting at which members discussed strategies to bring together conflicting voices on the expanding U.S. debt and spending obligations. (Convergence is a new national organization that seeks to forge bipartisan solutions to important domestic and foreign policy issues through dialogue with stakeholders. Butler has been asked to join their Board of Directors.)

Meanwhile, Heritage’s retirement security expert, David John, and Mark Iwry, formerly of Brookings and currently an Obama appointee at the Treasury Department, developed the automatic IRA plan, which would enable employees who have no employer-sponsored retirement plans to save some of their own money in an IRA. The plan uses the same powerful automatic enrollment mechanism that drives many employers’ 401(k) plans. Auto-IRAs were endorsed in February by the Obama administration and are included in its 2011 budget as a priority.

Scope

This project focuses on calling attention to the fact that U.S. entitlements are vastly over-obligated and will bankrupt the nation without reform. The total present value of unfunded federal obligations of the federal government, or fiscal exposure – what will ultimately have to be paid under current obligations – now reaches over $50 trillion. This is a financial burden of $440,000 for every household or, a mortgage of $170,000 placed in the crib of each and every baby born in the U.S. today. The worst-case scenario is that if we don’t come to our senses, we could eventually suffer the same fate as Argentina, which ultimately defaulted on its debt, with devastating effect on that country’s economy and living standards. But Argentina wasn’t a superpower, with the risks and responsibilities of that role in the world. Economic collapse of the magnitude that is appearing on the horizon, absent some kind of reform, could have far reaching consequences for America’s place in the world.

Information Dissemination

On March 1, 2010, Meet the Press moderator David Gregory introduced a roundtable conversation on President Obama’s plans to raise taxes by quoting Heritage Fellow Brian Riedl. Riedl’s research shows that the top 20 percent of taxpayers currently pay more than 80 percent of all taxes collected, and 40 percent of households pay no income tax. Under President Obama’s plan, the top 20 percent of all tax filers would pay 90 percent of all taxes, and the number of families who owe no tax would climb to 50 percent.

Heritage staffers have worked with syndicated columnists such as George Will, Cal Thomas, and Rich Lowry; congressional staffers; and radio talk-show hosts Rush Limbaugh and Sean Hannity (who reach some 25 million Americans every week) to publicize our findings. Heritage research and analysis have helped fuel the “Tea Party” movement, one of whose major concerns is bringing out-of-control entitlement spending under control.

Heritage analysts have compiled a two-page primer containing our solutions to the entitlement crisis. Due to release this summer, Reclaiming Our Future: Solving the Entitlement Crisis lays out a simple, easily-understood roadmap to entitlement reform that should be of considerable interest to journalists, politicians from both parties, Tea Party activists, talk-show radio hosts, and the general public.

Heritage is also reaching out to the media and the general public through our 2010 Budget Chart Book (available both on our Heritage Web site and as a booklet) which illustrates the explosive growth of the federal budget through 39 charts and graphs that pull together current data on federal spending, taxes, debts and deficits, and entitlements.

Finally, Heritage continues to broadcast our entitlement reform message to our growing membership. Between Aug. 31, 2009, and August 31, 2010, our membership grew from 515,880 to 696,000 members and rising. Americans join Heritage at an average rate of more than 15,000 every month.

Amount Approved
$3,000.00 on 6/24/2009 (Check sent: 7/24/2009)


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Posted 11/5/2008 1:18 PM
Updated   9/20/2010 9:54 AM



 
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