Many object to conservative criticism of George W. Bush. He may have increased non-defense discretionary spending more than any president since Franklin Roosevelt, and obligated $7 trillion in new Medicare obligations, the greatest entitlement surge since Lyndon Johnson, but it is impossible today to limit government spending. No one can stop it. The people simply will no longer support smaller government.

In fact, President Bush has proposed to curtail 128 programs and eliminate 65. Thirteen are especially targeted because he says they do not work. The problem is that even if all 65 were eliminated, it would save only $4.9 billion, two-tenths of one percent of the budget. Even among his 13 worst programs, a presidential spokesman reported that most of the personnel and funds would be added back into existing programs. The Even Start educational program, for example, would be ended but the funds would be redirected into other literacy programs. He said that some personnel might be eliminated but "it's equally likely they could be put to work on other programs."

The president has also said he wants to limit overall non-defense discretionary spending to a one percent increase for next year. Yet, he proposed only four percent increases in his last two budgets and Congress doubled his estimates. A serious effort would have to include his veto, which unlike any previous president he has not utilized Even if he did, it would merely stench the bleeding, not stop it. To really reform things a president would have to take a serious case to the people why spending must be cut rather than promoting scores of programs implying the government can solve all problems. As Ronald Reagan said, conservatives should want to cut budgets not simply to save money but to empower individuals and communities. The total unfunded Federal liability is $50 trillion (not billion) while total national wealth is only $40 trillion--houses, cars, bank accounts, businesses and all. No nation has faced such a debt in history with a declining or even steady state population and survived. As the Baby Boom generation retires, there simply will not be enough workers to pay the bills if things keep going this way.

The entitlements in the U.S. were devised at a time when 40 workers supported each retired one. Today, there are only 3 to support each retiree, and going down. Social Security, Medicare and Medicaid will grow from 8 to 14 percent of total national wealth in twenty years, which will require a 36 percent increase in all federal taxes or a 91 percent increase in the payroll tax or an 81 percent increase in the income tax, any of which would destroy the economy. The closest historical analogy is Germany after World War I. The war debt and reparations were simply too high to pay. The result was bankruptcy, run-away inflation, mass privation, Adolph Hitler to solve it and world misery for all in the end. No one thought this could happen in the single most powerful and advanced nation in the world at that time either.

The president must make the case that to avoid such a disaster, America must change the way it does business. First, America's Founders never thought the national government could perform all the things it does today. Indeed, they limited the national functions to a very few and expected most social activity would be performed by states and localities and people privately. This way, Washington could specialize in a few functions and do them well, the states could do some regional matters and the people and localities would do the rest. Education, for example, was deemed a local function. Even today, Washington spends only eight percent and state-local government 92 percent. Yet, the national bureaucrats try to leverage their funds to set standards for a vast community complexity they cannot possibly understand.

A reformist president would send these functions back to states and localities, where citizens could control them better than national bureaucrats. Divided responsibility means blame can be shifted to the other government. States and localities today are also more economically solvent than their national counterpart. Decentralizing education alone would save the national budget $60 billion. In a similar manner, housing (especially community development grants), transportation (except truly interstate matters like air rules but including mass transportation and Amtrak), and welfare should be transferred to the states or privatized, saving $150 billion more. Second, all non-retirement entitlements should be eliminated at the national level and offered to the states if they want to adopt them. The largest is farm subsidies, saving $80 billion more. Washington would then be left with enough work for any institution to manage--national defense, the national aspects of homeland security, true interstate commerce and support for people in their old age, the later of which should be added to Article I, Section 8 of the Constitution as a national responsibility to give the current reality the necessary legal support.

Even this would still leave the national government at risk. As the normally taciturn Federal Reserve chairman, Alan Greenspan recently warned, old-age entitlements alone could cause bankruptcy and something must be done to reform them before it is too late. Of course, people already receiving such benefits and people near retirement have become too invested in the current system and must be guaranteed support, best accomplished in the same Amendment necessary to give constitutional status to the programs. Any reforms would have to be phased in gradually. Yet, if there is one clear fact about modern times it is that people are living longer and healthier. People do not need to retire at age 65 and fewer are doing so. Yet, the senior entitlements do not recognize this fact and encourage the elderly to retire before this is necessary or even makes sense for most, or supplements income for people who really do not require it.

Probably the least painful way to account for these demographic changes is to gradually shift to a defined contribution retirement plan, where workers would pay funds into private investments. This would give workers control of their funds from day one, would allow total flexibility for retirement at any time, make the system financially sound and would lead to a larger investment return. Or eligibility for the existing defined benefits plan would have to be shifted to age 70 over twenty years or so, as should Medicare. Medicaid and SSI should either be shifted to the states, or to the nation entirely. A common sense set of senior's reforms could easily save $300 billion per year and help restore fiscal sanity.

What is the alternative? The U.S. could go the way of Europe. By the year 2030, seniors over age 65 will represent 55 percent of its population, while the working age population will actually decline by eight percent. At the same time, the population as a whole is declining--with only 1.5 babies per childbearing woman, well below the 2.1 necessary merely to replace the population. Fewer people mean fewer taxpayers and retirement contributors. Government spending in the European Union already absorbs 48 percent of GDP (compared to 34 percent in the U.S.). As a result, economic growth has averaged only one percent per year, well below the U.S. rate of 2.8 percent. Europe cannot be sustained with these demographics and, unfortunately, the U.S. is following along the same path, only at a slower rate.

Small government is not a luxury for America. It is a necessity. A serious president and Congress would face these problems before they become as acute as Europe's, where it is probably too late to save the civilization. In the U.S., a recent Rothenberg poll found that 60 percent of Americans say they support a smaller government with fewer services over a larger government with more services, about the same as under Ronald Reagan after he cut government. Beforehand, there was no majority for cutting government. His leadership turned public opinion and it has not retreated since. Of course, people also tell pollsters they want to spend more money on most of the big programs but they did so under President Reagan too. Leadership made the difference--and he also had to deal with a Democratic House of Representatives.

The good news is that the program outlined here can be accomplished with minimal difficulty if it is undertaken soon. The national government would regain fiscal health, seniors would have the funds necessary when they did need to retire or obtain benefits, and state and local governments closer to the people and a lower-taxed private sector would be more able to solve the remaining social problems. Most important, citizens would regain control of their lives from far away bureaucrats so they could build America into the shining city on a hill that President Reagan saw as its true destiny.

By Editor