Thursday, August 18, 2011

CATO Institute Department By Department Cuts Website: Downsizing Government

The CATO Institute is putting together proposals for budget cuts to each and every department in the US Government. Check out their fine work here. Below are some highlights:

Department of HHS

The 2010 health care law should be repealed and other HHS programs should be terminated, as listed below.

The Ryan plan would repeal the current tax exclusion for employer-provided health insurance and replace it with a refundable tax credit of $2,300 per adult, $1,700 per child, and a maximum of $5,700 per family. The tax credit would be used to cover the costs of either individual or employer-based health insurance for people under age 65.

Individuals age 65 and over would purchase private health insurance with the aid of a federal voucher. Individuals with lower incomes would purchase private health insurance with the aid of the federal tax credit and a voucher. The reforms would essentially convert Medicare and Medicaid from defined benefit to defined contribution plans. That would allow policymakers to directly restrain program costs without having the government ration health care services.

If individuals receiving tax credits and vouchers purchased health insurance costing less than the federal payment, they would put the excess in a tax-free medical savings account. If individuals purchased an insurance plan costing more than the federal payment, they would chip in the extra. Either way, individuals would be encouraged to make efficient purchasing decisions.

To restructure Medicare, the Ryan plan would provide retirees with a voucher averaging $11,000, which is the current average Medicare spending per beneficiary. The reform would only affect people who are age 55 and younger today. When those individuals start reaching age 65 after 2020, they would receive the Medicare voucher instead of benefits under the current program structure.

The Medicare voucher would grow in value after 2010 based on the average growth rate of general inflation and medical inflation. The dollar values of the vouchers would be adjusted to reflect the age of a beneficiary, income level, and health status. Poorer and sicker persons would receive higher subsidies. The low-income elderly under the Ryan plan would receive an additional payment to their medical savings accounts to cover out-of-pocket health expenses.4

To restructure Medicaid, the Ryan plan would provide low-income individuals with both a refundable tax credit and a voucher to purchase private health insurance. People below the poverty line would receive a $5,000 voucher, while those with incomes between the poverty line and twice the poverty line would receive a smaller voucher amount. State taxpayers—who currently pay a portion of the costs of Medicaid—would pay a portion of the costs of the new Medicaid vouchers.

An alternative approach to reforming Medicaid would be to convert it to a block grant for the states. The states would receive a fixed grant from the federal government with few strings attached, allowing them to experiment with more efficient ways of delivering health subsidies to low-income families. This approach is probably preferable to the Ryan voucher approach because it would likely result in less federal micromanagement of state health care markets and more state innovation.

However, both the voucher and block-grant approaches to reforming Medicaid would create strong incentives to improve efficiency in health care markets, and both reform approaches would allow federal policymakers to directly clamp down on explosive Medicaid spending growth.Table 1 lists HHS programs aside from Medicare and Medicaid that could be terminated. These programs have one thing in common: they are all state grant programs. The federal government raises the money from taxpayers who live in the 50 states and then dispenses it back to the states to administer these programs. That roundabout way of financing government programs makes no sense. Why don't the states just fund their own programs and cut out the inefficient middleman in Washington?

Department of Education

The Department of Education should be closed and its programs terminated. The main activity of the department is to provide grants to state and local governments. However, channeling taxpayer dollars through Washington and then back to the states is an inefficient way to fund local activities such as education. It would be better if the states funded their own education programs free from all the paperwork that comes with federal aid.

Federal intervention into primary and secondary schools has steadily increased since the 1960s, but there have been no obvious improvements in educational achievement. Indeed, standardized test scores for K-12 students have been stagnant for decades. Interestingly, Canada has virtually no federal involvement in its schools, but Canadian students generally score higher on international tests than do American students.

The sad truth is that rising control from Washington has probably damaged American schools by reducing local flexibility, retarding innovation, and burying school administrators in regulations. Federal involvement should be ended, and it should be up to the states, the schools, and parents to boost school performance. Cato scholars have proposed many ways to improve school quality.

Department of Education loans and grants to college students should be ended. Personal savings, financial institutions, and charitable organizations are more efficient funding sources for college costs. For decades, federal student aid has suffered from inept administration and large amounts of fraud and abuse. Another problem is that rising federal aid has generated inflation in college tuition and other educational costs. Thus, ending federal student subsidies would create beneficial pressure on colleges and universities to trim their bloated budgets and reduce their tuition.

Check out more at the link above and keep going back as they add more departments and more cuts.