On Tuesday, the country will either re-elect president Obama to a second term or to elect Gov. Romney as the new president. No matter who wins, this country can't afford to stay on its current fiscal path, along which government size and scope have reached unprecedented levels. Here are the policies I hope the next president, whoever it is, will pursue in the next four years.
* Reduce government spending: Spending as a share of gross domestic product grew from 18.2 percent in 2001 to 23.4 percent in 2012 -- a 29 percent increase in real terms. Overspending is a bipartisan problem, as we witnessed during President George W. Bush's terms in office. It's time to put Washington on a diet. That means cutting more than waste, fraud and abuse, even in legitimate areas of federal spending such as defense. It also means returning many functions, such as education, to the states where they belong.
But to end the spending crisis that we are facing, programs like Social Security and Medicare must be reformed. If they aren’t, the country will be locked into a completely unsustainable transfer of wealth from the relatively young and poor to the relatively old and wealthy in society. This generational warfare isn’t just costly, it’s also profoundly unfair.
* Reform the tax code: For decades now, the tax system has been used for social engineering rather than tax revenue collection. As a result, two American taxpayers making the same amount of money today may have significantly different tax bill depending on whether they are married or single, have a child or not, earn income from capital or wages, own or rent their home, etc. This is unfair and inefficient. Fundamental tax reform that gets rid of deductions and lowers marginal tax rates for all -- ideally resulting in a flat-rate system -- would address these problems. Particularly if it were combined with reforms to eliminate the double taxation of income that is saved and invested. However, no pro-growth tax policy will be achievable and durable unless it is accompanied by serious and deep reforms to control the growth of federal spending.
* End cronyism: Private interests, such as banks, energy companies (whether oil, gas or green), automobile companies and farmers continue to get special treatment from the federal government in the form of tax breaks, subsidies, loan guarantees and more, with little consideration of the cost and damage of these political favors. The Mercatus Center's Matt Mitchell has the best description of the negative consequences of cronyism: "Whatever its guise, government-granted privilege [to private businesses] is an extraordinarily destructive force. It misdirects resources, impedes genuine economic progress, breeds corruption, and undermines the legitimacy of both the government and the private sector."
With a trillion-dollar deficit, it should be obvious that we need to put an end to these politically motivated favors including bailouts of entire industries.
* Rein in regulations: Regulations are continuously added to the Federal Register without much review or performance measurement. A statute requiring regulators to do economic analysis of their regulations would be a start. Such a mandate would force regulators to think about basic questions such as whether there is actually a problem that requires intervention, whether regulators are the ones who should try to solve it and whether they can even solve the problem at all. Subsequently, massive regulations such as Dodd-Frank need to be entirely revisited and old regulations should be reviewed for potential abolition.
There is be much more to add to this list. But I hope that no matter who is in power on January 2013 will be a true agent of change and will realize that there are serious limits to what the government can and should do.
Examiner Contributor Veronique de Rugy is a senior research fellow of the Mercatus Center at George Mason University.