As the deadline for the so-called “Super Committee” to put forward a deficit reduction plan approaches, officials in Washington are arguing over whether the government or the American people will have to bear the pain.
What they do not realize is that the United States is actually caught between three possible futures:
1. Fantasy and collapse (the Greek model)
2. Pain and Austerity (the Washington establishment model)
3. Innovation and Growth (the Hamilton-Lincoln-Reagan-Thatcher-Gingrich model).
President Obama is wandering around the country promising billions in his bid for reelection. He is spending our children’s and grandchildren’s money like a teenager with his first credit card.
Such policies are clearly unsustainable. If we continue to pile up $2 trillion a year in debt, we will crush the economy under massive interest payments. We only need to witness what is happening in Greece and Italy to glimpse where that model leads.
The Washington establishment’s reaction to the runaway spending is a policy of austerity and pain.
Democrats would cause austerity and pain on the individual by raising taxes, thereby shrinking family and business purchasing power.
Republicans would cause austerity and pain to government by cutting spending and thereby shrinking the services and income transfers government provides.
Shrinking government is clearly preferable to hurting the American people, but we must remember that there is a third alternative to pain. It is the path of innovation and growth. Historically, this has always been the American solution.
Alexander Hamilton was an early advocate of an economic growth model. His first report on manufactures paints the picture of a growing, industrializing America.
Abraham Lincoln spoke for those who wanted transcontinental railroads and other examples of modern innovation and growth.
Both President Reagan and Prime Minister Thatcher believed that a better future could be achieved through innovation and growth.
The key to today’s budget problems is to recognize that there is a world that works (largely but not entirely in the private sector) and there is a world that fails (bureaucracies in both the public and private sectors). With even a little creativity, we should be able to maximize the world that works and eliminate the world that fails.
For instance, if we applied modern private-sector management systems to government they would save up to $500 billion a year. That is three times the goal of the Super Committee. To see the incredible savings such systems can offer take a look at the examples Strong America Now already provides.
If we applied the American Express, Visa, Mastercard, and IBM models of fraud suppression to Medicaid and Medicare to stop paying crooks who are committing fraud, we would save $70 to $120 billion a year. (For a detailed plan to stop Medicare and Medicaid fraud, see the book Stop Paying the Crooks published by the Center for Health Transformation.)
Block-granting Medicaid and returning it to the states, as Budget Committee Chairman Paul Ryan advocates, we would save $700 billion over the next ten years. That is almost half the goal of the Super Committee.
With just these few examples we have already come up with most of the savings the Super Committee is trying to achieve, with no pain involved.
Adding a training requirement to unemployment compensation would strengthen America’s human capital. Many would probably leave the program if they actually had to do something to earn the money.
History has shown us that innovation, reform, and growth will be better than the pain and austerity being discussed in Washington today on both sides of the aisle.