1. Eliminate unnecessary and wasteful programs. The federal budget currently consists of several thousand line item agencies, bureaus, offices, and grant programs. Over the past 20 years very few of these programs have actually ceased operation. Since 1996, not a single federal program of any fiscal consequence has actually been eliminated.
2. Privatize federal assets, using the proceeds for debt retirement. The United States government is bleeding red ink even though it is the wealthiest entity on the planet. The federal government owns almost one-quarter of all the land in the United States. Only a tiny fraction of the vast federal land holdings are of environmental or historical significance; most should be sold to the private sector.
3. Devolve federal programs like education, transportation, and welfare to the states. Our federalist system is based on the sound principle that states should be “laboratories of democracy,” and that through competition, experimentation, and innovation states will learn from one another and adopt best policy practices.
4. Replace all federal anti-poverty programs with a more generous Earned Income Tax Credit (EITC) that requires work as a condition of federal assistance. If welfare cannot be fully devolved to the states, a second-best option is to completely abolish all forms of welfare–AFDC, food stamps, public housing, Medicaid, SSI, etc. Part of the savings achieved by abolishing those programs should be used to expand the earned income credit (EIC).
5. Use market-based incentives to fix federal entitlement programs. No plan to downsize the federal government and reduce its costs can possibly succeed without a strategy for reining in entitlement spending. Federal entitlements now account for well more than half of the budget, and these income transfer programs are by far the fastest growth areas of the federal budget. For years, Congress has treated entitlements as if they were on automatic pilot and their costs were beyond legislative control–this attitude cannot, and need not, continue.
6. Abolish all corporate welfare. America’s most costly welfare recipients today are Fortune 500 companies. In 2002 Uncle Sam doled out about $93 billion in taxpayer subsidies to such firms.
7. Enact legislation to make any American with a net income of more than $1 million a year ineligible for any form of federal aid. Many federal domestic programs primarily benefit Americans with high incomes. In 1994 the National Taxpayers Union conducted a study pinpointing just what groups get the benefits of federal income transfer programs. The study discovered that Americans with incomes of more than $100,000 a year account for 5.1 percent of all households, but they receive 5.6 percent of all federal subsidies.
8. Fix federal budget rules to end the inherent bias in favor of spending, rather than saving money and cutting taxes. Congress has done little to change budget rules that skew political decision-making in favor of ever-larger federal outlays. Currently the deck is stacked against those who wish to reduce expenditures. The lesson of the states is that budget rules denying lawmakers the power to spend and tax recklessly can be quite effective deterrents to fiscal irresponsibility.
9. Attach to all spending reduction proposals a tax cut dividend for all taxpayers, as a way to build a taxpayer constituency for spending cuts. A leaner federal budget must be sold to the voters as a means to promote individual liberty and economic freedom. For every dollar they earn, Americans now pay roughly 40 cents to the tax collectors in Washington, their state capital, and city hall–a tax burden incompatible with a free society.