 Overview The Trump administration, supported by a Republican-led Congress, has a pivotal chance to reverse the damage inflicted by the Biden administration's misguided antitrust policies. This report outlines the path to unleashing America’s tech potential through innovation, competition, and free-market principles. Key Points
Conclusion The report highlights a roadmap for the Trump administration and Congress to promote free-market policies, secure America’s technological leadership, and prioritize innovation and economic growth. Confirming regulatory leaders who support these principles is vital to achieving these goals.
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 Originally posted at Texans for Fiscal Responsibility. The latest Biennial Property Tax Report from the Texas Comptroller confirms what many Texas homeowners and fiscal watchdogs, like TFR, already suspected: property taxes did, in fact, increase in 2023 by $650 Million despite promises of relief. While this news is frustrating, it also sets the stage for extraordinary opportunities to deliver meaningful reform for taxpayers in the upcoming 2025 Legislative Session.  The Legislature allocated nearly $13 billion over two years to reduce school district maintenance and operations (M&O) property taxes. However, these efforts fell short due to excessive local government spending and levy limit loopholes. Yet, with an expected $20 billion state surplus—the result of over-collected taxpayer dollars—the 2025 session presents a chance to rethink Texas’s property tax system entirely and deliver lasting relief. 2023 Data Highlight What Went Wrong  The Legislature’s intent to cut school district property taxes by more than $6 billion in 2023 was undermined by decisions at the local level:
A System Built to Grow Government The current property tax system prioritizes government growth over taxpayer relief. Over the past 25 years, total property tax levies in Texas have grown by an average of 5.63% annually, far outpacing inflation and population growth. Local governments have consistently used loopholes in property tax levy limits to raise revenues and fund new spending projects without voter approval. Additionally, rising local debt burdens taxpayers further. Property tax revenue is increasingly used to pay for debt service rather than essential services, compounding the strain on homeowners. Even the $13 billion allocated by the Legislature for property tax relief in 2023 was insufficient to counteract these spending trends. Frustration with the Legislature The Legislature’s efforts in 2023 didn’t go far enough. While they allocated billions for relief, loopholes in levy limits and excessive state and local spending negated much of the benefit. Texans deserve better. However, frustration can turn into optimism. The 2025 Legislative Session, beginning on January 14, offers a historic opportunity to fix what’s broken. With a roughly $20 billion surplus, lawmakers have the resources to make bold changes that could transform the property tax system for good. The Opportunity in 2025 This extraordinary surplus allows the Legislature to address the systemic issues driving property tax increases. Here’s how the Legislature can deliver meaningful reform:
While the 2023 results are disappointing, the upcoming session presents an opportunity for bold action. Texans deserve lower property tax bills, not a system that fuels government growth at their expense. The Legislature must recognize that excessive spending is the core problem and take decisive steps to address it. The good news is that Texans are paying attention. The public demands real solutions, and lawmakers have the resources to deliver. By focusing on spending restraint, closing loopholes, and using surplus funds for tax relief, the Legislature can make 2025 the year Texans finally see meaningful, lasting property tax cuts on a path to elimination. The Path Forward This isn’t just about cutting taxes—it’s about empowering Texans to own their property and reducing the government’s burden on their lives. By taking bold steps in 2025, the Legislature can ensure that homeowners no longer feel like they’re renting their homes from the government. I’ve spent over a decade advocating for property tax reform and fiscal responsibility, and I remain optimistic about what can be achieved in 2025. Let’s turn frustration into action and maximize this extraordinary opportunity to let people prosper! Eliminating Property Taxes in Texas: Real Options for True Homeownership and Economic Prosperity12/11/2024
 Originally published at Texans for Fiscal Responsibility. Property taxes are a financial burden that Texans can no longer afford to endure. Over the past 26 years, Figure 1 illustrates how property taxes have increased by an unsustainable 330%, far outpacing population and inflation growth of 136%. For Texans, this is not just an economic issue—it’s a question of fairness and freedom. Property taxes make homeowners perpetual renters, burden renters and businesses, and restrict economic opportunity. Despite six legislative attempts since 1997, Table 1 shows the structural problems driving property tax growth remain unaddressed and unresolved. Texans need bold, permanent solutions.  Two pathways to finally eliminate property taxes include:
The Problem: Why Property Taxes Must Go Property taxes are burdensome in both design and execution. Figure 2 highlights how property taxes have increased fourfold since 1998. This unchecked growth has created severe economic distortions and eroded true homeownership.   Uncontrolled Growth Since 1997, property taxes in Texas have exploded, growing faster than the population and inflation combined. Special districts led the way with an astronomical 576% increase, followed by cities (403%) and counties (402%), as shown in Figure 1. Figure 3 shows how property taxes increased by 6% on a compounded annual rate, which was 72% higher than the average Texan’s ability to afford them, as measured by the rate of population growth plus inflation.  Property taxes affect all families who are homeowners, renters, and business owners, as noted in the Texas Comptroller’s 2023 report. Figure 4 from the Texas Comptroller’s Office shows that estimated school property taxes’ final incidence (i.e., burden) hits families across Texas.  Source: Texas Comptroller’s Tax Exemptions and Tax Incidence Report
Homestead Exemptions: A Misguided Solution While well-intentioned, homestead exemptions, which exempt an amount from the appraised value for property taxes, are not the answer:
A Lack of Accountability Most local governments, except special purpose districts and some other small tax jurisdictions with a maximum of 8%, can raise property taxes by 3.5% on existing property (with no limitation on new property) without direct voter approval. With these loopholes in current law, county and city taxes increased by over 10% last year. This lack of oversight enables runaway spending and taxes. To address this, all property tax increases above 0% must require voter approval, with a 0% growth rate unless explicitly approved by the public. This means that as the County appraisal office does appraisals, the property tax rate determined by the local governing body must go down, so that the tax revenue (levy) collected doesn’t change from the prior period. This levy cap system makes appraisal caps or tax rate caps unnecessary, and the no-new-revenue rate is what the levy cap should be. The limitation must be on the levy collected from all property taxes, which a strong spending limit that covers spending from all revenue, including property taxes, sales taxes, and other revenues, should ultimately do. This would make it less relevant where the tax revenue comes from as the spending and, therefore, taxes are held in check and hopefully reduced. Pathway 1: Surplus-Driven Buydowns The surplus-driven buydown approach systematically reduces property taxes over time by dedicating state budget surpluses to lowering tax rates until they are zero. This gradual method ensures that essential services remain funded during the transition. How It Works
Scenarios of Surplus Buydowns to Eliminate Property Taxes
 Pros of Surplus Buydown Method
A redesigned tax system in Texas would swap sales taxes for property taxes, preferably with a strong spending state and local spending limit and surplus buydown to reduce sales and other taxes. This approach depends on:
 2. Adjust State and Local Sales Tax Base and Rates:
 3. Ensure Spending Restraint, Transparency, and Accountability:
 Pros of Tax System Redesign
Some suggest implementing a Value-Added Tax (VAT) instead of a broader sales tax to fund the property tax swap. This would be a mistake:
Texas must avoid adopting European-style tax systems that stifle economic freedom and growth. Recommendations for Legislators To ensure success, any plan to eliminate property taxes must include the following:
Texas must move beyond temporary fixes and fundamentally transform the state-local tax system. Whether through surplus-driven buydowns or a redesigned sales tax, the result will be a freer, fairer, and more prosperous state.  Texans deserve true property ownership, economic opportunity, and a government that operates within its means.
Let’s end property taxes and empower Texans to prosper. The time to act is now.  Originally published at Iowans for Tax Relief Foundation. Executive Summary Iowa’s steadfast commitment to conservative budgeting demonstrates how fiscally responsible governance benefits all, fostering an environment of economic prosperity and opportunity. By prioritizing disciplined spending over government expansion, Governor Kim Reynolds and the state legislature have positioned Iowa as a national leader in fiscal responsibility. The FY 2026 Conservative Iowa Budget, capped at $9.15 billion with a 2.7% growth rate, exemplifies this commitment to sustainable budgeting. Key elements of Iowa’s approach include aligning spending growth with population growth and inflation, ensuring fiscal stability while avoiding unnecessary tax burdens on residents. Key Highlights:
Iowa’s FY 2026 Conservative Budget reflects a disciplined approach to governance that balances fiscal responsibility with economic growth. By aligning budget growth with taxpayer capacity and prioritizing sustainable tax policies, Iowa has established itself as a model for other states. Introduction Through a steadfast commitment to conservative budgeting, Iowa has shown that fiscally responsible government benefits all, creating an economic environment where prosperity and opportunity thrive. Conservative budgeting requires the discipline to say “no” to the many competing demands for government funding—a challenging but essential approach to ensuring long-term fiscal health. Governor Kim Reynolds and the state legislature have championed this approach in Iowa, prioritizing responsible spending growth over government expansion. This commitment to fiscal restraint has established Iowa as a national leader in conservative budgeting, resulting in a robust fiscal foundation, significant tax cuts, and substantial budget surpluses. Maintaining this conservative approach is crucial as Iowa approaches the Fiscal Year (FY) 2026 budget. Iowa’s Success in Conservative Budgeting and Tax Reform Governor Reynolds’s dedication to conservative budgeting and pro-growth tax reform has received national recognition. The Cato Institute’s 2024 Fiscal Policy Report Card ranked her as the most fiscally conservative governor in the nation, highlighting her prudent budgeting choices and commitment to reducing tax burdens. Similarly, the Tax Foundation awarded her the Distinguished Service Award for her tax reforms, which have made Iowa’s economic landscape more competitive and inviting for businesses and individuals. According to the Tax Foundation’s 2025 State Competitiveness Index, Iowa’s tax system now ranks 20th overall, a marked improvement reflecting recent pro-growth reforms. These changes include lowering income tax rates, eliminating the alternative minimum tax, removing federal deductibility, and beginning the state’s inheritance tax phaseout. In 2025, Iowa will have a single-rate (3.8 percent) income tax structure, making it even more competitive. These tax changes might seem like abstract policies, but for everyday Iowans, they mean that more of their hard-earned income stays in their pockets. For example, moving to a flat tax allows everyone to pay the same rate, simplifying the system and making tax bills more predictable. This reform especially benefits small business owners and families who can now budget more confidently. Iowa’s transition from an inheritance tax also reduces burdens on family-owned businesses and farms, helping them remain in the family rather than being sold to cover tax expenses. Building and Sustaining Iowa’s Fiscal Strength Iowa’s conservative budgeting approach has strengthened the state’s fiscal foundation, with consistent budget surpluses, fully funded reserves, and a growing Taxpayer Relief Fund. In FY 2024, Iowa posted a budget surplus of $2.05 billion, projected to increase to $2.25 billion in FY 2025. These surpluses provide Iowa with a financial cushion, allowing the state to manage future uncertainties without resorting to sudden tax hikes or service cuts. The Cash Reserve Fund and Economic Emergency Fund, Iowa’s primary reserve accounts, are filled to their statutory maximums, with a combined balance of nearly $962 million. This conservative approach to savings is akin to a family setting aside an emergency fund, ensuring financial stability even in times of crisis. Furthermore, Iowa’s Taxpayer Relief Fund, currently holding $3.7 billion and projected to grow to $4 billion by FY 2026, is a dedicated resource for reducing tax burdens on Iowans. This fund’s growth ensures that tax cuts can be sustained, benefiting Iowa families and small businesses directly by putting money back into the economy. While these funds are important in sustaining tax relief, too much money in the hands of the government means it is overtaxing the private sector and reducing economic growth and opportunity. The government should adopt even more conservative budgeting practices than the private sector does, as it is managing public funds rather than its own money, and therefore should prioritize spending less. Using Population Growth Plus Inflation as a Spending Benchmark Iowa’s conservative budgeting model limits General Fund spending growth to the rate of population growth plus inflation. This approach ensures that spending stays in line with the average taxpayer’s financial capacity, reflecting the state’s economic conditions and preventing abrupt expansions that could create future fiscal challenges. By using this benchmark, Iowa keeps government growth aligned with what the average taxpayer can realistically support. Think of it like maintaining a household budget: if your income only increases by a small percentage each year, it would be unsustainable to double your spending. Visualizing Iowa’s Conservative Budget Strategy The following charts offer a clear picture of Iowa’s conservative budgeting. They show how the state has maintained fiscal discipline and aligned spending growth with population growth plus inflation in recent years. Figure 1 compares Iowa’s actual General Fund budget with different benchmarks, including a statutory spending limit and the proposed cap from Senate Joint Resolution 9 (SJR 9) in 2017. The proposed cap, which would have limited growth to 99% of estimated revenue or capped it at 4% above the previous year, ultimately did not pass. However, SJR 9 illustrates an important effort to restrain spending and maintain accountability. A better limitation that more closely resembles the budget passed in recent years and better matches the average taxpayer’s ability to pay for the budget is population growth plus inflation.  Actual General Fund appropriations increased well below the statutory spending limit for most of the period. The budget would have increased slightly less in 2023 and 2024 under SJR 9 than the statutory spending limit would provide, but the amount under SJR 9 would have been substantially too high. However, a spending limit based on the rate of population growth plus inflation during the previous calendar year before a legislative session would suggest $2.9 billion in cumulative overspending, resulting in less money in people’s pockets. This overspending means an average family of four spends $3,500 more on taxes and fees than they otherwise should be. But this overspending was not for the entire period. Figure 2 illustrates the average annual growth of General Fund appropriations compared with the combined rate of population growth and inflation from 2013 to 2025. Since 2019, Iowa’s budget growth has consistently been less than this benchmark, ensuring that spending remains sustainable. This approach reflects the everyday budgeting principle of living within one’s means, balancing the budget without sacrificing essential needs.  For FY 2026, Figure 3 shows that the Conservative Iowa Budget is set at $9.15 billion, representing a 2.7% growth rate, with state population growth up by 0.2% to 3,214,000 and chained consumer price index (CPI) inflation of 2.5% for 2024. By setting this limit, Iowa remains committed to aligning budget growth with taxpayers’ capacity, protecting against unchecked expansion (Iowa Budget Report FY 2026). This conservative threshold allows Iowa to continue operating on a strong fiscal foundation while keeping more money in the pockets of residents.  These charts highlight Iowa’s disciplined budget strategy and demonstrate the benefits of adhering to conservative principles for fiscal stability.
Path to Tax Relief: Using Surpluses to Empower Iowans and Future Tax Relief As a result of conservative budgeting, Iowa policymakers have been able to make historic income tax reductions. The Tax Foundation’s State Tax Competitiveness Index ranks Iowa 20th in the nation, a substantial improvement. Iowa was once ranked as one of the worst tax climates in the country, regularly residing in the bottom ten states and, in 2020, was ranked 44th in the Tax Foundation’s Index. Iowa’s tax climate is becoming more competitive due to pro-growth tax reforms made possible only by conservative budgeting. Iowa’s budget surpluses have enabled the state to pursue significant tax relief initiatives. Moving toward a 3.8% flat income tax by 2025, Iowa is positioned to reduce this rate further, potentially eliminating the income tax soon. This path to tax relief is more than just numbers on a page; it translates to more financial freedom for Iowans. For a family, this could mean extra monthly money for essentials or savings for the future without paying an ever-increasing share to the government. Although legislators may not seek to reduce the income tax during the 2025 legislative session, policymakers should stay active. Several policy options could be considered to ensure that the 3.8 percent flat tax continues to be lowered. Some of these include:
These are just three potential policy options that policymakers could consider ensuring that the income tax rate continues to be lowered and eventually eliminated. During the last legislative session, Iowa Senator Jason Shultz offered policymakers a good reminder when he stated: “Both Republicans and Democrats need to realize that tax policy is affected by spending. And when you start seeing spending creeping up for annual, year after year, new good ideas, you can’t have good tax policy.” By directing surplus revenue to tax relief instead of new government programs, Iowa’s approach respects the principle that taxpayers—not the government—should decide how to spend their earnings. This responsible budget approach keeps more money circulating in the local economy, promoting growth and empowering families and businesses. Formalizing Spending Restraints While Iowa’s conservative budgeting model has succeeded through voluntary adherence, formalizing a spending cap tied to a maximum of the rate of population growth plus inflation for state and local spending in the state constitution could secure these gains for future generations. Other states, like Texas and Colorado, have adopted similar limits with positive results, limiting government growth and protecting taxpayer interests. A formal spending cap would function as a financial safeguard, ensuring that Iowa’s government lives within its means, similar to how a family might cap discretionary spending to avoid debt. Research from the Independence Institute underscores the importance of such fiscal restraints, showing that they can protect taxpayers and bolster state economies. For Iowa, adopting a constitutional spending cap would prevent future administrations from eroding the gains achieved through conservative budgeting and provide a steady check against excessive growth. Conclusion: Iowa as a Model of Conservative Fiscal Responsibility Iowa’s commitment to conservative budgeting has established it as a national leader in economic freedom and fiscal responsibility. Governor Reynolds has demonstrated the importance of not just conservative budgeting but also reforming government by reducing its size and scope. Through two major government reforms and reorganization laws, Governor Reynolds is working to reduce the influence the government has on taxpayers. Going forward, policymakers should continue to build upon the governor’s efforts to reform state government. This includes improving legislative oversight and ensuring taxpayer dollars are not being wasted. Other beneficial steps to budget reforms include priority-based budgeting, independent efficiency audits, and routine evaluation of programs by legislative committees to see which ones should stay or go. Iowa has demonstrated that responsible budgeting benefits everyone by aligning budget growth with population and inflation, maintaining consistent surpluses, and dedicating funds to tax relief. The FY 2026 Conservative Iowa Budget, capped at $9.15 billion with a conservative 2.7% growth rate, reflects the state’s ongoing dedication to disciplined budgeting. Iowa’s success is a blueprint for balancing fiscal responsibility with economic growth for other states facing budget challenges. By prioritizing taxpayer interests and limiting government expansion, Iowa has created an environment where economic freedom and opportunity can flourish. References
Let Americans Prosper Project: Ensuring Fiscal Sustainability for America's Future (Updated)11/1/2024
 Introduction The U.S. stands at a critical crossroads, burdened with a mounting national debt from excessive government spending. This fiscal crisis threatens economic stability and future prosperity. While various fiscal reform proposals have been floated over the decades, the most recent pro-growth plan was former U.S. House Speaker Paul Ryan's FY 2012 budget. It avoided raising taxes and focused on reducing the deficit, reforming “entitlement” programs, and fostering economic growth. Today, these pillars have renewed significance and should be prioritized over any attempts to raise taxes. The Let Americans Prosper Project is vital, advocating for pro-growth policies such as tax and regulatory reforms, spending restraint, block grants to states, and work requirements for safety net programs so that America can achieve fiscal sanity before it is too late. The economic literature shows that raising taxes reduces economic activity while spending restraint promotes growth. The Congressional Budget Office (CBO) projects the U.S. federal government's gross debt to reach $34.8 trillion in FY 2024, with unfunded liabilities exceeding $100 trillion. Federal outlays are 23% of GDP and are expected to rise to 28% by 2054. Historical data indicates that reducing spending and promoting growth can decrease debt Successful reforms in the late 1990s and early 2000s included slowing spending growth and promoting economic expansion. About 70% of the federal budget comprises mandatory outlays, which are challenging to reform due to political risks. However, significant reforms are possible, as evidenced by past Medicaid and welfare reforms. Robust economic growth is crucial for a sustainable fiscal future. Lowering taxes and implementing pro-growth policies can stimulate economic activity and increase government revenues. Historical examples include the Reagan tax cuts and the 2017 Trump tax cuts, which led to significant economic growth. Adopting strict spending limits, similar to the Swiss debt brake or Colorado’s TABOR, can stabilize debt levels. A fiscal rule capping federal spending at the rate of population growth plus inflation could have significantly reduced the federal debt over the past two decades. Transitioning Medicaid and other welfare programs to block grants with work requirements can improve efficiency and reduce costs. This approach was successful in the welfare reforms of the 1990s, leading to decreased dependency and poverty rates. Introducing market forces and personal responsibility into programs like Medicare and Social Security can address the unsustainability of mandatory spending. Advocating for limited government and economic freedom can drive prosperity and fiscal sustainability. The Let Americans Prosper Project outlines a bold fiscal reform approach focused on lower spending, lower taxes, and reduced taxpayer burden to foster economic growth and ensure fiscal sustainability. Disciplined fiscal management and economic freedom are essential to securing America’s financial future. Spending Crisis Leads to Massive National Debt The economic literature has clearly shown that there are better ways to reduce deficits than raising taxes because it disincentivizes work and productivity, thereby reducing economic activity and lowering tax collections. Instead, cutting or slowing government spending has a better track record and can be pro-growth as it reduces government distortions to economic activity. Renowned economists Alberto Alesina, Casey Mulligan, John B. Taylor, and others, including my work on the Sustainable Budget Project with Americans for Tax Reform, have found spending restraint is the best path forward. The recent Congressional Budget Office (CBO) budget and economic outlook show the U.S. federal government’s gross debt will likely reach $35 trillion in FY 2024. But it gets worse: American taxpayers face unfunded liabilities—the net present value of spending commitments above expected revenues for programs such as Medicare and Social Security—of more than $100 trillion. The U.S. debt was 119.8% of the Gross Domestic Product (GDP) following World War II. Today, the debt is about 125% of GDP and is projected to climb to 257% by 2043. Federal debt held by the public is about 100% of GDP in FY 2024 and is expected to be 116% by 2034. Excessive spending leads to these unsustainable rising costs. Federal outlays are 23% of GDP but are expected to increase to at least 28% by 2054. Net interest payments of more than $1 trillion on the national debt are 16% percent of the total budget, the highest share since 2001, and will continue to climb. These net interest payments are about 3.7% of GDP, the highest share since 1999, and will likely increase to 6.2% in 20 years. Other nations have inflated away their debt or defaulted on it. That has yet to work well. After the debt rose to 119.8% of the economy in 1946, it was down to 31% of GDP by 1981, even though the budget was only balanced or in surplus for 8 of those 35 years. This was achieved through more economic growth and less spending. Past Budget Reform Effort Successes and Failures In the last three years of the Clinton administration, the federal budget was in surplus, along with the first year of the Bush, Jr. administration. However, the gross federal debt continued to increase as they exchanged debt with different maturities. The public's debt decreased by about $430 billion from 1998 to 2000 and $128 billion in 2001. President Clinton and the Democrat Congress had plans to spend every dollar of the 1993 tax hike plus $200 billion, the amount they felt was politically acceptable. Reagan had run such deficits. When Republicans captured the House and Senate in 1994, they refused to spend as Clinton wanted because of the work of Speaker Newt Gingrich and others. The capital gains tax was cut in 1997 from 28% to 20%, and the economy was spurred. Slower spending and more growth gave America four years of surpluses. Can we increase the economy's growth rate and slow the growth rate of federal spending again? We must! About 70% of the federal budget comprises mandatory outlays, such as Social Security, Medicaid, Medicare, Veterans benefits, national defense, and other expenditures. These are considered on automatic pilot because politicians don’t want to make necessary changes to these and risk upsetting voters, thereby not winning reelection. Unlike in the late 1990s, we cannot significantly cut spending by reducing domestic discretionary and military spending. The Clinton-Gingrich surpluses were largely made possible by the collapse of the Soviet Union and a decline in military spending from 5% to 4% of GDP, as well as by reforming safety net programs, which included beneficial work requirements for safety-net recipients. In the Obama years, the U.S. House voted to block grant programs such as welfare, food stamps, and federal housing programs to the states and capped their outlay growth. This is what Republicans did during the Clinton years for Medicaid and traditional welfare, Aid to Families with Dependent Children, now known as Temporary Assistance to Needy Families (TANF). Clinton refused to block grant Medicaid, but after vetoing welfare reform—block granting it to the states—he was reportedly told he had to choose whether to sign the welfare reform bill or lose the 1996 presidential election. He signed it. Welfare spending fell substantially, by as much as 30%, in most states after that as people went to work and provided for their families. Also during the Obama years, the Budget Committee Chairman and then-Republican House Speaker Paul Ryan led the House of Representatives to pass a budget called The Path to Prosperity: Restoring America’s Promise that block-granted most means-tested welfare programs and capped their spending growth. Those reforms covered Medicaid and welfare programs but not Social Security and Medicare. The Senate passed such a budget once. But Obama would not sign such reforms. Ryan showed a better approach than the fiscal insanity today. He also showed that such a budget could be passed in the House multiple times and that Republicans could keep control of the House and Senate. Such reforms to mandatory programs focused on means-tested programs—not the ones people believe they have paid for (Social Security and Medicare)–without political backlash. More recently, in 2017, Republicans passed a related Medicaid reform through the House and came within Senator John McCain’s one-nay vote to pass such a reform that Trump had agreed to sign. Even a narrow majority of Republicans in the House and Senate with a Republican president could enact significant reform. This could include block-granting welfare programs to the states and removing federal mandates so states could experiment with different ways to keep costs down, which is paramount in our system of federalism. At the state level, several states are moving their government pensions from the traditional union-style defined-benefit system that runs up unfunded liabilities to defined-contribution plans—40lK-style—that do not create unfunded liabilities. As they grow in number and size–and in the private sector, most pensions are already 401K-style defined-contribution plans–the willingness of Americans to shift Social Security and Medicare to similar structures will grow. The idea first floated by Bush, Jr. remained popular with younger voters even as the Democrats refused to consider the reform in the 2000s. Chile shifted its social security system to an opt-in program like an IRA. Ninety percent chose to leave the traditional program, and the government option was eventually phased out. Since then, more than 30 other countries have privatized or partially privatized their retirement programs. Britain has a hybrid system similar to some U.S. state pensions. Over time, the unfunded liabilities reduce to zero under this approach, and total spending bends down the cost curve. Simply beginning the block granting of means-tested programs and later starting the longer phase-in to fully funded, individually controlled 401 K-style Social Security and Medicare would clarify that the U.S. was headed toward fiscal sustainability by reducing pressure on the budget and the economy. Economic Growth: The Key to Prosperity A robust economy is the bedrock of a sustainable fiscal future. By implementing pro-growth policies, we can bolster economic stability and create an environment that fosters job creation and wealth generation, ensuring a prosperous future for all. The Impact of Tax Policy on Growth We had strong economic growth after the Reagan tax cuts. This broad-based tax cut reduced the top individual tax rate from 70% to 50% in 1981 and then to 28% in 1986, which lasted until Bush, Sr. raised taxes. The capital gains tax reduction in 1978, 1981, 1997, and 2001 contributed to higher economic growth rates. More recently, the Trump tax cuts of 2017 cut the corporate income tax rate from 35%, the highest in the developed world, to 21%, making it near the European average. Over time, the entire Trump tax cuts and deregulation contributed to an inflation-adjusted median household income increase of 8.5% from 2017 to 2019. Lower individual tax rates and capital gains taxes (Coolidge, JFK, Reagan, Bush, Jr., and Trump) and the corporate tax rate in 2017 contributed to faster economic growth rates in the past and will again. Less spending and more economic growth are good ideas but are now required by the growing debt from years of uncontrolled spending and underperforming economic growth. The Role of Pro-Growth Policies in Reducing the Deficit To achieve long-term fiscal sustainability, it is essential to implement pro-growth policies that stimulate economic activity and increase government revenues without raising tax rates. Lowering taxes can increase incentives to work and invest, supporting higher economic growth and increasing tax revenues. This is the "Laffer Curve" effect, where reducing tax rates can sometimes increase total tax revenue by boosting economic activity. Regulatory relief can lower the cost of compliance for businesses, encouraging them to invest and expand. This increased investment increases productivity, job creation, and economic growth. By making the Trump tax cuts permanent, finding other tax reforms and relief to support more growth, and reducing regulations that inhibit economic growth, there is ample opportunity to support faster economic growth and increased tax revenues. The CBO expects total outlays to be $6.4 trillion in FY 2024, $6.8 trillion in FY 2025, and $10.1 trillion in FY 2034. This is not sustainable because total revenue is expected to be $4.9 trillion in FY 2024, $5.0 trillion in FY 2025, and $7.5 trillion in FY 2034. Figure 1 shows this under these caps, which would function like a strict fiscal rule for the entire budget and projected total revenue if there was a sustained 1-percentage point higher real GDP over the decade due to more pro-growth economic policy. The spending caps are explained further below.  Table 1 shows the results of the CBO’s projection of the total for mandatory outlays and our estimates for each growth cap scenario for the upcoming 10-year window.  Faster economic growth could come with such tax reforms as a simplified, broad-based, flat-income tax system. Based on the data from the President’s latest budget estimates (see Table 2-4) of a sustained one percentage point higher real GDP over the 10-year window, there could be nearly $3.5 trillion more in tax revenue. The result would be that the federal government would nearly balance in 2031 with a 1% growth limit on spending or by nearly 2034 with a spending limit of inflation. A spending limit of the rate of population growth plus inflation would still run a deficit after a decade but would balance shortly after that. Total Deficit These sustainable budget approaches work well to support more economic growth and reduce spending growth over time. However, these will likely create tough political challenges, though they should be considered rather than raising taxes. Of course, these budget improvements would be even more significant if there were pro-growth policies of less spending, lower taxes, reduced regulation, expanded free trade, and other efforts that limit government intervention in our lives and livelihoods. Given the above calculations, we can evaluate, based on our approaches, what could happen to the deficit over time. Figure 2 shows what this looks like under these caps.  Table 2 shows the results of the CBO’s projection of the total for the total deficit and our estimates for each growth cap scenario for the upcoming 10-year window.  Overall, the only approach to a balanced budget by 2034 is the 1% growth cap, but faster economic growth would help the other two spending restraint approaches reach a balanced budget in about a decade. All three spending restraint approaches would improve the budget picture substantially compared with the CBO’s baseline budget. Also, we have kept the CBO’s projections for tax revenues or used the President’s latest estimates with faster economic growth, so our approach is very conservative. The results would most likely be substantially higher tax revenues by limiting government spending in the productive private sector and not hurting economic activity by raising taxes, as noted above, but rather providing pro-growth tax reform. Fiscal Reform Initiatives and Their Outcomes Various fiscal reform initiatives have been proposed and implemented over the years, with varying degrees of success. The most effective have combined spending restraint with pro-growth economic policies. Sustainable Budgeting Practices Adopting sustainable budgeting practices involves setting strict limits on spending growth and focusing on essential services. This approach helps to stabilize debt levels and create a more predictable fiscal environment. The federal government's enactment of a sustainable budget would assist these reforms. This would be a fiscal rule of spending limit similar to the Swiss debt brake or Colorado’s TABOR, whereby federal spending would be capped at no more than the rate of population growth plus inflation. Of course, federal spending should be much lower than this rate to correct for past excesses and bloated national debt. However, the spending limit will force Congress to reform mandatory programs and reduce the national debt. Had this spending limit been in place from 2004 to 2023, the federal debt would have increased by $700 billion instead of the actual increase of $20.2 trillion (Figure 3).  A cornerstone of our approach is establishing a strict federal spending limit, block-granting federal safety net programs, and mandating work requirements for recipients to receive taxpayer funds. This approach underscored the need for disciplined fiscal policy to curb the government's excessive spending tendency. By setting a clear ceiling on expenditures, our proposal sought to ensure that federal spending grows at a rate that does not exceed the taxpayers’ ability to fund it, thereby addressing the root cause of the burgeoning national debt. The key pillars of our project are block grants and work requirements for safety net programs tied with spending restraint and other pro-growth policies. Block Grants and Work Requirements One successful reform has been the implementation of block grants for welfare programs, coupled with work requirements. This approach was central to the welfare reform of the 1990s, which led to significant decreases in welfare dependency and poverty rates. Medicaid, a significant component of the federal safety net, has been a focal point of fiscal scrutiny due to its rapidly expanding costs. As a joint federal-state program, Medicaid's current open-ended funding structure incentivizes higher spending, contributing to its unsustainable trajectory. We propose a transformative reform of Medicaid by transitioning it to a block grant program. This approach would allocate fixed amounts of funding to states, granting them greater autonomy over the administration of Medicaid. This decentralization is intended to spur innovation and efficiency as states tailor the program better to fit the needs and circumstances of their populations. Crucially, this block grant proposal includes stringent limitations on funding growth. These limitations ensure that Medicaid spending does not outpace the broader economy or the government's fiscal capacity. By imposing these constraints, the plan aims to make Medicaid more sustainable long-term, aligning its growth with realistic fiscal parameters and reinforcing the broader goal of government restraint. Advancing Fiscal Responsibility: The Broader Implications While Medicaid reform was a critical aspect of Ryan's fiscal strategy, it should be extended to a comprehensive overhaul of mandatory programs. By advocating for reforms that introduce more market forces and personal responsibility into programs like Medicare and Social Security, we could address the unsustainability of mandatory spending. These reforms are grounded in the principle that fiscal responsibility necessitates hard choices and innovative solutions to preserve the social safety net for future generations. At the heart of our proposal is a call for limited government. This means reducing the size and scope of federal programs and emphasizing the importance of unleashing the private sector's potential. By advocating for tax and regulatory reforms that encourage investment and job creation, our proposal reflects a belief in the power of economic freedom to drive prosperity. Results from the Let Americans Prosper Project Many areas of the federal budget need to be reformed or eliminated, as many are questionable under the Constitution. But without eliminating those areas right away, unless there is political will, the Sustainable American Budget approach block grants many of the programs that currently go to states and cap the growth rate of those to different rates. These growth rate caps include 1%, inflation rate, or the rate of population growth plus inflation. The inflation measure used is the chained-consumer price index, which accounts for substitution effects and has been the index used to adjust federal income tax brackets since the Trump tax cuts. Our analysis uses the average growth rates from the last decade of 2.59% for chained CPI and 3.12% for population growth plus inflation. We consider different areas of the budget for the latest CBO projections for tax revenues and spending from 2025 to 2034. These projections from the CBO need to be more precise as they do not account for unforeseen recessions or other complications. Our projections do not account for the likelihood of faster economic growth from our pro-growth policy changes. Regardless, our projections provide helpful estimates when considering the best path forward to deal with the fiscal and economic crisis. Table 3 provides the CBO’s 10-year window estimates for the federal budget.  These data indicate that mandatory spending on things like Medicare and Social Security will account for 61.7% of the total outlays over the next decade, with discretionary spending comprising 23.2% and net interest of 15.0%. This provides further evidence that something must be done about mandatory programs before there is fiscal relief. Given this unsustainable trajectory, we consider the following scenarios for specific areas of the budget and others for comparison to help right the ship that is ready to crash if it has not already. Medicaid Spending We start by block-granting Medicaid expenditures to states. Medicaid has many problems, as recently outlined by the American Legislative Exchange Council, and those states that haven’t expanded Medicaid should not. In short, coverage doesn’t equal care, especially when it is covered by the government and paid for by taxpayers. Regardless, we consider what Medicaid could spend over the next decade if it was block-granted to states and then limited to the growth rate caps noted above. Figure 4 shows what this looks like under these caps.  Table 4 shows the results of CBO’s projection of Medicaid spending and our estimates for each growth cap scenario for the upcoming 10-year window from 2025 to 2034.  Medicaid and Income Security Programs Spending Expanding the block grant approach beyond Medicaid, we should include income security programs such as the Supplemental Nutrition Assistance Program (SNAP), earned income, child and other tax credits, supplemental security income, unemployment compensation, child nutrition, and family support, including housing vouchers and foster care. Consolidating these programs into block grants to states can significantly improve efficiency and accountability. States, being closer to the needs of their populations, are better positioned to administer these programs effectively, ensuring that aid reaches those who need it most while minimizing waste and fraud. Figure 5 shows what this looks like under these caps.  Table 5 shows the results of the CBO’s projection of the total for Medicaid and income security program spending and our estimates for each growth cap scenario for the upcoming 10-year window.  Because the CBO projects that spending on income security programs will decline in 2026 and 2027 and then increase again, its average growth rate is 1.1%. Hence, the primary savings from our approach is on Medicaid spending. Discretionary Spending Capping Medicaid and other safety net programs will help provide some fiscal relief but not much over time. We also consider our approach with discretionary spending, which is expected to be $1.7 trillion or about 27% of $6.4 trillion in total outlays in FY 2024. Figure 6 shows what this looks like under these caps.  Table 6 shows the results of the CBO’s projection of the total for discretionary outlays and our estimates for each growth cap scenario for the upcoming 10-year window.  The only scenario that reduces discretionary outlays compared with the CBO’s baseline is the 1% growth approach. Of course, this is less than 30% of total outlays, so major cuts would be needed to improve the unsustainable fiscal trajectory. Mandatory Spending Capping discretionary spending alone will not solve the long-term fiscal problem. While we understand this will be politically challenging, evaluating what else must be done to provide a sustainable fiscal path is important. We consider our approach for mandatory outlays, which includes Social Security, Medicare, and other programs. The CBO expects mandatory outlays to be $3.8 trillion, or about 73% of $6.4 trillion in total outlays in FY 2024. Figure 7 shows what this looks like under these caps.  Table 7 shows the results of the CBO’s projection of the total for mandatory outlays and our estimates for each growth cap scenario for the upcoming 10-year window.  These sustainable budget approaches work well to reduce the long-term cost of mandatory outlays. However, these will likely create tough political challenges, though they should be considered rather than raising taxes. Social Security Regarding mandatory outlays, we consider our approach specifically for Social Security and Medicare. Figure 6 shows what spending on Social Security looks like under these caps.  Table 8 shows the results of the CBO’s projection of the total for Social Security and our estimates for each growth cap scenario for the upcoming 10-year window.  Medicare Regarding mandatory outlays, we consider our approach specifically for Social Security and Medicare. Figure 9 shows what spending on Social Security looks like under these caps.  Table 9 shows the results of the CBO’s projection of Medicare's total and our estimates for each growth cap scenario for the upcoming 10-year window.  Conclusion: Envisioning a Sustainable Fiscal Future The Let Americans Prosper Project provides a fiscal reform approach that boldly attempts to steer the U.S. from its unsustainable fiscal path. Government restraint, including a strict spending limit and targeted reforms like block-granting Medicaid and other safety net programs to states with work requirements, can provide a strong framework for achieving long-term fiscal sustainability. While requiring significant political will and public support, these measures underscore the imperative of disciplined fiscal management and the value of economic freedom in securing America's financial future with a sustainable budget. Vance Ginn, Ph.D., is president of Ginn Economic Consulting, host of the Let People Prosper Show, affiliated with more than 15 free-market national and state think tanks, and was previously the associate director for economic policy of the White House's Office of Management and Budget, 2019-20. Follow him on X.com at @VanceGinn.
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Vance Ginn, Ph.D.
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