Conservative Guideposts for Fiscal Policy

Conservatives need a new budget strategy that emphasizes discretionary programs in basic research, education, infrastructure, economic-self-sufficiency and national security. In doing so, emphasis should be focused on funding contingent on quality analysis and outcomes.

Conservatives/Republicans are widely perceived as being opposed to any government spending. Indeed, they are often caricatured as being opposed to government entirely. It is true that conservatives are - and should be - opposed to overspending and unnecessary demands upon taxpayers. But getting the mix of spending right is important as well.

The founders recognized that the government had important roles in national security, basic research, education, and infrastructure. Conservatives should reflect these principles in their budgets. As it turns out, however, these areas are funded in the annual appropriations bills - precisely the area of the budget that was the focus of caps in the Budget Control Act. Conservatives should reject mechanistic budgeting like caps in favor of funding core roles of government contingent on quality analysis and outcomes.

In defense, budgets should reflect the capabilities needed to address the threats identified in the Quadrennial Defense Review - not simply a desire to spend more without justification. Similarly, infrastructure projects should receive funding only if a rigorous analysis shows they improve economic outcomes. Education dollars should reward actual achievement and progress, while health dollars should be contingent on quality outcomes. And most importantly, poverty programs must be re-oriented away from a focus on making sure enough money gets to the poor and towards the real solution to poverty: economic self-sufficiency.

The key issue is that it is a budget strategy focused on annual funding of programs consistent with conservative principles and focused on quality outcomes.

Of course, something has to give and the obvious candidates are the large, and ever-growing, entitlement programs. Reforming entitlement programs turns out to be the right thing to do for reasons beyond budget math. The U.S. economy is characterized by big federal debt - now 75 percent of Gross Domestic Product and rising unsustainably - and poor growth. A lesson of other countries faced with this unpleasant economic cocktail is that the route to better economic performance is to keep taxes low and cut spending to deal with the budget imbalance. But not all spending is created equal. Instead, it is better to cut transfer programs and preserve core functions of government. The historical lesson dovetails perfectly with a conservative budget strategy.

Importantly, the large entitlement programs need reform in their own right. Social Security is a good example. The "plan" - the law of the land - will cut across the board the retirement checks of those in retirement by 25 percent in two decades. That is a disgraceful way to run a pension system. It is possible to reform Social Security to be less costly overall and financially sustainable over the long term.

Similar insights apply to Medicare and Medicaid, the key health safety nets for the elderly and poor. These programs have relentless appetites for taxpayer dollars yet do not consistently deliver quality outcomes. Reforms can address their open-ended draws on the federal treasury and improve their functioning at the same time.

The conservative fiscal strategy will re-orient spending priorities away from dysfunctional autopilot spending programs and toward core functions of government. It will focus less on the dollars going into programs and more on the quality of the outcomes of those programs. It will do so because it is the principled approach; because it coincides with the best strategy to deal with the debt and growth dilemmas; and because it will force a restructuring of the entitlement programs to generate a quality social safety net.