Tea Party Budget

Pre-Publication Version

The Tea Party Budget

A Comprehensive Ten-‐Year Plan to Stop the Debt,

Shrink the Government, and Save Our Country

Findings and Recommendations of the Tea Party Debt Commission

Delivered to Congress

November 17, 2011 Washington, D.C.

2

"The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money."

Alexis de Tocqueville, 1840

Summary: Everyone Benefits

he critics say the tea party is “all hat and no cattle” — that we have lots of talk, but no plan. Well, that’s about to change.

Imagine a reform plan that makes dramatic moves toward restoring limited, constitutional government. Imagine a plan that slows the numbers on the National Debt Clock to a crawl, and then brings them to a halt, and then shifts them into reverse. Imagine a plan that cuts, caps, and balances federal spending without raising taxes; that gives future generations control over their own retirement security; and that lifts the massive debt burden from our children’s shoulders so they can know the American dream of ever-higher freedom and prosperity. And on top of all that, imagine that it’s a serious, credible, plan generated by the grassroots. This is that plan. We call it the Tea Party Budget. Of course, we realize that the tea party is a broad, spontaneous popular movement, without leaders or formal organization — so we won’t presume to speak for anybody but ourselves. But if any plan offered to date has a fair claim to the “tea party” label, we think this is it. Four months in the making, this plan is the product of countless suggestions and comments from thousands of local citizen-activists across the country and voting by tens of thousands more online. Unlike other budget plans produced in Washington cubicles and quickly forgotten, this plan represents a milestone because it reflects real grassroots input.1 The plan’s virtues are those of America herself: optimistic, practical, and bold. The contrast with President Obama’s budget plan could not be starker. His plan was unanimously rejected earlier this year by the United States Senate, for good reason. It offered neither hope nor change. Instead, it would have saddled our children with more spending, taxes, and debt — more economic stagnation, unemployment, and decay. 1 Our sincere thanks to the good folks at FreedomWorks for facilitating our work.

T

3

We emphatically reject that vision for our future. Instead, we offer a bold — but, we believe, feasible — plan that:

ü “Cuts, caps, and balances” federal spending.

ü Balances the budget in four years, and keeps it balanced, without tax hikes.

ü Closes an historically large budget gap, equal to almost one-tenth of our economy.

ü Reduces federal spending by $9.7 trillion over the next 10 years, as opposed to the President’s plan to increase spending by $2.3 trillion.

ü Shrinks the federal government from 24 percent of GDP — a level exceeded only in World War II — to about 16 percent, in line with the postwar norm.

ü Stops the growth of the debt, and begins paying it down, with a goal of eliminating it within this

generation. To achieve these goals, our plan, among other things:

ü Repeals ObamaCare in toto.

ü Eliminates four Cabinet agencies — Energy, Education, Commerce, and HUD — and reduces or privatizes many others, including EPA, TSA, Fannie Mae, and Freddie Mac.

ü Ends farm subsidies, government student loans, and foreign aid to countries that don’t support us

— luxuries we can no longer afford.

ü Saves Social Security and greatly improves future benefits by shifting ownership and control from government to individuals, through new SMART Accounts.

ü Gives Medicare seniors the right to opt into the Congressional health care plan.

ü Suspends pension contributions and COLAs for Members of Congress, whenever the budget is in deficit.

In short, the Tea Party Budget enables us to end chronic deficits and pay down debt, while moving us back toward the kind of limited, constitutional government intended by our Founding Fathers. And it does all this without raising taxes. In fact, we make the so-called Bush tax cuts, and other expiring tax relief provisions, permanent. With these reforms, we can unburden the productive sector and get back to robust economic growth and rising living standards for all. With this plan, everyone benefits.

4

The Challenge

merica’s current economic and fiscal challenges are truly daunting. A $15 trillion national debt. Nine percent unemployment. Twenty-six million Americans out of work or underemployed. College graduates unable to find work, waiting tables, and moving back in with their parents.

Businesses sitting on more than $2 trillion in cash rather than using it to create jobs, because of massive regulatory and political uncertainty. Debt ceiling “deals” that don’t reduce the debt. Diminished credit. Downgrades. Meanwhile, the specter of inflation and higher interest rates is bubbling beneath the surface, preparing to explode. It’s already visible in producer prices, and in the rising cost of staples like milk and gasoline. The press and political class may call it a “slow recovery,” but it sure feels like a depression to the millions of citizens who have lost their jobs, their homes, their retirement savings. We are in the midst of the worst economic stagnation in a generation, certainly since the 1970s and perhaps since the Great Depression itself. Americans voted for change in 2006, 2008, and 2010. But this wasn’t the change they were asking for! At the root of these problems is our own federal government — its size, its reach, and many of its policies. Washington is simply too big. Our government is doing too many things it can’t do well, or shouldn’t do at all, with money it doesn’t have. We are borrowing 43 cents of every dollar we spend. Waste and duplication abound. A report published this past March by the Government Accountability Office counted no fewer than 47 job training programs, 56 financial literacy programs, 80 economic development programs, 18 food assistance programs, 20 programs for the homeless, 82 teacher-quality programs spread across 10 agencies, and more than 2,100 data centers. All told, we have nearly 2,200 federal programs. What human being could ever know or monitor them all? Who’s minding this mess? Perhaps the best summation of this lamentable state of affairs came at our field hearing in Indianapolis, from a young lady named Chloe Minor, age 15: “Government today is making a mess of things. My generation has absolutely no say in the matter. Each of us owes over $44,000 to pay off the national debt. It is obvious to me what is needed in this country is some teenage supervision!” The Questions

n this, as in any, crisis, the question for Americans is not “How much government should we cut?” or “How much government is enough?” nor even “How much government do we need?” Rather, the first and essential question is, as it has always been, “What does our Constitution require?” — followed

closely by a second: “What does it permit?” Alas, our leaders in Washington seem as determined as ever to evade these essential questions. And that is why the Tea Party Debt Commission was formed. The idea came about in late June of this year, at a summit of tea party leaders in Washington. The concept: Give the American people a platform to propose specific cuts in the federal budget and to put to

A

I

5

rest the argument that our movement isn’t serious about specific spending cuts and that we “have no plan.”

“The only way we will ever reduce the debt and balance the budget

is if America beats Washington and tea party activists take over this process.”

Matt Kibbe Washington, DC

The Tea Party Debt Commission is, in a sense, our answer to the "deficit reduction super committee,” that unique and remarkable creature of this summer’s Beltway debt ceiling deal. While the Super Committee is composed of twelve powerful Washington insiders charged with trimming the budget around the edges, we are a dozen shirt-sleeve Americans — volunteer activists and leaders from across the country — who want to help save our country from a Greece-style debt collapse. The Super Committee’s work product is super-privileged: it will receive fast-track consideration, with a guaranteed up-or-down vote in both Houses, no amendments, no extended debate, no filibusters. That’s power. We, of course, have no such power. And yet, the irony is that if the Super Committee succeeds, it will reduce spending by about $1.2 trillion over the next decade, from a steeply rising baseline. Our plan, by contrast, would reduce spending by eight times that amount, $9.7 trillion. Or to put it in percentage terms, assuming they meet their full charge without gimmicks or double-counting, the Super Committee plan would slightly reduce ten-year spending from $44 trillion to $43 trillion, a 2.3 percent trim. Our plan would reduce ten-year spending from $44 trillion to $34 trillion, a 23 percent reduction. And more important, we would stop the debt. If we’re going to go to all this trouble to cut spending, why not achieve some lasting, meaningful gains for ourselves and our posterity? In order to hear directly from the public, we undertook a national listening tour, holding field hearings in towns across the country, from Philadelphia, birthplace of American liberty, to tiny Logan in the remote reaches of northern Utah. We met in churches, public libraries, community centers, even a Denny’s restaurant. In addition to hearings, we surveyed the public online through a crowd-sourced poll at a website we created, www.TeaPartyDebtCommission.com, that allows voters to prioritize spending cuts. More than 70,000 people have visited the site to date, and more than 50,000 have completed the entire survey, voting on more than 1,000,000 “matchups.” The point was to gauge priorities: If you had to cut spending, what programs would you cut first? What would you protect? From their responses, we were able to obtain a good sense of the priorities of people of all stripes — Republicans, Democrats, libertarians, and independents. What struck us is how much consensus there is. Ninety-three percent of the time, for

6

example, when folks are asked to choose between “Repeal ObamaCare” and any other randomly selected budget cutting idea, they will choose “Repeal ObamaCare.” Ninety-three percent. Also striking: results were very similar between those who describe themselves as “tea party supporters,” and those who don’t, which tells us that, far from being extreme, our movement is right in the mainstream of American political opinion. In a sense, this report is the next logical step in the tea party’s progression from protest movement to governing majority. Indeed, the Tea Party Budget builds perfectly on the CONTRACT FROM AMERICA

(http://www.thecontract.org), the unofficial — and also grassroots-generated — platform of our movement:

1. Protect the Constitution 2. Reject Cap & Trade 3. Demand a Balanced Budget 4. Enact Fundamental Tax Reform 5. Restore Fiscal Responsibility & Constitutionally Limited Government 6. End Runaway Government Spending 7. Defund, Repeal, & Replace Government-Run Health Care 8. Pass an ‘All-of-the-Above’ Energy Policy 9. Stop the Pork 10. Stop the Tax Hikes

In 2010, a whole new class of tea-party backed freshmen was elected to Congress on this platform. Unfortunately, Washington remains resistant to these commonsense reforms. So in 2012 we will need to send an even larger group of reformers to Congress — men and women who not only support the Contract but also the kinds of bold, specific reforms needed to implement it. Reforms like the ones contained in this budget plan.

In assembling our plan, we decided not to reinvent the wheel. Instead, we took good ideas wherever we found them. We started with the compellingly simple framework of Rep. Connie Mack’s (R-FL) popular “One Percent Spending Reduction Act,” a.k.a. the “one cent solution” or Penny Plan for short. In the Penny Plan, federal spending is reduced by just one percent a year until the budget is balanced, and then capped at 18 percent of GDP. That’s it. With this approach, the budget is balanced within 10 years.

With the Penny Plan as our inspiration, we built out a detailed, year-by-year path to balance. We took budget reform ideas, not only from the general public, but also from numerous specific plans proposed by various leaders we know and respect. We looked at the House-passed “Path to Prosperity” plan and the conservative alternative put forth by the House Republican Study Committee (RSC). Also worthy of special mention in this context are a few members of Congress who have done outstanding work: Senators Mike Lee (R-UT), Rand Paul (R-KY), Pat Toomey (R-PA), Tom Coburn (R-OK), Jeff Sessions (R-AL), and

7

Representatives Paul Ryan (R-WI), Jim Jordan (R-OH), Ron Paul (R-TX), Jeff Flake (R-AZ), Mick Mulvaney (R-SC), and Kevin Brady (R-TX). The Plan’s Four Principles

he Tea Party Budget reflects four basic values:

1. Fiscal common sense. 2. Constitutional limits. 3. Economic freedom. 4. Personal self-reliance.

By “fiscal common sense,” we mean the old, time-tested rules for keeping government from becoming a burden on the people: limit spending, tax lightly, borrow the minimum, maintain a surplus, pay off debt. Every household and business has to operate on these principles. So should government.

ü Pass a Balanced Budget Amendment. Balanced budgets should be the rule rather than the exception. Congress should send a strong BBA to the states immediately. By “strong,” we mean a BBA carefully crafted to constrain Washington in as many ways as possible, consistent with the dictates of prudence. We favor Sen. Mike Lee’s (R-UT) strongly framed BBA proposal, which not only requires annual balance but also includes procedural reforms to make it harder for Washington to increases taxes, spending, or debt.

By “Constitutional limits,” we mean the limits that the Founders took such great care to devise. The most important, for our present purposes, is federalism. Of every program at the federal level (and every proposal for a new federal program), we should ask two basic questions: 1) Is it constitutionally authorized? 2) Is it best carried out by the federal government, as opposed to states or private entities? Only when the answer to both questions is yes, should that program exist.

“What is needed in this country is some teenage supervision!” Chloe Minor, age 15

Now, we recognize that good and reasonable people can disagree about where exactly to draw the line between the federal government on the one side, and the state governments and the private sector on the other. Even the Founders differed among themselves about that at times. But in most cases, the line is pretty clear. And even when it’s not, every federal office holder has a sworn duty to try to discern the line for himself, and to bring to an end those programs that he finds to be on the wrong side of it. When in doubt, the burden of proof should be on those who say, “This is a federal issue,” rather than on those who say it isn’t. Health, education, and welfare, for example, are clearly areas of life essentially local in nature; therefore, they should be addressed mostly if not entirely at the state and local level. When popular opinion makes

T

8

it difficult for the being to devolve an unconstitutional program, Congress should at least make that program as constitutional as possible, as quickly as possible.

ü Assess the constitutionality of every federal program. When we began this project, we set out to carefully and thoughtfully assess the constitutionality of all 2,200 federal programs — program by program. Time and resource constraints made this impractical. We hope, however, that, as a follow-up to this report, the tea party movement at large will take up the task and carry out a wholesale “tea party constitutionality review process.” Let’s start with a blank sheet of paper and ask, “What, if we were starting over, would we want Washington to be doing?” And then next to that, let’s set out the list of all 2,200 programs and ask our two basic questions about each: “Is it authorized?” and “If authorized, is it prudent?” And then let’s see where our two lists overlap, and keep only what’s on both.

“Require all elected officials to read the Constitution and

then take a test on it. Include essay questions!”

William E. Keeling via email By “economic freedom,” we mean getting the government off the back of this economy and letting individual entrepreneurs innovate and create jobs. In particular, we think Congress should immediately undertake the following economically crucial reforms.

ü Scrap the Tax Code. We should not raise taxes. We are taxed enough already. Tax hikes would

only destroy jobs. Instead, we should make the tax burden lighter. And at the same time, we should make the tax code fairer, flatter, simpler, and more pro-growth. Many bold ideas have been proposed to achieve this, such as a flat-rate income tax, a national retail sales tax, or even going back to the traditional, pre-1913 system of tariffs and excises (i.e., abolishing the income and payroll taxes altogether). Since our focus in this report is stopping the debt by restraining spending, we decided to take no position on fundamental tax reform, except to say that: 1) we endorse it enthusiastically, and 2) it will never happen in the absence of massive spending cuts.

“The United States is the Saudi Arabia of coal and natural gas.”

Bill Bigelow Punta Gorda, Florida

ü Stop the Regulatory Train Wreck. Massive over-regulation is killing this economy. To lift that heavy burden, Congress should: 1) Place an immediate moratorium on all pending federal regulations. 2) Provide a full audit of all regulations passed since 2000 to determine their need, impact, and effect on job creation. 3) Pass the REINS Act to rationalize the regulatory process, going forward. And 4) Repeal the Dodd-Frank, “too big to fail” bailout scheme.

9

ü Replace ObamaCare with Patient-Centered Care. Excessive health care cost inflation is the number one driver of federal spending and deficits. It’s also the biggest reason why 15 percent of the population is uninsured. It’s imperative that we replace ObamaCare and other federal distortions of the doctor-patient relationship with a patient-centered system. And that means addressing the root cause of medical inflation and the uninsured, which is the federal tax code’s unfair treatment of people who buy insurance with their own money out of pocket. When the subsidy playing field is level, patients will be back in charge, cost growth will abate, and health care quality will improve. To be healthier, we must be freer.

ü Tap America’s Massive Energy Reserves. Our country is blessed with abundant natural resources

that could allow us to attain near total energy self-sufficiency within 10 to 15 years, if we can just overcome the extreme environmentalists and liberal politicians. The job-creating power of these resources is staggering. Unleash it.

ü Ensure Sound Money. It is too easy for politicians to evade the government’s debts by simply

inflating the currency — a moral and economic blight. Unfortunately, Congress has been inflating the currency ever since it set up the Federal Reserve to buy and sell its debt back in 1913. Over the past century, thanks to Congress and the Fed, the dollar has lost 97 percent of its value. Recent congressional stimulus spending and the Fed’s “quantitative easing” policies are now inviting a disastrous bout of hyperinflation. To prevent that, Congress should: 1) Conduct a true and complete audit of the Fed with an eye to reforming or replacing that failed institution. 2) Give citizens a sound alternative to cheap Federal Reserve Notes by letting them transact business in U.S. minted precious-metal coins and U.S. issued gold-backed notes.

“In the long term, I think the tea party should push for deep structural reforms [such as repeal or revision of the 16th and 17th Amendments to the Constitution]. Without such

reforms, I think our efforts to cut budgets, shrink the government, and protect liberty will continue to be an uphill battle at best.”

Edward Hyde Cincinnati, Ohio

10

“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States

respectively, or to the people.”

Tenth Amendment The Plan

ow we are ready to spell out the specifics of our plan. Before we do, we want to highlight some of its big-picture benefits. Here’s how the Tea Party Budget dramatically changes Washington:

1. Balances the budget in 2015, and keeps it balanced. Almost all of the proposed reforms take

place in the first year, 2012, rather than after a phase-in, because it’s legally impossible to bind future Congresses. The best way to ensure reforms never happen is to postpone them till “tomorrow.”

2. Reduces total federal outlays by about 15 percent in the first year. This may sound like a deep

cut, until we recall that spending went up by 19 percent in 2009.

3. Shrinks the government by 30 percent, relative to current law. Outlays shrink from today’s 24 percent of GDP to a more affordable 16 percent of GDP.

4. Reduces gross debt from 99 percent of GDP to 75 percent of GDP.

5. Reduces the publicly held portion of the debt from 68 percent of GDP to 47 percent of GDP.

Reducing the debt is extremely important, because it’s the key to ensuring lower future interest rates and more robust economic growth. The Obama budget, by contrast, goes in the opposite direction on all of the above measures. We divided the federal budget into five roughly equal segments, and found savings within each, as shown in this table.

Tea Party Budget Savings

(in dollars) 1st Year (2012) 10 Years (2012-2021) Annually Appropriated 386,684,000,000 3,583,965,000,000 Social Security 23,000,000,000 230,000,000,000 Medicare & Medicaid 676,000,000 2,030,843,000,000 Auto-Pilot Programs 119,720,772,800 1,770,094,138,500 Defense 31,643,000,000 2,085,136,000,000 TOTAL 561,723,772,800 9,700,038,138,500

N

11

And here are the specific proposals, grouped as follows:

1. Annually Appropriated 2. Social Security 3. Medicare & Medicaid 4. Auto-Pilot Programs 5. Defense 6. Receipts 7. Budget Process Reforms

1. Annually Appropriated

Currently represents: 19% of spending Contributes: 38% of savings Save, first year: $391,684,000,000

Save, 10 years: $3,760,962,242,653

End all foreign aid to countries that don’t support us.2

Save, first year: $11,000,000,000 Save, 10 years: $110,000,000,000

Eliminate all earmarks.


Trim annually appropriated spending to 2010 levels (one-time, 2.5% across-the-board savings, prior to other reductions).


Eliminate the Department of Education.


Eliminate the Department of Energy (transfer nuclear research and programs to Defense).


Eliminate HUD.


2 Actual savings could differ from our estimate, due to subjectivity.

12

Eliminate Commerce Department business & economic development subsidies.


Eliminate Department of Commerce ethanol & unproven energy technology subsidies.


Eliminate the Legal Services Corporation.

Save, first year: $398,000,000 Save, 10 years: $3,980,000,000

Devolve most EPA duties to the states, cut the agency's budget by 50%, and fold it into the Interior Dept.


Privatize the Transportation Safety Administration (TSA).


Shutter the Small Business Administration.


Privatize air traffic control

Save, first year: $3,800,000,000 Save, 10 years: $38,000,000,000 Eliminate certain federal job training programs.


Retire the AmeriCorps paid-volunteerism program.


Eliminate Title 10 family planning grants.


Eliminate the National Endowment for the Arts.


End urban mass transit grants.


13

Privatize Amtrak and end rail subsidies.3


Repeal Davis-Bacon labor rules. Save, first year: $6,000,000,000 Save, 10 years: $48,000,000,000

End the welfare payment component of the Child Tax Credit program.


Reduce Bureau of Land Management by 50% from FY 2010 level.


Eliminate the Bureau of Reclamation.


Reduce U.S. Geological Survey by 20% from FY 2010 level.


Reduce number of federal workers to the 2008 level.


Cut the federal employee travel budget to $4 billion (half of FY 2000 spending).


Cut federal employee pay by 10 percent.


Consolidate 2,100 federal data centers and server warehouses down to 1,100 over 3 years. Save, first year: $5,000,000,000 Save, 10 years: $176,997,242,653

Reduce unused or under-used federal building space by 25%.


3 This should also increase receipts.

14

By legislation, terminate all of the President's policy "czar" positions.4 Save, first year: $0 Save, 10 years: $0

End all “green” technology initiatives. Let the private sector do the innovating.5

Save, first year: $0 Save, 10 years: $0

2. Social Security

Currently represents: 20% of spending Contributes: 2% of savings Save, first year: $23,000,000,000 Save, 10 years: $230,000,000,0006

Create optional SMART Accounts for new workers born after 1981.7

Save, first year: $0 Save, 10 years: $0

Increase the number of work-years used to calculate a senior's Social Security benefit level at retirement.


Tighten eligibility for Social Security Disability Insurance.


Explanation The Challenge. Social Security is going broke, and beginning about 25 years from now will only have enough funds to pay about 75 percent of promised benefits. Benefits are also comparatively meager, and cannot be passed down to one’s heirs, should one die before reaching retirement age. 4 No separate savings because positions funded out of other, existing accounts.

5 Initiatives sprinkled across government. No unified savings estimate available.

6 Estimate does not include effect of SMART Accounts, which affect receipts rather than outlays.

7 Budgetary effects of SMART Accounts are displayed in the Receipts section, below.

15

“The ‘Galveston model’ is a superior alternative to traditional Social Security.”

Noel Griffin Mohnton, Pennsylvania

Our Answer. Successful experiments have proved that we can make this program sustainable and actually improve benefits. How? By harnessing the power of compound interest. Three decades ago, Chile embarked on a bold transformation of its retirement security system. Today, that system is the envy of the world, giving seniors far better benefits than the old, government-run system ever did. Soon after the Chilean reform got underway, three Texas county governments opted out of Social Security in favor of personal accounts. Today, county workers in those three jurisdictions retire with much more money and have significantly more generous death and disability supplemental benefits than do Social Security participants. And those three counties—unlike almost all others in the U.S.—face no long-term unfunded pension liabilities. All state and local governments should have the option of opting into the “Galveston model.” And all young people should have the option of opting into a better future with personal accounts like those found in Chile. The Tea Party Budget embraces the Chilean / Galveston approach, specifically by enacting a modified version of Rep. Jeff Flake’s (R-AZ) SMART Act. That bold reform allows new workers born after 1981 to invest one-half of their payroll taxes (7.65%) in a SMART Account, which they can use to fund their retirement and health care costs in retirement. If they prefer, they can give up their account and opt back into traditional Social Security at retirement. Thanks to this modern approach, our plan:

ü Improves benefits. ü Doesn’t increase the retirement age. ü Doesn’t means-test benefits. ü Doesn’t cut benefits for people in or nearing retirement. ü Doesn’t touch the existing Social Security Disability Insurance program. ü Shores up the long-term solvency of traditional Social Security by slowing the growth of benefits

(with “progressive price indexing”). This reform — which we expect to be very popular — reduces federal payroll tax receipts by about $500 billion over the ten-year period—an excellent investment on a better system, and one that is fully paid for in this plan.

16

3. Medicare and Medicaid

Saves, first year: $676,000,000 Saves, 10 years: $2,030,843,000,0008 Currently represents: 21% of spending Contributes: 21% of savings

Let individuals opt out of Medicare (currently prohibited) (Sen. Jim DeMint’s “Retirement Freedom Act”).9

Save, first year: $0 Save, 10 year: $0

Let all new Medicare beneficiaries enroll in the Federal Employees Health Benefit Program (FEHBP), after 2013 (Sen. Rand Paul’s “Congressional Health Care for Seniors Act”).

Save, first year: $0 Save, 10 year: $1,253,483,691,378

Reduce Medicare subsidies to actual cost of hospitals’ graduate medical education. Save, first year: $1,000,000,000

Save, 10 year: $205,000,000,000 Maintain Medicare's physician payment rates at the 2011 level.10

Spend, first year: $12,024,000,000 Spend, 10 year: $297,557,000,000

Convert the open-ended Medicaid program into a capped block grant to the states.

Save, first year: $0 Save, 10 year: $750,000,000,000

Call on all states to reform their medical malpractice and product liability systems (tort reform).11 Save, first year: $0 Save, 10 year: $0

8 This is a net figure that includes the increased spending associated with a permanent Medicare “doc fix.”

9 No savings estimate available. Likely to be negligible.

10 This item, which increases spending, is commonly called the “doc fix.” It forestalls an automatic cut in Medicare physician payments that would otherwise occur at beginning of each calendar year, due to a quirk in a statutory formula. Forestalling these yearly automatic cuts “costs” money from a budgetary perspective. We have included a permanent fix in our plan because, although Congress has passed a temporary one every year since 2003, there is no guarantee it will do so in the future.

11 Savings not counted, because policy not mandatory.

17

Explanation Medicare The Challenge. The second-largest federal program, Medicare is also the most important single factor in future deficits and debt. If we don’t slow Medicare’s growth, we won’t be able to balance the budget, long-term. Currently comprising 13 percent of the budget, it is growing at an unsustainable rate of 7 percent a year. Beyond its fiscal impact is its enormous effect on the entire health care sector. The Medicare bureaucracy focuses all its efforts on trying to control medical prices, rather than on preventing fraud — and fails miserably at both tasks. Designed in the mid-1960s, Medicare has never been adequately updated to reflect changes in medicine, and, while it represents a very generous benefit relative to the amount of payroll taxes collected for it, Medicare in fact offers seniors and the disabled a benefit that is poorly designed, wasteful, and in many ways inadequate. On top of all this, President Obama and his liberal allies in Congress have decided to use Medicare as a piggy bank to create an entirely new, unsustainable entitlement program, ObamaCare. Their favorite method of taking money out of Medicare is to simply reduce reimbursement rates for doctors, hospitals, and other health service providers; this meat-ax approach only reduces patients’ access to care, without improving efficiency or slowing the program’s rapid underlying cost growth. The great challenge for policymakers, then, is to find smarter ways to slow Medicare’s unsustainable growth rate without rationing patients’ access to care or stifling medical progress and innovation. Our Answer. We believe true reform will begin with a return to the tried-and-true market principles that make life better in every other area of our lives. Medicare is too bureaucratic, top-down, and government-centric. To save and improve Medicare, we must give patients more choice and control. We must make it patient-centered. Whose health is it, anyway? While we think the private sector can and should provide health care for older citizens, we do not propose ending Medicare or sending it back to the states. Rather, we propose to make Medicare more efficient, sustainable, and optional, as follows.

“To get health care costs under control, we should follow common sense. Do things that reduce demand, increase

supply, increase competition, reduce waste, and promote prevention.”

Alan Guillaudeu Denver, Colorado

We preserve the existing Medicare program for those who prefer to remain in it. But we allow individuals, after 2013, to opt into the popular and successful Federal Employees Health Benefit Program (FEHBP). This is the same program enjoyed by current and former Members of Congress. (A separate risk pool would be set up within FEHBP to minimize the upward pressure on federal workers’ premiums.) The Congressional health care program relies on competing private insurers to provide benefits, and as a result has very little of the fraud and waste problems that plague today’s outdated and poorly designed

18

Medicare system. With somewhere between 10 and 20 percent of Medicare’s $450 billion annual budget being attributable to waste, fraud, and abuse — and no, that was not a typo — the potential savings from this reform are huge. This approach will also make the system more patient-centered, because it will give beneficiaries more modern insurance plans with more rational cost-sharing, co-pays, deductibles, etc., and thus greater cost-consciousness as patients and consumers. Medicaid The Challenge. Medicaid, the joint federal-state health care program for the poor (and the third largest federal program), has exploded into a semi-middle class entitlement that is bankrupting the states while providing low-quality care to poor families. Some 40 percent of physicians will not take new Medicaid patients. Our Answer. To relieve state and federal taxpayers and improve the quality of care for low-income Americans, we propose that Medicaid be block-granted. The amount of funding would be fixed. States would have maximum flexibility to determine benefits, eligibility, and reimbursement rates for health care services. As with the hugely successful welfare reform of 1996, this would give states the incentives and flexibility to focus scarce resources on those who truly need help. Tort Reform The Challenge. Excessive medical malpractice awards drive up medical costs for everyone. Our Answer. We call on states to reform their medical malpractice (and product liability) systems. Such reforms as the commonsense “loser pays” rule are saving money for patients, customers, and taxpayers in many states. However, because this is a state rather than a federal issue under the Constitution, we do not include any savings from med-mal reform in our estimates; we do note, however, that the Congressional Budget Office (CBO) has estimated that federal legislation imposing it on the states would save around $54 billion over 10 years.

4. Auto-Pilot Programs

Save, first year: $119,720,772,800

Save, 10 years: $1,770,094,138,500 Currently represents: 20% of spending Contributes: 18% to savings

Repeal ObamaCare. (This line breaks out just those savings related to insurance coverage provisions.)

Save, first year: $6,000,000,000 Save, 10 years: $1,042,000,000,000

19

Repeal ObamaCare. (This line breaks out just those savings related to “other direct spending” in the act.)12 Spend, first year: $10,000,000,000 Spend, 10 years: $732,000,000,000

End TARP subsidies to failing financial institutions. Save, first year: $4,000,000,000 Save, 10 years: $18,000,000,000

Break up the giant, taxpayer-backed housing banks Fannie Mae and Freddie Mac.


End farm subsidies.


Convert the open-ended Food Stamps program into a capped block grant to the states.


Reduce and limit the growth of federal payments to the states for cash welfare programs.


Eliminate the ethanol tax credit subsidy.


Reduce number of troops deployed for certain overseas military operations to 45,000 by 2015. (This line reflects the debt service effect of this policy change, only.)


Maintain Medicare's physician payment rates at the 2011 level. (This line displays the debt service effect of this change, only.)

Spend first year: $134,668,800 Spend, 10 years: $53,399,506,100

Withhold COLAs for retired federal workers until they reach age 62.


12 This item increases spending. ObamaCare was funded in part with $500 billion in 10-year cuts to Medicare, via deep reimbursement cuts to doctors, hospitals, and other health service providers. If not reversed, those reimbursement cuts will reduce patients’ access to medical care. Reforms are needed to make Medicare more affordable, but government rationing is the wrong way to do it.

20

Use a more accurate measure of inflation for all government programs.13 Save, first year: $1,000,000,000 Save, 10 years: $96,000,000,000

Explanation What we are calling auto-pilot spending is better known inside the Beltway as “mandatory” spending. Whatever you call it, it means “No one is minding the store.” Auto-pilot spending is especially problematic when – as in the case of so-called “entitlements” like Medicare, Medicaid, Food Stamps, and Social Security – it is also open-ended and uncapped. That’s a formula for explosive cost growth.

The obvious first step to putting our fiscal house in order is to repeal the newest open-ended, uncapped entitlement, ObamaCare. It’s a program we cannot afford and a majority of the public does not support. Repealing just the new spending in that controversial law would, by itself, produce 85 percent of the $1.2 trillion the Super Committee is charged with saving. Politicians love to prop up banks and businesses with subsidies, and then, when the props fail, with taxpayer bailouts. Enough! No more bailouts. In particular, the Wall Street bailout, TARP, has to end. So should further government support of the two giant housing banks, Fannie Mae and Freddie Mac, which together have already cost taxpayers in excess of $100,000,000,000 in bailout costs.

The Department of Agriculture is one of the largest agencies of the federal government. With fewer than 1,000,000 farmers in the United States, USDA has over 110,000 employees, or roughly one employee for every 9 farmers! USDA currently provides up to $29,000,000,000 in farm and crop support programs each year, and also administers food stamp and supplemental nutrition programs that account for more than half of all agriculture spending. Meanwhile, the government is subsidizing ethanol fuels that consumers don’t want or need. These short-sighted policies distort markets, drive up food prices, and have even led to food shortages in parts of the developing world. We should lower food prices by getting back to basic economic freedom. We should eliminate farm subsidies altogether, while converting the open-ended Food Stamps program into a capped block grant to the states.

Switching to a more accurate measure of inflation — “chained CPI” — makes sense, and would save money; but it should be applied neutrally to all government programs, not selectively as part of some political compromise.

5. Defense


Currently represents: 20% of spending

Contributes: 21% of savings

13 Moving to chained CPI also affects receipts. Receipt effects are not broken out separately.

21

Reduce waste and duplication by implementing Sen. Tom Coburn's “Back in Black” defense reforms. Save, first year: $13,300,000,000 Save, 10 years: $963,300,000,000

Reduce number of troops deployed for certain overseas military operations to 45,000 by 2015 .


Explanation If there is one function of government clearly addressed and permitted in the U.S. Constitution, it is defense. Defense protects all of the other functions of government, and our freedoms.

“Our national debt is our biggest national security threat.”

Admiral Mike Mullen Chairman of the Joint Chiefs of Staff

Still, as the largest military establishment on earth, America’s defense community can afford to contribute to debt reduction. We approach this challenge with the following basic goals:

ü Preserve weapons systems and personnel investments that our commanders, after careful review, have deemed vital to the nation’s security.

ü Cut out all obviously wasteful spending, such as duplicative purchases of Pentagon supplies.

ü Eliminate or move from the Pentagon budget all programs that have nothing to do with national defense.

ü Prefer specific cuts over across-the-board reductions or sequesters. (Avoid a meat-ax approach.) Having looked at a number of studies, reports, and white papers issued by experts both in and out of government, we believe the recommendations of Sen. Tom Coburn (R-OK) in his “Back in Black” report represent an excellent opportunity for cost reduction, saving approximately $1 trillion over the next 10 years while still providing the defense infrastructure and capability necessary to adequately defend the nation. We also endorse and call attention to the March 2011 GAO Report on “Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars and Enhance Revenue.” This report confirms the soundness of many of the savings proposals in the Coburn plan. The Budget Control Act of 2011, which created the Super Committee, will impose an automatic across-the-board cut in defense and other spending, to make up for any shortfall in the savings produced by that Committee. We are worried that such a sequester, if large, could weaken our defenses, perhaps to a

22

dangerously unacceptable level. We should avoid a meat-ax approach. And happily, we can easily do so. The Super Committee can avert our having to pull that trigger – and incidentally meet almost all of its $1.2 trillion savings target — simply by adopting the Coburn defense proposals.

6. Receipts

Changes from CBO baseline Collect, first year: +$48,849,540,313 Collect, 10 years: -$5,509,670,654,408

Extend Bush tax cuts and index Alternative Minimum Tax (AMT) to inflation.

Collect, first year: -$11,335,000,000 Collect, 10 years: -$3,949,251,457,122

Extend Bush tax cuts and index Alternative Minimum Tax (AMT) to inflation. (This line displays the debt service effect of this change, only.)

Collect, first year: -$1,269,520 Collect, 10 years: -$697,643,183,248

Extend other expiring tax provisions.

Collect, first year: -$12,505,740,276 Collect, 10 years: -$761,341,914,813

Extend other expiring tax provisions (This line displays the debt service effect of this change, only.)

Collect, first year: -$140,064,291 Collect, 10 years: -$158,786,409,507

Repeal ObamaCare. (This line breaks out the budgetary effect on receipts of repealing the act's tax hikes.)


Sell off certain currently unused non-defense-related land and mineral rights in the West.

Collect, first year: +$0 Collect, 10 years: +$519,972,544,000

Sell off a portion of the U.S. held loan portfolio, across the government.

Collect, first year: +$0 Collect, 10 years: +$355,645,022,618

Sell a portion of U.S. Government gold holdings.

Collect, first year: +$95,000,000,000 Collect, 10 years: +$189,814,453,125

23

Modified SMART ACT: Let workers born after 1981 deposit 7.65 percentage points of payroll tax into personal retirement accounts.


Explanation The Tea Party Budget avoids tax hikes. Instead, it would significantly reduce federal receipts from the CBO current law baseline by repealing the ObamaCare tax hikes, extending expiring tax relief, and creating SMART Accounts for younger workers (although the latter reform is really a long-term investment for the taxpayers, and not a short-term “tax cut”). This plan would also increase receipts through sales of certain U.S. Government assets.

7. Budget Process Reforms As we’ve recommended above, Congress should pass a strong Balanced Budget Amendment. But whether or not the states ratify the BBA, Congress must make tough choices to stave off the coming debt collapse. The current budget process is clearly broken. It has been more than two years since the Senate passed a budget. Budget gimmicks and double-counting are rife, with ObamaCare being only the most notorious recent example. Increasingly, instead of doing the basic work of budgeting, Washington is stalemated, resorting to “continuing resolutions,” threats of partial-government-shutdowns, and tepid last-minute compromises — in short, our representatives just keep kicking the can down the road. It’s time to end this cycle of failure.

ü Pay for performance. Workers in the private sector suffer financial penalties when they fail to “hit their numbers.” So should lawmakers. We should suspend pension contributions and COLAs for Members of Congress whenever the federal budget is not in balance. Period.

ü Sunset outdated programs and agencies. Enact Rep. Kevin Brady’s (R-TX) “MAP Act,” which

includes a Sunset Commission for federal agencies, tough spending caps backed up by the threat of sweeping automatic sequesters, and other excellent reforms.

ü Make budgeting more honest. We need to thwart the gaming, gimmicks, and double-counting that is endemic to the current, broken budget process. A good way to do that is to enact Senator Jeff Sessions’s (R-AL) “Honest Budget Act.”

“I used to work for the Federal government. . . . I cannot overemphasize the need for a change in the basic federal culture, from one of frowning on saving money

to one of rewarding saving money.”

Alan Bosler via email

24

ü Manage out waste and duplication. Adopt sensible modern management reforms, including Strong America Now’s “Lean Six Sigma” method, in order to root out billions in waste across the government. This could be especially useful in the Defense Department.

ü End baseline budgeting. Stop assuming every program gets automatic, built-in increases each

year. Instead, make each program regularly justify any increase, as well as its continued existence. To put our money where our mouth is, our plan takes a big step in this direction. In the 40% of the budget that is annually appropriated, we include reductions and terminations that make possible an effective freeze. In the 60% of the budget that is on auto-pilot, we include reforms consistent with a freeze. But that’s not enough. Over the next few years, Congress should go through the entire budget, program by program — all 2,200 of them — and reform each, so as to shift it from auto-pilot to annually appropriated status. If Congress had to review all 2,200 federal programs every year, we are pretty sure it would look for ways to have fewer programs.

ü Crowd-source government. We think it’s time to harness the decentralized power of “crowd-

sourcing” to prioritize government itself. We propose a Designated Tax Allotment option that would work as follows. Each taxpayer, on his annual tax return, would be allowed to earmark 10 percent of his tax payments to go to up to three agencies of his choice. Agencies so selected would receive the money on top of their current annual budget, but no agency would see more than a 10 percent “top up.” Any funds left over each year, after allocations, would revert to the general fund. This option would create a powerful incentive for federal bureaucrats to become more efficient by rewarding agencies that can win popular support. At the same time, it would help Congress identify unpopular agencies for future reductions, mergers, or termination. (Safeguards would be needed to keep bureaucrats from trying to win more funding through advertising campaigns and the like.) In the spirit of this proposal, we also commend to readers’ attention Rick Raddatz’s thoughtful “cap and grade” concept, spelled out at his website, winwinrevolution.org.

25

“Go bold or go home.”

Greg Fettig Noblesville, Indiana Conclusion

merica’s present challenges are so great — her economic future is so dire — that we must make tough choices. But with tough choices come great opportunities for reform and renewal, and for getting back to first principles.

These difficult times demand that we lay aside conventional thinking for a bolder course, based on the enduring principles of economic freedom and limited government that made our nation great. It’s time for Washington to:

ü Stop the debt.

ü Cut, cap, and balance federal spending.

ü Get out of whole lines of business that Washington shouldn’t be doing, or can’t do well.

ü Eliminate or privatize all agencies and programs that are unconstitutional, outdated, or unaffordable.

ü End earmarks, corporate bailouts, and counterproductive foreign aid.

ü Improve future generations’ retirement benefits through individual ownership and control.

ü Enact strong budget reforms to make our government small, lean, limited, and affordable.

If our leaders can’t or won’t do these things, why are they our leaders? Are you listening, Washington? Go bold or go home.

A

26

Appendix A

Designated Tax Allocation

This is a tax reform program which will permit every American Citizen to vote with his or her tax dollars every year on April 15th. Under the terms of this program every individual taxpayer (businesses and corporations are excluded) shall be permitted to designate up to ten percent of his or her federal taxes to the federal government agency, department, or program of their choice.

In this manner, any such designated federal government agency, department or program, as determined by the congress, may receive up to a ten percent increase in their budget in the coming fiscal year. They will accomplish this by becoming more responsive to the needs of the tax paying citizens they serve.

Historically, the temptation that has plagued federal government lawmakers and bureaucrats is that of furthering their own careers and agendas, instead of those of the citizens they are pledged to serve. Now, with the implementation of a Designated Tax Allocation program, a profit incentive can be initiated that will affect the paychecks of the bureaucrats in direct proportion to the amount of Designated Tax Allocation their agency, department or program receives, by permitting a small portion of that allocation to be paid out as a bonus to their key personnel.

The ultimate goal of this program is to give government a bottom line to look after each year. It will also force government to be accountable to the citizens they serve as a way to increase their budget each year. In this manner, we create a capitalist government to govern a capitalist society. If ever a government has served a free enterprise system, this is a government structure which will nurture and support that system.

This program will invite abuse by opportunists and therefore must have certain specific safeguards built in. Limits on the amount each government agency, department or program can spend on advertising,

27

public relations, and poll taking, will need to be in place limiting these activities to a very small portion of their annual budget. You can be certain the number of advertising agencies, public relations firms, and pollsters will increase exponentially in Washington, DC, with the implementation of this program.

A government that will support free enterprise is what is needed most in the United States today, and in the future, if our country is to flourish, prosper, and remain a world power. If we can makeover our federal government into a body that supports a free enterprise system of business, commerce and accomplishment, and do so willingly and eagerly, we will continue to be one the greatest nations in the world.

Phil Henry

PO Box 151115, Ely, NV 89315

Phone: 702-‐456-‐9664

Email: [email protected]

28

29

30

31

32

33

TEA PARTY BUDGET 2012-2021

(billions of dollars)

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

2012-‐2021

GDP 15,663 16,182 16,974 18,132 19,110 20,028 20,948 21,901 22,856 23,801 195,624

RECEIPTS 2,684 2,778 2,955 3,236 3,331 3,487 3,602 3,743 3,876 4,020 33,710

OUTLAYS 3,056 3,114 3,086 3,144 3,322 3,449 3,566 3,742 3,834 3,863 34,176

DEFICIT -372 -336 -131 90 9 37 36 1 43 157 -‐466

PUB H DEBT -10,767 -11,165 -11,331 -11,361 -11,439 -11,465 -11,475 -11,507 -11,487 -11,344 -‐113,346

GROSS DEBT -15,430 -15,947 -16,257 -16,477 -16,780 -17,086 -17,395 -17,704 -17,996 -18,101 -‐169,138

SAVINGS 553 578 717 843 928 1,001 1,070 1,171 1,327 1,546 9,734

As Percent of GDP

RECEIPTS 17.13% 17.17% 17.41% 17.83% 17.43% 17.41% 17.20% 17.09% 16.96% 16.87% 17.25%

OUTLAYS 19.51% 19.24% 18.18% 17.34% 17.38% 17.22% 17.02% 17.09% 16.77% 16.21% 17.60%

DEFICIT -2.38% -2.07% -0.77% 0.50% 0.05% 0.19% 0.17% 0.00% 0.19% 0.66% -‐0.35%

PUB H DEBT -68.74% -69.00% -66.76% -62.66% -59.86% -57.25% -54.78%

-52.54%

-50.26%

-47.61% -‐59.95%

GROSS DEBT -98.51% -98.55% -95.78% -90.88% -87.81% -85.32% -83.04% -

80.84% -

78.56% -

75.96% -‐87.52%

Source: Tea Party Debt Commission, 11/172011 Figures may not total due to rounding. Negative figures indicate deficit or debt.

34

Credits / Acknowledgements

Commissioners

Ed Bell

Cincinnati, Ohio Pre-‐press services professional; OurTP.org, Eastern Hills Tea Party

Deneen Borelli

Eastchester, New York Project 21 fellow, FreedomWorks fellow

Sam DeMarco

Pittsburgh, Pennsylvania Businessman; Veterans and Patriots United

Greg Fettig

Noblesville, Indiana Small business owner; America ReFocused

Andrew Hemingway

Bristol, New Hampshire Business owner; Republican Liberty Caucus of New Hampshire

Phil Henry

Ely, Nevada Formal naval officer, current Marine Corps leadership trainer; White Pine Tea Party

Bob Howard

Pittsburgh, Pennsylvania Retired business executive; Pennsylvania Coalition for Responsible Government

Lawrence L. King Vienna, Virginia

Retired project manager; NoVA Tea Party (Taxed Enough Already)

David Kirkham Provo, Utah

President, Kirkham Motorsports; Utah Tea Party

Bob MacGuffie Fairfield, Connecticut

Insurance agent; RightPrinciples.com

Alfred C. Maurer Colorado Springs, Colorado

IT consultant, former military officer; publisher, The Voice of Liberty; member, Pikes Peak 9-‐12

David A. Zupan Avon Lake, Ohio

Community organizer for the Constitution; North Shore Patriots; West Shore Tea Party; Lorain County Tea Party (LoCo47TP); Lorain County 9-‐12

35

Working Groups Principles Alfred C. Maurer Social Security Greg Fettig, Ed Bell Medicare and Medicaid Sam DeMarco Auto-Pilot Programs David A. Zupan Defense Phil Henry, Sam DeMarco Annually Appropriated Deneen Borelli, Bob MacGuffie Staff Dean Clancy, FreedomWorks Legislative Counsel and VP Health Care Policy

Celia Bigelow, FreedomWorks Intern Field Hearings (“Stop the Debt!” Tour 2011) 9/01 Salt Lake City, UT 9/23 Orlando, FL 9/26 Ogden, UT 9/27 Logan, UT 9/28 St. George, UT 9/29 Philadelphia, PA 9/30 Provo, UT 10/06 Cincinnati, OH 10/08 Louisville, KY 10/15 Columbia, SC 10/21 Indianapolis, IN 11/17 Washington, DC Sources Budget plans and comparisons the Tea Party Debt Commission took into account include:

• Congressman Connie Mack's "One Percent Reduction Act" (Penny Plan)

• Congressman Paul Ryan's "Path to Prosperity" Plan (House-Passed Budget)

• Congressman Ron Paul's "Plan to Restore America"

• Senator Tom Coburn's "Back in Black" Plan

• Senator Rand Paul's 5-Year Budget Plan

• Senator Pat Toomey's "Restoring Balance" Budget Plan

• House Republican Study Committee "Honest Solutions" Budget Plan

• Simpson-Bowles Commission Bipartisan "Moment of Truth" Plan

• President Obama's Official Budget Submission for FY2012

• Cato Institute "Balanced Budget" Plan

• Heritage Foundation "Saving the American Dream" Plan

• Esquire Magazine Bipartisan Budget Plan

• NTU-USPIRG "Toward Common Ground" Budget Plan

• Jackson Security Plan (JSP) (Medicare and Social Security accounts)

• FreedomWorks Report Card: Grading the Budget Plans

36

Documents

Tea Party Budget