The Christmas Present the Super Committee Gave Us

The Super Committee is dead. Long live the sequestration!

The failure of the Super Committee saved the American people and economy $1 trillion or more in punitive new tax burdens demanded by President Obama and the Democrats, since they don’t seem to know the difference between tax RATE increases (penalties) and tax REVENUE increases (rewards for job creation and economic growth).

But the debt-ceiling vote deal, which created the Supercommittee, still has life to produce positive results during presidential election year 2012. The Supercomittee failure has triggered sequestration, which means the Gramm-Rudman-Hollings spending controls now spring back to life, requiring a reduction of a minimum of $1.2 trillion in discretionary spending divided equally between military and domestic spending in early 2013.

This creates a competition among the spending interests seeking more rational spending cut alternatives than $1.2 trillion across the board. It will incentivize national defense conservatives and the potent military lobby to identify the many domestic programs that are failing and can – and should – be cut. For every dollar of such cuts, military programs – and hardware – will be off the table. But concurrently, military proponents will be encouraged to identify the “low hanging fruit” in the military budget that should be plucked and eliminated.

To maximize this opportunity, the Oversight and Government Reform Committee of the Republican-controlled House through its seven subcommittees, and the 12 oversight subcommittees of the House Authorizing Committees, should ramp up and run continuous hearings on the programs that have flunked OMB’s grading system (Expectmore.gov) or which have been found wanting, by CBO, GAO, departmental inspectors general, private think tanks, etc. Program directors should be challenged to demonstrate why one more dollar of taxpayer money should be spent on such programs or why we need multiple duplicative and overlapping programs addressing the same problem.

Moreover, under House Rule XXI, all appropriations for programs without a current authorization from the appropriate policy committee are subject to a point of order by any Member on the House floor and a vote of the full membership. Tens, if not hundreds, of billions of dollars a year could be carved from the budget pursuant to this rule alone. (CBO is required to calculate annually appropriations for which there is not a current authorization. For 2011 the total is nearly $800 billion.) Any way you view it, the House ought to follow its own rules.

In addition, led by Medicaid, Food Stamps, Housing Assistance, etc., the more than 180 federal, means-tested, entitlement programs consume roughly a trillion dollars a year but have been largely off the radar screen. Governors have been demanding that Medicaid at least be devolved to them with finite block grants and few “strings,” as was the old AFDC program in the fabulously successful ’96 federal welfare reform, saving taxpayers 50% of the cost of that program.

The House alone should commence hearings on these programs and fashion legislation that would begin devolution to the states of all 180 or more remaining federal means tested welfare programs, effectively sending welfare back to the states, on the model of the 1996 AFDC block grant reforms. House leaders can point to a potential reduction in federal spending of trillions of dollars over the next decade. Let Harry Reid try to wiggle out of that one in the Senate. Blame for excessive spending will be focused where it should be.

Finally, now that Social Security and Medicare reforms have been placed on the national agenda by the House Republican Budget and Republican Presidential candidates, we must prevent them from being politicized as “seniors vs. Washington.” That requires a calm, grassroots discourse among those affected: grandparents, parents, children and grandchildren. That would lay the essential foundation for successful, fundamental reform in 2013.

Through that process, reformers can fully explain the 1980 Chilean reform, Paul Ryan’s model legislation, Newt Gingrich’s freedom of choice entitlement reform proposals, and other personalization models. Young workers need to know that the rate of return on their Social Security payments will be unfair to them at only around 1%, compared to long term market investment returns of 4% to 7% after inflation. They need to know there is a much better alternative for them and a manageable transition over time from the current system to ownership and control of personal savings and investment accounts.

Moreover, all workers need to know that the current Social Security “promise” (remember President Obama’s statement during the debt ceiling debate that he might not send out Social Security checks) will be converted into a “recognition bond” (as in Chile) involving enforceable debt of the United States equal to the value of the taxpayer’s past accumulated payments into Social Security. The current Social Security system, as an annuity that terminates with death, is unfair to those who work a lifetime but die prematurely. It is especially unfair to black males whose life expectancy is less than their white counterparts.

And all citizens need to know that if Social Security payments were invested rather than spent – as they are now – the capital base of the United States would expand dramatically, as it did in Chile, generating economic growth and good paying jobs today. Also, through the savings and investment accounts, the concentration of wealth would be greatly reduced, by as much as half, as all workers would be accumulating their own substantial savings and investment.

With our families we also need a national grassroots conversation about making “cost-conscious consumers of health care” of all of us by reducing the role of third-party payers. We can talk about personally paying for the “tires, batteries and lube jobs” of health care and buying medical insurance, as we do car insurance, for the catastrophic events for which we can pay the deductible but not the full bill. Such free market, sensible and manageable alternatives will never emanate from Washington; they have to come from families at the grassroots. Meanwhile, we must repeal ObamaCare as the first step to federal fiscal sanity in health care.

The Super Committee will have done us a service if we use sequestration to our advantage, evaluate federal programs, cutting those which don’t pass muster and devolving to the states numerous federal functions better managed close to home, and ultimately reform our remaining entitlements.

Lew Uhler is the Founder and President of the National Tax Limitation Committee. Peter Ferrara is Senior Fellow for the Carleson Center for Public Policy and Director of Entitlement and Budget Policy for the Heartland Institute.