Overview

The U.S. faces a fiscal crisis. The problem is not too many budget cuts, as suggested by recent talk of a “fiscal cliff,” but too much spending. Looking into the future the Congressional Budget Office warned of an “explosive path of federal debt.”¹

Figure 1. Federal Outlays for Selected Low-Income Assistance Programs: FY1962 through FY2022 (in billions of constant FY2011 dollars) (PDF – 217 KB).

Source: Congressional Research Service (CRS), based on data from the U.S. Office of Management and Budget FY2013 Public Budget Database, and the Congressional Budget Office March 2013 baseline budget projections for FY2012 through FY2022.

Notes: Constant dollars were computed using the implicit price deflator for Gross Domestic Product (GDP).

Figure 1 shows federal outlays for the major low-income assistance programs in inflation-adjusted terms historically for FY1962 through FY2011, and shows CBO-projected outlays under current law for FY2012 through FY2022. The figure shows several periods of pronounced growth, with the most recent occurring from FY2007 through FY2011. This represents spending, both automatic (through increased enrollment) as well as legislated (e.g. benefit and funding increases through the American Recovery and Reinvestment Act of 2009, ARRA, P.L. 111-5), in response to the deep recession from 2007-2009.²

This rising debt threatens to increase interest payments, restrict policy options in response to economic or financial crises, and “increase the probability of a sudden fiscal crisis, during which investors would lose confidence in the government’s ability to manage its budget and the government would thereby lose its ability to borrow at affordable rates.”³

The federal government simply spends too much. It also wastes far too much. Needless duplication and wasteful inefficiency permeate the federal bureaucracy. For instance, the Government Accountability Office issued a report in March 2011 detailing “34 areas for consideration related to duplication, overlap, or fragmentation” and 47 additional areas “describing other opportunities for agencies or Congress to consider taking action.”⁴ A year later, only five percent of the GAO’s recommendations had been fully addressed. At that time the agency released a new study presenting “51 areas where programs may be able to achieve greater efficiencies or become more effective.”⁵

The shocking refusal of federal officials to take responsibility for the pervasive and persistent misuse of taxpayer funds threatens Washington’s ability to fund truly essential services authorized by the Constitution. This failure also threatens our national conscience. A measure of a country’s character is how it treats its most vulnerable citizens — those who must turn to others for their basic needs. Today’s ever-growing welfare state does more to enrich interest groups than uplift the poor.

Politicians who “spread the wealth” also increase dependence on government and threaten to run up unmanageable debt for generations to come. If left unchecked, this spending will destroy our economic health, preventing us from helping those who really require it. The inevitable response will be across-the-board spending cuts that will fall most heavily on the truly needy among us. Such a blunt approach will cut bone as well as fat and violate our moral obligation to secure the basic social safety net for those most in need.

It’s time to take dramatic action to set our priorities in order and halt the profligate expansion of the welfare state. An informed government policy to protect the nation’s safety net should begin by reining in the welfare state through a time-tested approach — cutting spending on those who are NOT really in need.

Over thirty years ago, Ronald Reagan approved a blueprint to end welfare dependency not just for the benefit of federal and state taxpayers, but also for the long-term benefit of welfare recipients themselves. Unfortunately, the time was not right then. Progress was made in 1996, after Republicans took control of Congress. But more remains to be done. The time is right now.

This CCWR report proposes an achievable, common-sense plan — and model legislation to enact it — to end the hopeless bureaucratic overlap and fiscal abuse plaguing our nation’s current welfare spending; assure that limited taxpayer funding is directed to benefit the truly needy; and permanently reduce the size and influence of the federal welfare bureaucracy.

The proposal is simple: federal welfare spending should be turned into block grants, which would pass directly to the states without conditions, other than annual audits. The design, reach, and benefits of government welfare would be subject to state control. Washington would be out of the welfare business, other than transferring the necessary funds to the states.