Spending Revolt has consistently claimed we have a spending problem, not a revenue problem. In an op-ed in today’s News-Leader.com, coalition partner Bev Ehlen of Concerned Women for America discusses the out of control spending that leads to high deficits year after year:

“Two combined forces create a strong formula for endless deficits. First, politicians want to keep their jobs, so they continue to bring home goodies for constituents. That means choosing spending over spending reductions. And to help make sure they keep their jobs, politicians always promise not to raise taxes. The result is systemic deficits.

On its present course, Congress would need to double income tax rates to meet the obligations they have made on our behalf. Yet all we see is continued deficit spending and Washington’s refusal to take the hard steps to staunch the problem. There is an alternative to sudden and dramatic increases in taxes. The government can cut back on spending and adopt policies to increase economic activity. A faster-growing economy will generate more revenue with unchanged or even lower tax rates. But this takes time.

Ask any business person how to be fiscally prudent and he or she will give you a simple rule: you don’t spend what you don’t have and if you do, you are in trouble. Even families know that basic economic principle. The intricacies and precision needed to run a household demand careful fiscal acumen. Parents know what a budget means — you can’t spend what you don’t have and if you do, you are in trouble.

We need responsible government now. Our hard-won vote still means something if we work together to make it count. Our spending is solvable unless Washington refuses to hear us. Let’s make them listen.”

There’s a lot of interest in identifying specific areas in the federal budget that could be cut or pared down. With many ideas floating around, perhaps Congress should consider restructuring or privatizing those businesses it controls that lose money on a consistent basis. The biggest one is of course the two housing giants, Fannie Mae and Freddie Mac – currently costing the more than $150 billion with potential to add another $135 billion if the economy continues to struggle. While not on quite the same scale, other government-run businesses that lose money year after year are just as troubling. For example, the Post Office and Amtrak are both perennial black holes in the federal budget with no end in sight.

Amtrak’s generous subsidies and bloated budget have made them a target of fiscal hawks for some time.

The US Post Office is not much better off. Just a few days ago, they reported a larger than expected $8.5 billion loss for 2010 and a projected $5.5 billion loss for 2011. A main driver of the losses appears to be retiree health costs; more generally though, the USPS suffers from bureaucratic management inherent in a government-run business.

Today’s fiscal crisis might be just the catalyst for kicking to the curb government-run businesses that have shown little ability to outperform their private counterparts in anything but annual operating loss.

The President’ Fiscal Commission, set to release their recommendation for addressing America’s long term debt crisis in early December, has conjured up much speculation on what direction they will go – tax hikes, spending cuts or a mix of both.  From our perspective, it’s clear we have a spending problem, not a revenue problem. Thus, the recommendation should focus on spending cuts.

Certainly this approach is not the one expected from the Commission though, with 12 of the 18 members chosen by President Obama and Congressional Democrats more prone to tax increases than spending cuts. That being the case, it was welcome news to hear the two leaders of the Commission express their ideas on a possible proposal – one that involved three-fourths spending cuts and the remainder focusing on restructuring the tax code. In effect, this would more closely mirror the example being set by David Cameron in Great Britain right now.

The general outline of the plan would:

• Deficit: cut $3.8 trillion from the deficit, bringing it to 2.2% of GDP by 2015 from the current 9%;
• Social Security: raise the retirement age slightly over time while adjusting down the rate at which benefits grow;
• Medicare: pay doctors less for services provided and call for “comprehensive” legislation to reduce malpractice costs;
• Discretionary Spending: reduce congressional and White House budgets by 15%, freezing federal salaries and cutting the federal workforce by 10%; $1.4 trillion in discretionary cuts would apply equally to domestic and defense programs;
• Tax Code: eliminate the mortgage interest deduction and many other deductions in exchange for lower marginal rates of 8%, 14% and 23%.

It’s a pleasant surprise that co-chairs Bowles and Simpson have taken a serious shot at reducing spending, but increasing tax revenue to pay for the recent increase in the size of government is a dangerous precedent to set.  These changes would increase federal revenue well above its post-WWII average and represent a permanent increase in the size of government.  If their tax proposals were revenue neutral, they’d be a positive step towards a fairer, simpler tax code.  While most economists support the idea that tax reform to broaden the base and lower the rate is good, pro-growth policy, the fact remains that we have a spending problem, not a revenue problem.

While the President’s post-election analysis concluded that people “felt” the government was getting bigger and turned away, a new analysis by USA TODAY justifies that “feeling.” It turns out that the number of federal workers earning $150,000 or more a year has soared tenfold in the past five years and has doubled since President Obama took office.

Democrats and President Obama have complained heartily about the lack of specifics from new Members of Congress on how they would roll back the size of government. This study couldn’t have come at a better time to highlight the bloated size of our government and offer a perfect place to start imposing newfound fiscal discipline. But to do this, it will require defeating a current proposal by the President to raise the pay of 2.1 million federal workers by 1.4% across the board.

Here’s a hint to surviving members of Congress and those interested in someday returning to Congress: heed the public’s concern over government spending and either freeze federal pay or even better, cut the federal workforce by 10%, as has been proposed by some members.

In the aftermath of one of the biggest drubbings the Democrat party has had in over 70 years, it’s been shocking how the President and party leaders have insisted it had nothing to do with their big government policies. The favorite response has often centered on the “poor messaging” job by the White House specifically and Democrats in general to promote their policies.

Their reasoning assumes that if people only understood how much good these policies did, then they would be happy with the last two years. Or to quote the President in his assessment of why the electorate voted the way it did, “people felt like government was getting bigger.” The implication being of course that it has not gotten bigger, his opponents just like to claim it is to rile up the public. If only that were true.  In reality, the government has grown significantly under President Obama while the private workforce has suffered.

All evidence points to public anger at bailouts, government takeover of the health care, auto and financial industries and a general trend toward bigger government role in our lives. As we have pointed out before, Republicans doubled the debt under Bush and Democrats came in and tripled it. But the Democrats just did it on a scale and pace that made the Bush years look economical.

At this point, a judgment day has come and passed. We can only hope that the message was received. The Lame Duck session should only deal with necessary legislation to fund the government for the year and to prevent massive tax hikes from taking place.  More importantly, the 112^th Congress will be the true test of whether they are really listening to what the people want – spend less, cut the size of government and start focusing on policies that incentivize work, savings and investment.