Tom Campbell

Tom Campbell’s Response to State of the Union Jan 27th

I wish I could say after watching the President’s address that I saw a truly new fiscally responsible direction. I did not see that. Instead, I heard him postpone anything  for another year. And then, the proposed freeze in spending will affect only the non-defense discretionary side of the budget, a tiny portion of the federal budget. If he achieves all he promises, it will lower the deficit by 1 ½ percent—and even then, not until another year has gone by. Another year, whose deficit is projected to be 1.3 trillion dollars.

I saw a President still committed to a federal government far too big, and a debt that is unsustainable. He is enabled by big spenders in Congress, like Senator Boxer, who, over 28 years in the House and Senate, has run up a record of spending that is almost unequaled by any other politician. Until we replace her with a proven fiscal conservative, I fear we won’t have real budget reform.

As I have said since my announcement, the federal government has run up a debt that is a fiscal, foreign policy and moral failure. Last year, we increased it by almost 1.5 trillion, and it stands now at over 12 trillion dollars. We pay for the deficit by borrowing money from foreign governments (China is our largest creditor), and by printing money, and now, it will take almost 300 years to pay it back.

Tonight, the President proposed a “partial freeze” on some forms of spending, which might save 15 billion from the deficit projected to be 1.3 trillion. That’s to say, the “partial freeze” will affect roughly 1 percent of the budget deficit.  What we need is not a partial freeze, but a hard freeze.   My proposal takes on even the big spending categories. One of the biggest, Medicaid, is exempt from the President’s partial freeze.  But if we were to impose a one-year freeze in Medicaid — not cut, but simply freeze Medicaid costs where they are today — we’d save $66 billion, more than four times what the President has proposed.

Here are more ideas.  We should apply the hard freeze to to all non-defense discretionary spending. That category went up by 98 billion last year. The President proposes cutting 15 billion from that increased level. I propose taking it back to where it was; saving 98 billion.

These first two ideas start to add up to real cuts.  Medicaid freeze at 66 billion plus 98 billion equals 164 billion in savings. Let’s continue further.  The $700 billion TARP money is being returned as banks no longer need it. The President has proposed spending it for new “stimulus projects.” I say no. We borrowed the money, now pay it back. Lower the federal debt directly.  The stimulus money, $789 billion in total, has not proved successful. Let’s take what’s not yet been spent (about 500 billion), and use only half. That would save us a quarter of a trillion dollars, over the next two years: 125 billion this year. 125 billion plus 166 billion, totals 291 billion. Now we are starting to see real progress.

My proposal for the remainder of the stimulus money is to use it to eliminate the payroll tax on hiring new employees, who have been out of work for more than two months. That would be real stimulus, targeted to specific jobs for specific people–not favorite projects in the districts of powerful Members of Congress.

Let’s combine my proposal for real spending cuts and real stimulus with real reform.

We need to bring back Gramm Rudman Hollings. That law cut federal spending in all areas but Social Security and defense: across-the-board cuts if annual targets for budget reduction were not met. It provided the lever that brought Washington’s big spenders to the table, in the late 90’s.  Let’s reinstitute Gramm Rudman Hollings on a five-year time horizon. Starting with the 291 billion savings I’ve just identified for this year, let’s reduce the federal expenditure  each of the next five years, too–bringing us down to a deficit of less than half of its current amount. If Congress can’t agree to make the cuts, then, just like before, everything but Social Security and defense is on the table for across-the-board cuts. That will give the will to Congress to do what has to be done; or will substitute for their will if it’s lacking.

The American people are watching, and they see that the President proposed only about 15 billion dollars in cuts this year, whereas I’ve just identified almost 300 billion – a much more serious proposal.

Moreover, these cuts will allow us to avoid tax increases, putting more spending power in the pockets of the average American. These cuts will also reduce the federal government’s massive borrowing, which crowds out money that could be available for small businesses. These cuts give more economic power to individual Americans. They are the path to economic recovery.