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Report: Consumer Protection
Toward Common Groud: Bridging the political Divide to Reduce Spending
Our nation faces unprecedented fiscal challenges, as the commitments we’ve made now and into the future far outpace our fiscal capacity. Congress, the President’s National Commission on Fiscal Responsibility and Reform, and citizens across the country must grapple with very difficult decisions about how we can put our fiscal house in order. It will be critical to reach out across party lines and across ideological persuasions to achieve common-sense reforms that can bring us closer to balance.
The U.S. Public Interest Research Group (U.S. PIRG) and National Taxpayers Union (NTU) have joined together to propose a list of 30 specific recommendations to reform our future spending commitments. If enacted in their entirety, these changes would save taxpayers over $600 billion in total by 2015, the target date for the Fiscal Commission to reduce our publicly-held debt-to-GDP ratio to a more sustainable level of 60 percent. While our organizations have often differed about the proper regulatory scope of government and a host of tax policies, we are united in the belief that we spend far too much money on ineffective programs that do not serve the best interests of the American people.
The cuts deal with specific reforms to entitlement programs, defense spending, wasteful subsidies and a broad range of discretionary items of a smaller scale. While these proposals won’t get us all the way there, it is a start that could establish some common ground and make government more accountable in the process.
Some of the suggestions are aimed at procedural improvements, like collecting errant payments for Supplemental Security Income or housing subsidies. Others seek to eliminate programs that are wasteful or unnecessary, like the Market Access Program, which helps some of the most profitable companies in the world advertise their products abroad.
Every item on the list includes a five-year savings estimate for the Commission’s 2015 target. Those estimates are backed up by authoritative official sources such as the Congressional Budget Office, Government Accountability Office, Joint Committee on Taxation, or the Office of Management and Budget, as well as bipartisan panels and audit agencies. The recommendations are specific, detailed, and actionable items that Congress could pursue right now to reduce spending.
Most importantly, we strongly believe this list represents a consensus that can be reached between political factions that spend a great deal of their time fighting one another. In our estimation, these recommendations reduce spending without significantly degrading the level of services provided to the American taxpayer and without neglecting the federal government’s commitments.
As a nation, we can no longer afford to delay difficult decisions. It is our hope that this list of spending reductions can serve as a starting point for longoverdue reforms and lay the groundwork for a bipartisan approach to those decisions.
What follows is a general summary of spending reductions that fall into four rough categories: ending wasteful subsidies, improving contracting and asset acquisition, improving program execution and government operations, and addressing outdated or ineffective military programs to align spending with current needs. Following the summary is a list of each specific recommendation, with an estimate of its savings by 2015, totaling over $600 billion, and a reference to the source from which the estimate is based.
Ending Wasteful Subsidies – Total Savings, up to $62 billion
Every year, the federal government hands out billions of dollars in subsidies for a wide variety of commercial activities. Though the vast majority of such programs are well-intentioned efforts to provide targeted support to businesses or individuals in need, in practice many are a poor use of scarce taxpayer dollars and fail to achieve their stated objectives. This section recommends spending reductions that focus primarily on “corporate welfare” programs, inefficient agricultural supports, and subsidies for energy production.
First, we recommend the elimination of several programs that use taxpayer resources to promote exports. Operations like the Market Access Program and the Overseas Private Investment Corporation have been shown to benefit some of America’s most profitable and recognizable multi-national corporations. Companies like McDonald’s, Nabisco, and Fruit of the Loom should market their exports out of their ample budgets.
Next, we tackle something that continues to be a battleground issue for many interest groups: agricultural subsidies. While disagreements in this arena can be fierce, we believe that taxpayers deserve agricultural policies that have not been perverted from their original intention or fallen short of their goals.
That’s why we identify subsidies for large corporate farming businesses and refundable tax credits for ethanol production as areas ripe for reform.
Finally, we recommend cutting several subsidies for energy production that are reaped primarily by profitable businesses in mature industries. For example, we recommend eliminating a research program for developing ultra deepwater petroleum and natural gas drilling technologies. While this program is funded from existing oil and gas revenues, it exists outside the annual appropriations process and should be ended because oil and gas companies can more effectively fund their own applied research.
Improving Contracting and Asset Acquisition – Total Savings, up to $353 billion
Given the hundreds of billions of dollars that flow through the contracting process, it is unsurprising that vast improvements can be made to their efficiency. First, we recommend ending orders for obsolete parts and supplies in the Army, Navy, Air Force, and Defense Logistics Agency. According to the Government Accountability Office, these agencies waste billions purchasing items that go unused or were never required in the first place. In some cases, the agencies purchase 50 percent more parts than necessary. Streamlining this process would save more than $184 billion over five years without materially impacting national security.
In addition, this section recommends passing and implementing the findings of the Bipartisan Defense Acquisition Panel. The Panel seeks to ensure that the Pentagon reduces waste, spends taxpayer dollars more carefully and pays for services and programs that provide the best value. It has the potential to save $135 billion.
Improving Program Execution and Government Operations – Total Savings, up to $77 billion
Payment errors and duplicative programs are a constant source of headaches and wasted money in the federal budget. This section focuses on myriad improvements that could be made to procedures and programs in order to save tens of billions for taxpayers. Several recommendations deal with overpayments, primarily in entitlement programs. Recalibrating Medicare reimbursement rates in high-cost regions and better aligning payments to teaching hospitals with actual costs could save more than $30 billion. In Social Security, there is currently a ceiling on collection of mistaken payments from the Supplemental Security Income program. Removing that cap would improve the government’s ability to recover erroneous payments, saving more than $500 million.
Similarly, the Department of Housing and Urban Development overpays on housing subsidies due to incorrect calculations of income and billing. Eliminating those overpayments could save nearly $5 billion. The federal government also has substantial unused property and commercial holdings that could be sold for the benefit of taxpayers. The Office of Management and Budget has reported that the federal government owns 55,557 buildings that are “not utilized or underutilized,” with a value of $96 billion. Instructing the General Services Administration to reduce this backlog by 25 percent could generate as much as $24 billion.
Finally, this section recommends the elimination of two programs: the Troubled Asset Relief Program (TARP) and the National Drug Intelligence Center (NDIC). While TARP has largely wound down by this point, there remain $15 billion in commitments of taxpayer resources despite the fact that the banking system is no longer under imminent threat. The NDIC has been the subject of numerous scandals and its poor performance is well documented. The GAO has concluded that it duplicates efforts in drug enforcement and it should be eliminated, for a potential savings of more than $200 million.
Addressing Outdated or Ineffective Military Programs– Total Savings, up to $107 billion
While the need for a strong national defense is clear, it is equally clear that the Department of Defense has a number of programs that do not advance those goals while wasting federal resources. Selectively reducing or eliminating procurements while improving the operation of other programs could yield billions in savings.
The bulk of such savings would be realized by scaling back or cancelling outdated or unnecessarily costly systems. This section lays out a menu of options for reducing or cancelling procurements of the V-22 Osprey aircraft, the F-35 Joint Strike Fighter, the Space Tracking and Surveillance System, and the Expeditionary Fighting Vehicle. Several of these programs have failed basic costbenefit analyses and have incurred large delays and cost overruns.
Another large potential source for savings can be found in aligning our nuclear defense programs with current needs and threats. “Rightsizing” our nuclear arsenal has been supported by a wide range of public officials as well as military and national security experts, including Defense Secretary Robert Gates and Senator John McCain (R-AZ). Pursuing this option could save more than $56 billion.
Finally, we recommend altering the pricing structure for central repair depots. When military vehicle components need repairs, unit commanders can direct them to be completed in-house or send the equipment to central maintenance depots. Making this change would incentivize unit commanders to use central depots more than their less cost-effective local repair facilities.
Allowing depots to charge for the “incremental cost” of repairs could save more than $1 billion.
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