The Sequester Solution

It's only taken a decade or so, but suddenly there's momentum in Congress for spending restraint. We'll be watching the fine print, but you can tell Republicans are worried about complaints from conservative voters

Because for a change they're trying to act, well, like Republicans.

In a first good sign, House leaders are rewriting their Fiscal 2006 budget resolution to increase the amount of "savings" to as much as $50 billion over five years. This is far from onerous, but it is better, than the $35 billion Congress passed the first time around.

In another miracle, they are also moving to "de authorize" 98 federal programs that long ago outlived their usefulness. These include such pork-barrel classics as the Robert C. Byrd Honors Scholarship Program. A de authorization doesn't cut any spending, but it does reduce the likelihood that money will be spent on these fiscal dodos in the future. Political symbolism has its uses.

By far the most promising idea is for a spending cut of as much as 3% on every discretionary federal agency, program and department. The case for across-the-board cuts is especially persuasive given the boom times that federal agencies have enjoyed in recent years. As the chart at the end shows, spending for federal education programs is up 99% since 2001; international affairs and foreign aid is up 94%; community development 71%; housing programs 86%, and so on. The inflation rate over the same period was 12.5%.

This "cut," by the way, would only reduce spending from the "baseline" that already

includes annual increases for inflation for 2006. A 3% sequester, as it's known in Beltway lingo, would save $36 billion in 2006. And because baseline spending levels would be reduced going ahead, the savings would magnify over time-to as much as $500 billion over 10 years. This is without even touching the $1.4 trillion to be spent on Medicare, Medicaid and other entitlements. (The programs that would be cut are those that Congress agrees to fund every year; entitlements go up automatically unless Congress rewrites the law.)

Democrats are deploring an across-the board cut as a "mindless buzz saw" that fails to set priorities and hurts the poor. And it would be nice if Congress actually debated priorities. But since the late 1990s, spending has gone up on nearly everything every year. Given Hurricane Katrina and the war on terror, an acrossthe-board cut is a blunt political instrument whose time has returned.- As for the poor, income security programs have expanded by $59.3 billion in four years, an increase of 39%. The General Accountability Office has also found that the rate of fraud in programs like Medicaid and food stamps is in the billions of dollars. One in 10 food stamps is "improperly issued or illegally trafficked," says the GAO.

Government is fully capable of rooting out waste if it is forced to .In . 1987, when the. Gramm Rudman deficit-reduction law was enforced, President Reagan ordered a 4.3% sequester of .all domestic and defense spending. A funny thing happened: Agencies found ways to save money. Social Security checks got sent out; the air traffic control system still operated; and the Washington Monument wasn't closed down.

Some conservatives want to exempt homeland security and Pentagon spending from the budget scalpel. That's a bad idea. The defense budget is up 64% in four years, or to about 4% of GDP after it had fallen to 3% from 5% during the Clinton era. (A dirty little secret of the 1990s is that nearly all of the reduction in federal spending came from defense.)

If more spending is needed for Iraq or Afghanistan, the White House can ask for it. But Secretary of Defense Donald Rumsfeld has identified billions of dollars of low-priority spending that could be excised. A scathing 2003 report by federal auditors concluded that financial problems at the Pentagon are "pervasive, complex, longstanding, and deeply rooted in virtually all its business operations."

Ditto for homeland security. Veronique De Rugy of the American Enterprise Institute has identified $2.6 billion of "homeland security" funds on questionable grants to states and localities, including $500,000 for the steamship authority to transport people to the upscale island of Martha's Vineyard, and $50 million for a national exercise program.

There was a time, in 1995 and 1996, when the freshly minted Republican majority really did try to restrain spending and kill unnecessary programs. But over the years, the GOP has lost its way, albeit with the help of a White House willing to let the Members run wild. If they want to regain their fiscal conservative credentials, they'll sign up for the 3% across-theboard sequester.

Beltway Bonanza

Percentage increase in Federal spending in nominal dollars. 2001-2005 .

.

Inflation .12%

Science, Space and Technology _ 21%

Transportation _ 24%

Unemployment Benefits - 26%

General Government - 32%

Income Security Programs _ 39%

Health _ 42%

Community Development 71%

Housing and Commerce 86%

International Affairs 94%

Equcation 99%

Source: Heritage Foundation, based on Office of Management and Budget