Donald Trump was a big spender during his first term in office. Even if you don’t count the orgy of pandemic-related spending, he spent more and spent fasterthan Barack Obama.
He even increased domestic spending faster than Obama!
But maybe his second term will be different. One positive sign is that Elon Musk and Vivek Ramaswamy are spearheading a Department of Government Efficiency (DOGE), which is a private effort to identify ways of saving money and streamlining government.
In a triumph of hope over experience, let’s make some suggestions for DOGE.
We’ll start with fiscal federalism.
Under current law, politicians in Washington send hundreds of billions of dollars every year to state and local governments. Every single penny of this spending is in areas where the federal government should have no involvement.
As part of a federalism agenda, it is time to eliminate all these transfers.
The savings for taxpayers could be enormous. Here’s a list of federal handoutscompiled by my former colleague, Chris Edwards.
Nearly $1.3 trillion last year!
Most of these grants can and should be immediately eliminated.
In a few cases (such as Medicaid reform), the changes would take several years.
In all cases, however, the ultimate goal should be to get Washington out of the business of subsidizing activities that should be solely the responsibility of state and local government (or, in most cases, activities that should be left entirely to the private sector).
For further background on this topic, here are some excerpts from a column in the Wall Street Journal by John Cogan of Stanford University’s Hoover Institution.
Excessive spending has been a way of life for lawmakers in Washington for more than half a century. …Elon Musk and Vivek Ramaswamy’s Department of Government Efficiency will attempt to put an end to this fiscal profligacy. Both men will soon discover that the root cause of this problem lies with the federal government’s abandonment of federalism in fiscal matters. …It is difficult to think of a single activity that state and local governments spend money on that isn’t also financed by Washington’s check-writing machine.The feds spend on local roads, social services, police and fire protection and education. Washington also appropriates funds for building and maintaining municipal parks and playgrounds, bike paths and hiking trails, city sidewalks, bus stops, railroad crossings, traffic signs and stop lights, and beautification projects. …The Founders believed that, among its benefits, federalism would serve as an effective constraint on federal spending… Fiscal federalism started to erode more seriously around World War I. …Policymakers finally abandoned fiscal federalism during the Great Depression. …Following World War II, and especially during the peak years of the Great Society (1965-74), the federal government greatly expanded its spending on activities that were traditionally regarded as state and local affairs. …The federal government needs to…return…state and local affairs to their proper place. Sorting out which programs should go first could be a natural starting point for Messrs. Musk and Ramaswamy.
Very good suggestions (just like Cogan has provided good analysis and good advice on entitlement programs).
P.S. As a general rule, DOGE should be bold. Here’s some of what I wrote when giving Trump’s people advice on inauguration day in 2017.
Check the roots
…don’t cut programs by 10 percent, 20 percent, or even 50 percent. If you do that, it’s like cutting off a weed at ground level. If the root system is still there, it’s just a matter of time before it regrows and begins to suffocate the good plants (i.e., the private sector). Instead, shut them down. Eliminate them. Raze the buildings. And pour a foot of salt on the ground so nothing can regrow. Simply stated, it’s very easy to restore a budget cut at some point in the future. But if a part of government is totally wiped out, then special interests have to go through all the effort of recreating that function. And that’s not overly easy given the separation-of-powers system that the Founding Fathers wisely created.
To elaborate, special interests are going to squawk and complain even if Trump merely proposes to freeze spending. So why not actually go bold and actually solve some problems?
P.P.S. Every suggestion I make to DOGE over the next few weeks will be accompanied by a recommendation to enact a spending cap, much like the very successful “debt brake” in Switzerland.
By Dan Mitchell on December 3, 2024 Original here. Reproduced with Dan’s permission.
