Sipprelle Details Plans to Control Spending & Debt

Princeton, February 8, 2010 – “While families set spending priorities so they can afford the mortgage and seniors on fixed incomes worry whether they can afford their life-saving prescriptions, Washington politicians continue to spend money they don’t have and then either raise taxes or increase borrowing to pay for it,” said Sipprelle (R-Princeton) in unveiling the second plank of his “Blueprint for Renewal.” “This spiral towards national insolvency must end. Government must learn to live within its means, just like taxpayers do. The alternative is economic disaster for future generations.”


Blueprint for Renewal: Control Government Spending &The National Debt
The Problem: Out-of-Control Spending & Debt
America’s balance sheet is on a collision course with disaster, as the cumulative effects of demographics, legislative ineptitude, and financial recklessness by both political parties combine to push America’s creditworthiness to a tipping point, or beyond.

As American consumers and financial institutions attempt to dig out from a collapse in personal wealth resulting from the pricking of the real estate bubble, our government fuels an even bigger and more dangerous bubble by dramatically escalating the size of our federal debt obligations. In the current year, federal spending will exceed tax receipts by a staggering $1.6 trillion, or more than 10% of national income. But this one-year deficit represents only a small piece of a much larger problem. Consider these factors:

With the national debt now over $12 trillion, the annual interest costs for servicing the debt swallows up nearly 10% of federal revenues. This cost will increase by $500 billion over the next decade, even if the annual deficits shrink dramatically. To put this in perspective, $500 billion is greater than the combined annual federal spending on our wars in Iraq and Afghanistan, homeland security, energy, and education.

We are financing our new government debt at “teaser” rates, which have fallen below 1% in recent years. When interest rates normalize, as they surely will, our huge national mortgage will become even more problematic.

For the first time ever, the unfunded projected costs for Social Security and Medicare ($53 trillion) exceed household net worth in the United States. America has now crossed a demographic milestone as the first of nearly 80 million baby boomers reach the age where Social Security benefits commence. Social Security, Medicare, and Medicaid already combine to consume 57% of federal tax receipts, and that is before the coming baby boom effect.

In addition to the adverse implications of the demographic shift, the healthcare component of the entitlement programs continues to grow significantly faster than the economy and federal tax receipts, meaning that the automatic growth of these program costs will continue to absorb resources that could be allocated to other priorities. Much of the enormous increase in our national debt is owned by foreign governments that represent our political adversaries, making our fiscal imbalances a national security issue.

In sum, our present trends are unsustainable. If we do not address the enormous and growing gap between our federal spending and our federal revenues, we will one day wake up to the realization that the credit of America, once the world’s gold standard, will have become junk. What follows then is a catastrophic adjustment process that would necessitate dramatic cuts in federal programs, outsized tax increases, and a default on many unfunded future liabilities. The retirement security of our seniors would be destroyed and our children would become de-facto wards of a bankrupt state that drains their earnings to pay for past mistakes.


The Solution: Honesty, Integrity & Tough Choices
The path to fiscal recovery will require honesty about the scope of our imbalances, integrity to stop deferring the problem onto our younger generations, and leadership to make the tough choices which will be necessary. Any government program worth spending money on must also be worth paying for in advance. There can be no compromise on this fundamental premise. If we are not successful in restraining our federal spending, we will be unable to provide the most critical ingredient necessary for a recovery in private sector job creation: a reduced tax burden on businesses and individuals.

Take Our Entitlement Programs Off of Autopilot
The costs of our three large entitlement programs (Social Security, Medicare, and Medicaid) rise without any discussion, analysis, or approval merely because the number of participants rises or the cost per covered person increases. As these programs approach 50% of total federal spending and beyond, this uncontrolled expense has to be brought under direct Congressional budget authority if we are to have any hope of repairing our fiscal imbalances and preventing a default on these obligations.

While we must honor the commitments made to our seniors, the bias which favors entitlement spending for current recipients at the expense of future recipients or other federal programs should be transparent and decided by direct action, not as the result of automatic spending mechanisms. The total costs of entitlement programs for individual recipients should be transparent in the appropriations process and should also be placed on explicit long-term budgets that guarantee sustainability.

The costs of the programs should be reviewed regularly and significant deviations from projected budgets should trigger automatic adjustments to restore fiscal balance.

Put Government Spending on a Forced Diet
Every enterprise in the world will find new efficiencies and realize ways to enhance productivity when forced to the wall by a shortfall in available funds. The problem is that our Federal government has never been forced to deal with the brutal realities that companies in the private sector face every day. Incredibly, Congress increased the annual budget for its own operations by $245 million for 2010.

My plan would mandate a zero percent annual increase in the federal budget until such time as the federal deficit falls below 3% of GDP, including the fully-loaded costs of unfunded future entitlement programs. This restriction would force a real debate about our national priorities and the efficacy of all of our federal programs, while also beginning the long and arduous process of repairing our financial condition. This restriction could be overridden by an explicit vote of the Congress and approval by the President to deal with national emergencies.

Congress should freeze federal non-military employment and start to roll it back as a part of the proposed spending plan. The average federal non-military employee earned, including benefits, $120,000 in 2008 while average private sector compensation was roughly $60,000.

Initiate a Rigid Legislative Process for Culling Waste and Redundancy
Congress should direct the Government Accountability Office, or another objective designated authority, to identify annually all federal programs with duplicative goals, programs, activities, and offices and to estimate the savings that might result from consolidation or elimination. Present the program savings for an up-or-down vote in Congress annually.

Weed Out Costs and Ineffective Programs through Competition
Congress should direct the Government Accountability Office, or another objective designated authority, to undertake an annual performance review of all discretionary spending programs based on a tangible audit, evaluation of costs and performance relative to goals. The bottom-rated 10% of programs should have spending reduced by 10% in each annual budget year.

Reform the Crooked Earmarks Process
Since 1998, the number of annual earmarks has jumped from 2,000 to 11,000 at a cost to taxpayers of $23 billion. A large percentage of these funds reflect political payoffs to fund special pet projects. Congress should require that each of these special appropriations requests be accompanied by a written statement from the sponsoring legislator clearly identifying the reason supporting the funding.

Additionally, Congress should establish a transparent audit process for evaluating spending requests while agreeing to reduce earmark spending by 20% per year, thereby creating a competitive debate over the worthiness of each project. Earmark appropriations should not be a function of Congressional clout, prestige, or deal-making savvy.