Tuesday, December 15, 2015

The States Are Succeeding Where Washington Continues to Fail Miserably, Part 1

We are always pointing out the the overwhelming and wasteful spending of the Federal government and the Washington political class have us on a debt trajectory that will likely crash the financial stability of the Federal government, our economy and our freedoms in a relatively short time frame unless government spending and waste can be brought under control. Just in the seven plus years of the Obama administration, the national debt has grown about $8 TRILLION and 80%. By the time Obama leaves office, his administration will likely have incurred debt levels equal to ALL previous Presidential administrations COMBINED.

This debt accumulation cannot go on forever. The best illustration of how bad it will become and how soon it will happen is shown by the following chart from the Cato organization. Keep in mind that according to the White House budget website and spreadsheet, Federal government tax revenues in 2017 from all sources is expected to be just under $3.755 TRILLION:

A few observations:

  • According to chart, by 2017 the Federal government will spend just over $2 TRILLION just on these three government programs.
  • This is a whopping 55% of the entire Federal tax stream.
  • This leaves only 45% of the tax stream to pay for the rest of the current Federal government’s activities including military, transportation, housing, food stamps/assistance, education, border patrol, etc.
  • But it gets worse. If we assume that the Federal government’s tax stream grows 3% a year, the long term average growth in GDP, then by 2025 the Federal tax stream would be about $4.757 TRILLION.
  • Cato estimates that by 2025 these three programs will pay out $3.337 TRILLION which will eat up a whopping 70% of the Federal government revenue stream.
  • And this is probably a low ball estimate since the Washington political class has not shown the ability to grow the economy by at least three percent for at least the length of the Obama administration.
Despite this reality, there has been no trace of the ability or willingness to do something about the situation from Washington politicians. No discussion, no debate, no policy proposals, nothing. Nothing on how to change what is being done now, nothing on how to cleanup the massive amount of fraud and inefficiencies in these programs, etc. 

Of course, Washington will likely at some point say that higher taxes, rather than reduced spending and the eliminating of criminal fraud and waste, will resolve all of the problems illustrated above. The problem with that approach is two fold:
  • The more Americans are taxed, the less they have to spend and grow the economy. As economic growth slows down as the tax burden increases, the Federal government tax stream starts to slow down or actually decrease, leaving us exactly where we were to start with.
  • Second, increasing the tax burden decreases the amount of freedom that Americans deserve and desire. You cannot have political and real freedom without financial freedom and as the tax freedom day gets further and further out each year, that restriction on the amount of our earnings and wages we can keep further restricts the amount of everyday freedom we can enjoy.
If all of this sounds pessimistic and fatalistic to you, than you are getting it. Obviously, Washington politicians are not getting it even when such harrowing numbers and realities are right in front of their face.

But let’s try to stay optimistic today and tomorrow. Believe it or not, there actually are politicians in this country that are trying to get our of control government spending and entitlements under control. Unfortunately, none of them are in Washington. They are scattered across the country in state government positions who realize that the wasteful government spending and gouging of taxpayers has to be brought under control soon or the entire economy, financial stability, and freedoms of the country will implode.

Today and tomorrow we salute their brave efforts in this area and hope that somehow their efforts eventually take hold in Washington.

1) Georgia politicians have a simple solution to waste and fraud in their welfare programs: simply arrest and prosecute those that are abusing and stealing from the program. Specifically, in that state authorities are actively pursuing criminals who illegally obtain food stamps and then trade them for cash from crooked store owners, never using the food stamps to feed a hungry family or child.

Recently, 54 people there were arrested for opening grocery stores that cater to food stamp and welfare recipients. The primary purpose of these new stores was not to sell food but to illegally exchange food stamps for cash. Ninety other people were arrested for using these stores to commit food stamp fraud.

Pretty simple stuff: abuse the programs designed to help the poor and you will get arrested. So simple and yet Washington politicians have no programs like this to go after welfare abusers across the country.

2) But Georgia is certainly not alone in cracking down on fraud in its programs that are supposed to help the poor. According to an article on the Heritage Foundation website by Sara Jones from November 17, 2015, the state of Michigan reduced its welfare population by an amazing 70% over a four year period. The article also reported that:
  • In 2015, the number of state welfare recipients receiving cash assistance from the state government dropped to 64,492 people.
  • As recently as 2011, there were 227,490 welfare recipients in the state.
  • Part of the reason for the successful effort to drop the number of welfare recipients is that the state began enforcing a 48 month LIFETIME limit for its cash assistance program.
  • According to a government spokesperson: “As the governor said at the time of the decision to enforce time limits, this was returning cash assistance to its original intent—a transitional program to help families as they work toward self-sufficiency while preserving the safety net for families most in need.”
  • This enforcement of the time limit was coupled with a job placement effort to help those get off of welfare and become contributing members of society vs. parasitic members of society.
  • Rachel Sheffield, a policy analysts at the Heritage Foundation summed up how the Michigan program should be a model for the rest of the  country including Washington when it comes to welfare: “Welfare should promote self-sufficiency for able-bodied adults. A crucial aspect of achieving this goal is a work requirement: Able-bodied adults should be required to work, prepare for work, or look for work in exchange for receiving assistance. Welfare is available for those who truly need it,” she said, “but the ultimate goal is self-sufficiency.”
Self sufficiency, not life long dependency, isn’t that what any welfare program should always be? Compassion to help those get over a rough patch vs. a way of life. That philosophy has taken root in Michigan with outstanding savings for state taxpayers without forcing people to starve to death.

Fixing government program and making them effective, efficient, and fraud resistant can be done, saving taxpayers money and citizens’ dignity in the process. Michigan and Georgia are already doing it successfully. 

Tomorrow we will highlight other states that are doing it successfully with the hope that Washington eventually takes notice and does it successfully. Failure to teach Washington will make the above financial picture from Cato a more likely scenario, with the dire consequences associated with it more likely.

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