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If Deficit Commission Is Serious, They Ought to Look at Welfare Reform

Posted By Kathryn Nix On June 30, 2010 @ 7:00 pm In Culture | Comments Disabled

Today, Heritage budget expert Brian Riedl testified before the National Commission on Fiscal Responsibility and Reform, more commonly known as President Obama’s “deficit commission.”

The commission has been tasked to offer suggestions to reduce the federal deficit—a necessity which was proven even more serious today by the release of the Congressional Budget Office’s annual long-term Budget Outlook [1].  Today’s meeting was the third for the commission, and was intended to serve as an opportunity for the appointees to hear from the public on the topic of deficit reduction.  To paraphrase Senator Kent Conrad (D-ND), the commission was looking for ideas they may not have yet considered.

The commission has promised to keep all possibilities in mind as it considers how best to accomplish this feat, which include reductions to federal spending and, unfortunately, tax increases as well.  Riedl highlighted his recent research [2], which shows that it is due to out-of-control spending, not insufficient tax revenue, that deficits are soaring.  By 2020, spending will be 6 percent of gross domestic spending (GDP) higher than its historical average.  Meanwhile, tax revenues, even if all current tax cuts are extended, will also be above their historical average.  Riedl reiterates: “Spending is driving long-term deficits.”

Because spending is the problem, the solution to mounting deficits should focus on reducing federal expenditures.  Thus far, reformers have focused solely on entitlement programs such as Medicare, Medicaid, and Social Security, as the first place to make cuts.  Entitlement spending is on track to consume all tax revenue by 2052 [3], threatening to devastate the United States economy on its way.  Indeed, fiscal reform must address entitlement programs if it is to be successful, but this is not the only place where spending reduction is possible.

Riedl chose to focus on another option which the commission may not have hitherto considered: welfare reform.  Riedl explained that, “Since 1990, federal welfare spending has more than doubled, from 2.0 percent of GDP to 4.4 percent.  This 2.4 percent of GDP expansion exceeds the combined 2.1 percent of GDP expansion of Social Security, Medicare, defense, and education spending over the same two decades.”

The majority of growth in welfare spending occurred before the current recession, and thus represents a persisting trend. To reverse this likelihood, Riedl points to research from Heritage’s Katherine Bradley and Robert Rector [4], which explains that reforming welfare could save more than $2 trillion over the next decade, while at the same time causing no harm to the poor.

Bradley and Rector [4] write, “Welfare reform should include at least five components: controlling welfare spending, instilling a discipline of work among welfare recipients, reducing rewards for dependence on welfare by treating a portion of the aid as a loan, promoting healthy marriage as the best way to prevent poverty, and limiting immigration of low-skill immigrants.”

The welfare reform of 1996, which created the jobs-focused Temporary Assistance for Needy Families (TANF) program, is an example of how best to do this. By discouraging reliance on welfare benefits and encouraging employment, this program helped families to escape poverty, rather than trapping them in it.

Heritage’s recently released 2010 Index of Dependence on Government [5] shows that dependency on the federal government is growing at an alarming rate.  Reversing this trend would reduce federal deficits while simultaneously keeping American citizens on the upward move that results from self-reliance and a society where incentives lead to growth, not more dependency.

Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2010/06/30/if-deficit-commission-is-serious-they-ought-to-look-at-welfare-reform/

URLs in this post:

[1] Congressional Budget Office’s annual long-term Budget Outlook: http://blog.heritage.org../2010/06/30/cbo-reveals-magnitude-of-reform-needed-for-sustainable-fiscal-future

[2] recent research: http://www.heritage.org/Research/Reports/2010/06/The-Three-Biggest-Myths-About-Tax-Cuts-and-the-Budget-Deficit

[3] consume all tax revenue by 2052: http://www.heritage.org/BudgetChartBook/entitlements-historical-tax-levels

[4] research from Heritage’s Katherine Bradley and Robert Rector: http://www.heritage.org/Research/Reports/2010/06/Confronting-the-Unsustainable-Growth-of-Welfare-Entitlements-Principles-of-Reform-and-the-Next-Steps

[5] 2010 Index of Dependence on Government: http://www.heritage.org/Research/Reports/2010/06/The-2010-Index-of-Dependence-on-Government-Dramatic-Spike-in-Dependence-Projected

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