Hassett: Don't Subsidize Green Tech, Tax Carbon
Kevin Hassett, director of economic policy at AEI writes:
To listen to Democrats, they have new Republican House Speaker John Boehner right where they want him.
"The reality of governing is different than the reality of campaigning, and it's easier to throw out a number than it is to support it," David Axelrod, President Barack Obama's outgoing senior strategist, said last week.
The number, of course, is the $100 billion in cuts to federal spending that House Republicans have been discussing since they unveiled their 2010 campaign platform last September. Republicans in the House barely had time to adjust to their majority status before facing questions and skepticism about whether and how they can pull that off.
Boehner is going to win this one. Government spending has surged so much in the past two years that cutting $100 billion is a piece of cake.
First, let's understand exactly what Boehner and his team promised.
In their "Pledge to America," congressional Republicans wrote:
"With common-sense exceptions for seniors, veterans, and our troops, we will roll back government spending to pre- stimulus, pre-bailout levels, saving us at least $100 billion in the first year alone and putting us on a path to balance the budget and pay down the debt."
Note the operative phrase, "the first year." Those now predicting defeat for Boehner--dare I say, rooting for it--make his task tougher by implying that the word "fiscal" precedes "year." ...
No Tears
The Heritage Foundation's Brian Riedl came up with an ambitious plan for cutting $343 billion in spending. I'll shoot for one-third of that target, with the added goal of avoiding some of his proposals--such as reducing Pell Grants and eliminating homeland-security funding to states--that would be most likely to lead to wailing in the echoing halls of the Capitol complex.
Here's how to do it.
First, it's finally time to take on farm subsidies, which topped $15.4 billion in 2009, according to the Washington-based Environmental Working Group.
Farm-state lawmakers in both parties, using the Agriculture Committee as their base, have long beaten back efforts to slash direct payments to growers. So why might now be different? Because of the unprecedented power that Boehner is investing in Ryan and the Budget Committee.
This doesn't mean America's farmers have to be left to fend for themselves.
Farmer Savings
Canada has experimented with a program that provides government matching funds for farmers' deposits into savings accounts that help them buffer their incomes against the ups and downs of farm prices. Such a program in the U.S. could achieve the objective of helping family farmers survive while enabling policy makers to withdraw billions of subsidies to big agriculture.
These changes, plus closing the U.S. Agriculture Department's Foreign Agricultural Service, would save about $19.5 billion. Not a bad start.
Next, target energy subsidies, which might make us feel good but make little economic sense. As I've written before, if Congress wants to encourage innovation in energy, it should tax carbon, not subsidize politically favored approaches such as ethanol. Riedl says cutting energy subsidies would save about $6.5 billion. (We could go after the tax-credit subsidies too, which technically aren't spending.)
Justice Department block grants--annual sums given to state and local governments, which largely get to decide how to spend them to achieve a certain goal--have also been targeted for cuts, and then saved, again and again. Here, too, it's high time to strike a blow for federalism: local law enforcement is, by definition, a local concern. That's $7.3 billion in savings.
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