The next president will face a huge federal budget mess. Spending is driving up debt to unprecedented levels and is pushing federal intrusion ever deeper into state, local, and private affairs.

The most important question we should ask of 2024 presidential candidates is will they cut spending? Will they use their bully pulpit and budgeting powers to push Congress to cut?

The next president must be a dedicated spending cutter. Numerous candidates for the White House have track records on spending as governors. The table below includes governors who are in the race and some governors who are possible candidates.

The table shows general fund spending, which is the part of state budgets that governors have the most control over. The table shows spending for the first and last fiscal years each governor was in office. For governors still in office, the last year is their proposed spending for 2024. The table shows the annual average percent change in spending, and the change on a per-capita basis because state population growth rates differ.

By these metrics, the most frugal governors have been Asa Hutchinson, Mike Pence, Kim Reynolds, Chris Sununu, Chris Christie, and Doug Burgum, while the least frugal has been Gavin Newsom, Ron DeSantis, Gretchen Whitmer, and Nikki Haley.

Some caveats are discussed below. Also, broader fiscal assessments of these governors are available in Cato’s fiscal report cards.

Notes and Caveats

• The spending data is from NASBO fiscal reports. The most recent report includes 2022, 2023, and 2024. For prior years, I used the final “actual” figures from previous editions.
• General fund spending growth is just one measure of a governor’s fiscal performance.
• Governors share fiscal powers with state legislatures, which may or may not be controlled by the same party.
• The recent high inflation may have increased averages for current governors, although some current governors, such as Kim Reynolds, have nonetheless held spending down.
• California’s per-capita spending increased more than total spending because the state’s population is shrinking.
• I used Census actual state populations up until 2022, and then estimated 2023 and 2024 based on the growth in 2022.
• Broader discussions of these governors and their fiscal policies are in Cato report cards.

U.S. government spending is growing at a faster pace than the ability of taxpayers to pay for it. As government spending outpaces economic growth, more resources are redirected from productivity-enhancing functions toward government-fueled consumption without commensurate increases in the ability of workers to pay for a larger government. Excessive government spending also fuels inflation, depresses growth, and lowers living standards.

Congress’ latest debt deal is woefully inadequate for addressing the drivers of growing spending and debt, primarily putting controls on less than one-third of the budget that is already projected to decline further as a share of the economy: discretionary spending.

The Congressional Budget Office’s (CBO) latest long-term budget outlook projects that U.S. government spending will consume nearly 30 percent of the economy by 2053. At 29.1 percent of gross domestic product (GDP), federal spending will be 8 percentage points of GDP or almost 40 percent higher than the historical average.

As the figure above illustrates, interest costs are a main driver of spending increases, alongside expansions in major health care and Social Security spending. Other mandatory spending, which includes various welfare programs, retirement benefits for federal employees, and some veterans’ benefits, is projected to decline as a share of GDP. Discretionary spending growth also flattens out in CBO’s assumptions.

Interest costs are projected to triple as a share of the economy, assuming Treasury 10-year bonds at 4 percent – below average rates recorded over the past three decades. Interest cost increases are due to higher interest rates and the increasing size of the debt to which they apply. Publicly held debt borrowed in credit markets is projected to almost double from 98 percent of GDP in 2023 to 181 percent of GDP by 2053. The best way to address rising interest costs is to stabilize the debt as a share of the economy, which Congress can accomplish by reducing projected spending by at least 10 percent.

The only major category of federal spending expected to grow faster than interest on the debt is federal health care programs. Major health care programs include Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), and subsidies for private insurance purchased on the exchanges created by the Affordable Care Act (ACA). According to CBO, two-thirds of the increase in major health care spending will be due to the growth in per-person health care costs, meaning fixing the current subsidy, instead of allowing health care spending to grow ever more generous without budget controls, would fix most of the cost growth problem. Only one-third of the projected increase in total spending on the major health care programs is due to population aging. Unfortunately, President Biden’s initiatives to lower health care costs will be mostly futile, acting primarily as campaign talking points rather than addressing underlying cost drivers. As Jim Capretta with the American Enterprise Institute argues:

“President Biden’s latest plan to lower health care costs for American households…[is] far too trivial to matter much for most patients. If anything, the net effect is more likely to be an increase in overall costs rather than a reduction.”

The two largest federal programs, Medicare and Social Security, will face a fiscal cliff sometime in the next 10 or so years. CBO’s estimates assume that Medicare and Social Security spending will continue as if the fiscal cliff didn’t exist. Were Congress to let scheduled benefit cuts occur, Medicare providers would face 11 percent payment cuts as soon as 2031 and Social Security beneficiaries could see their benefits reduced by 20 percent as soon as 2033. Given the popularity of both programs, waiting until the 11^th hour before the fiscal cliff hits will likely result in legislators adopting a short-term band-aid approach, such as papering over entitlement deficits with additional borrowing and tax increases, while any benefit reductions could be delayed a decade or longer. U.S. workers have the most to lose from this wait-and-see approach as they’ll get hit with the double whammy of higher taxes and a slower-growing economy.

Following current debates in Congress, legislators have moved on from worrying about passing a budget or addressing the debt to arguing over how much to increase recently agreed upon spending levels on defense and non-defense discretionary programs under the guise of emergency needs. Congress should have closed gaping loopholes in the debt limit deal to account and pay for emergency spending if legislators wanted to ensure their agreement held tight.

Unfortunately, raising the debt limit didn’t make the debt issue go away, it merely kicked the can down the road while Americans continue to struggle under the weight of ongoing inflation that’s in no small part driven by excessive government spending. Americans should ask those running for office how they will stop the government from eating up more of the economy. Without public questioning, Congress may just as well try to ignore the debt problem until 2025, when the debt limit suspension comes to an end.

The U.S. Department of Agriculture runs dozens of farm subsidy programs, which cost taxpayers more than $30 billion a year. The largest program is crop insurance, which costs about $10 billion a year. The program displaces private methods of managing risk and gives subsidies to farm businesses that do not need them.

Federal crop insurance for revenue and yield shortfalls is available for more than 100 crops, but corn, soybeans, wheat, and cotton are the main ones. The policies are provided through 14 private insurance companies.

The USDA subsidizes insurance premiums, which costs taxpayers about $8 billion a year. The subsidies cover an average 62 percent of premiums, which results in most farmers making money on this so-called insurance. The Congressional Budget Office found that farmers received $65 billion more in claims than they paid in premiums between 2000 and 2016.

The USDA also pays about $2 billion a year to farm insurance companies to cover their administrative costs. With these subsidies and the inflated demand for policies, the 14 insurance companies appear to make above-normal profits, as suggested by the Government Accountability Office and other experts.

Here are some features of the USDA’s crop insurance program.

• Expansion in Scope. Federal crop insurance keeps growing in size and scope. The USDA reports that the number of crops insured has risen from 112 in 2000 to 134 today, while the number of insurance plans has risen from 20 in 2012 to 36 today. Expanding the scope of farm subsidies buttresses support for the logroll in Congress.
• No Income Limits. There are no income limits for the crop insurance program, with the result that subsidies are tilted upwards. An AEI study found that “farms in the top 10 percent of the crop sales distribution received approximately 68 percent of all crop insurance premium subsidies.” The Government Accountability Office reported that some billionaires receive crop insurance subsidies. It is often claimed that subsidies are needed to support family farms, but most farm subsidies go to the largest producers.
• No Transparency. The recipients of crop insurance subsidies are a government secret. Billions of dollars in taxpayer-funded aid is laundered through private insurance companies to help hide the identities of the millionaire and billionaire recipients. Congress is spending our money, but we’re not allowed to know who gets it.
• Crowding Out. Instead of government subsidies, the USDA itself identified market-based ways for farmers to manage risks, including diversifying crops, building savings, using forward contracts, using specialized equipment, and diversifying income sources. Farmers can also diversify planting locations and keep a low debt load in case emergency borrowing is needed. Federal subsidies displace or crowd out private risk management solutions, including new solutions that would arise if subsidies were repealed.
• Disaster Aid. Crop insurance subsidies have been expanded over the years under the premise that they would reduce pressure for Congress to pass emergency aid packages after disasters. But farmers have enjoyed huge emergency aid packages in recent years on top of all the regular aid. Since 2017, Congress has passed “an astounding $60 billion in ad-hoc disaster assistance” in a series of bills.
• Environmental Effects. Economists Vincent Smith and Barry Goodwin argue, “There is an extensive body of research overwhelmingly reporting that subsidized crop insurance has encouraged farmers to shift production onto more fragile lands, thereby increasing soil erosion and, by implication, agriculture’s carbon footprint.”
• Climate Change. The Environmental Working Group says that the federal crop insurance program “doesn’t encourage or require farmers to adapt to or mitigate climate change because it often pays farmers for the same type of loss year after year, like multiple years of payments due to drought.” That is a fascinating point—that subsidies undermine market adaptations to changing environmental conditions. The same is true, by the way, with federal flood insurance subsidies.

The best reform would be for Congress to repeal crop insurance subsidies, which would save taxpayers about $100 billion over the next decade. A more limited reform would be to impose an income limit for subsidy recipients, as economist Eric Belasco examines here. There is no reason why farm businesses cannot plan ahead by themselves to mitigate fluctuations in their earnings from drought and other contingencies.

More on farm subsidies here, here, and here. And see farm policy analyses from AEI, EWG, TCS, and Heritage.

Last week the House Appropriations Subcommittee on Transportation, Housing and Urban Development, and Related Agencies approved a Fiscal Year 2024 budget that forbids the Biden administration from granting additional funds to the California High-Speed Rail project. The marked-up budget bill is expected to pass the full House Appropriations Committee this week. If adopted on the house floor, the budget bill poses a significant challenge to a project that has already consumed over $3.6 billion of federal funds and carries an estimated $128 billion overall price tag.

In March, California’s High-Speed Rail Authority told the state legislature that existing funding sources were insufficient to finance the construction of the initial 171-mile operating segment linking Madera to Bakersfield. At the time, Authority management thought that it could obtain an additional $8 billion in federal grants, which it hoped would be enough to close the funding gap.

The new House budget appears to thwart that ambition, but there are multiple caveats. The Senate’s version of the budget almost certainly will not contain a similar prohibition of California High-Speed Rail funding, and the House prohibition would then need to survive a conference committee negotiation. Further, the prohibition only applies to the FY 2024 budget. It would have to be renewed annually until California either abandons the high-speed rail project or finds an alternative source of funding.

So, inclusion of the anti-HSR provision in the budget is unlikely to kill the project on its own, but perhaps it will trigger a renewed debate about high-speed rail at the federal level. Such a conversation is essential because if the project continues along its current trajectory, its sponsors will ultimately require tens of billions of federal funding. And the California project is seen by advocates as the first part of a nationwide high-speed rail network that would require hundreds of billions in federal funding. In 2021, Representative Seth Moulton (D‑MA) introduced a bill that would have spent $205 billion of federal funds on a nationwide high-speed network. Had that bill passed, the total cost would likely have multiplied amid cost overruns and operating losses.

There is nothing wrong with high-speed rail per se. It has been effective in Japan, parts of Europe, and China (although the last has invested in it to the point of negative real returns). But in the United States, with its high passenger rail infrastructure construction costs and relatively dispersed population, building specialized railways for trains running at 186+ miles per hour seldom (if ever) makes economic sense. The sooner the federal government moves beyond this technology, the sooner transportation dollars can be invested more wisely.

Recent years have brought significant changes to Idaho public finances. In addition to rapid increases in population and tax revenue, the state experienced a sharp increase in its Medicaid costs. Legislators, worried that a continued escalation could jeopardize the state’s robust fiscal health, created a task force to investigate whether the state could better control Medicaid spending growth by implementing managed care. While switching beneficiaries from traditional fee-for-service coverage to managed care is intuitively attractive, it may not be the right choice for Idaho policymakers in 2023.

The accompanying figure shows the state’s actual costs for the ten fiscal years ending FY 2022, a near final estimate of FY 2023 expenditures based on a review of remittances from the State Controller’s Transparent Idaho platform, and budgeted amounts for FY 2024. The most rapid cost escalation occurred since FY 2020.

According to the Centers for Medicare and Medicaid Services, Idaho Medicaid enrollment soared from 242,000 in December 2019 to 419,000 in March 2023, the last month for which data are available. Although some of this growth may be linked to migration into the state, two other factors were more critical. First, Idaho implemented Medicaid expansion at the beginning of 2020, allowing all adults with incomes up to 138% of the federal poverty level to join the program. Second, the federal government prohibited states from removing beneficiaries who no longer qualified for the program from the Medicaid rolls during the COVID public health emergency. This prohibition ended in April and Idaho should be able to reduce its beneficiary count in the coming months by conducting systematic eligibility redeterminations.

So, it is reasonable to conclude that Idaho’s Medicaid cost growth is more the result of an expanded enrollment base than of rising costs per enrollee, which is the problem managed care is supposed to address. Managed care promises to lower costs by restricting and coordinating a plan member’s use of medical services. Instead of seeing any provider that accepts coverage, the enrollee receives care from within the Managed Care Organization’s (MCO) provider network. The MCO receives a fixed “capitation” payment from the state for each covered beneficiary each month.

While Medicaid MCOs can save money by restricting the range of available providers, they cannot use a second lever that MCOs usually rely upon in the private insurance market to control costs: patient responsibility payments. Federal policy generally does not allow Medicaid MCOs to impose copayments or deductibles. As a result, Medicaid patients have no financial disincentive to seek medical care.

Two other factors militate against the ability of Medicaid managed care to yield significant savings. First, the MCO must cover its costs and earn a profit for its owners (and even a not-for-profit MCO can be expected to pursue revenues greater than expenses to build internal reserves). The largest for-profit Medicaid MCO, Centene Corporation, reported a $2 billion pretax profit on $145 billion in revenue for 2022. This is a modest profit margin, but the company also had $12 billion in selling, general and administrative expenses. (These amounts are company-wide totals including Centene’s Medicare and private plan management activities, as well as its Medicaid Managed Care services.)

A second consideration is that MCOs are compensated for inactive Medicaid enrollees. If someone on Medicaid gets other coverage, he or she may start using that alternative coverage without advising the state Medicaid office. The individual thus remains on the rolls even though he or she is not using services. Under a fee-for-service model, this is not an issue from a state budgeting standpoint because the individual does not generate any provider claims. But if that same individual is in managed care, the MCO will continue receiving per member per month (PMPM) payments until the state determines that he or she is no longer eligible.

There is some evidence that this latter effect can be large. In response to a public records request, a Los Angeles-based publicly owned Medicaid MCO told this author that 327,000 or 29% of its 1.125 million members did not receive any services during the 2021–22 fiscal year. The proportion of inactive beneficiaries may have been especially high that year due to the federal prohibition on redetermining eligibility discussed earlier.

Empirical research on cost savings from Medicaid Managed Care has yielded mixed results. A 2012 meta-analysis found a “paucity of evidence on cost savings from Medicaid managed care.” A more recent meta-analysis cited by Idaho’s consulting firm, Sellers Dorsey, found some evidence of cost savings from Medicaid managed care in Florida, Kentucky, and Pennsylvania. However, the consultant characterized these findings as anecdotal and state specific. Sellers Dorsey concluded: “While managed care typically does not (at least, not initially) reduce costs to the State, it can bring budget stability and predictability through the rate setting process and the transition of financial risk to the managed care entities.”.

It is commendable that Idaho legislators stood up a task force to investigate a commonsense way to save state and federal taxpayers money on the state’s growing Medicaid program. But the case for Medicaid Managed Care is decidedly mixed, and so it is important that the task force consider not only how to extend managed care in Idaho but whether to do so. Although the task force report is due on January 31, 2024, we may not have enough data to know by then whether the return of Medicaid redeterminations has sharply bent the program’s cost curve. It may thus be wise to defer any decision on managed care for several additional months.

Congress will consider a new farm bill this year, which will likely be a logrolling extravaganza costing $1.5 trillion or more over the coming decade. Just as Lollapalooza had a diverse lineup of bands, the farm bill will include a diverse lineup of subsidies for farms, food programs, energy, rural programs, forestry, trade, environmental activities, and many other things. Hemp production used to be illegal but now gets subsidized in the farm bill.

In his book on government dysfunction, MSNBC host and former congressman Joe Scarborough described the logrolling frenzy leading to the passage of the 2002 farm bill, which he called the “largest corporate welfare scam in history.” He discussed how dairy subsidies were demanded by members from Maine, Pennsylvania, and Vermont, peanut subsidies were demanded by members from Virginia, Alabama, and Georgia, and sugar subsidies were demanded by members from Florida. The logrolling continued for cotton, wheat, wool, mohair, and many other products.

Scarborough concluded, “Standing alone, not one of these corporate welfare measures could survive the bright light of public scrutiny.” That is the key point about logrolling. Unfortunately, logrolling is central to the modern legislative process because the government has grown too large to consider individual provisions on their own merits.

Logrolling means that bills jammed full of special-interest provisions can gain majority support even if none of the provisions could gain majorities by themselves. Logrolling involves committee chairs or party leaders bundling together narrow subsidies benefiting particular states and interest groups. If democracy means majority support for specific policies, then logrolling undermines democracy.

The problem with logrolling has been observed since at least the mid-19th century when omnibus bills bundled dozens of Army Corps of Engineers projects across many states. At the time, people objected that these bills included low-value projects that did not have broad support. The federal government is much larger today, and so the logrolling problem is worse, as I discuss here and here.

Here is a June 2023 Congressional Research Service (CRS) report on the upcoming farm bill: “The omnibus nature of the farm bill can create broad coalitions of support among sometimes conflicting interests for policies that individually might have greater difficulty achieving majority support in the legislative process.” That is a polite way of saying that if you bundle a bunch of loser provisions together you can end up with a legislative winner.

Farm bill logrolling is becoming more extensive says the CRS:

In recent years, more stakeholders have become involved in the debate on farm bills, including national farm groups; commodity associations; state organizations; nutrition and public health officials; and advocacy groups representing conservation, recreation, rural development, faith-based interests, local food systems, and organic production. These factors can contribute to increased interest in the allocation of funds provided in a farm bill.

What can we do about it? The official baseline for the farm bill this year is $1.5 trillion over 10 years. Farm bill leaders in Congress think of the baseline as the minimum pot of money they can carve up and handout to dozens of special-interest groups in coming months. But the federal government is hurtling toward a debt crisis, and business as usual is not acceptable. The bipartisan debt-ceiling deal passed in May reflected a new priority of controlling red ink. We need belt-tightening all around and a much lower price tag than $1.5 trillion for any farm legislation.

I look at logrolling in detail here and here and farm subsidies here.

Food stamp fraud is rising, particularly through EBT card skimming, as I discuss in this op-ed. EBT numbers and PINs are a great target for theft because the cards do not have chips. This is one of many failures that should prompt Congress to downsize the huge food stamp program in this year’s farm bill. The food stamp program is also called the Supplemental Nutrition Assistance Program.

The fraud problem with SNAP and other benefit programs is not just that individuals fake their personal data to gain unjustified benefits, but also that criminals find systematic program weaknesses and exploit them. Federal hand-out programs are looted by criminal gangs in an organized fashion.

Programs paid for by the federal government and run by the states—such as food stamps—are particularly prone to looting because state administrators have little incentive to worry about costs imposed on federal taxpayers.

This July 4 piece in the San Diego Union-Tribune caught my eye:

The bulk purchases of Red Bull and Monster Energy drinks were huge. Within about two months late last year, the same small group had spent $305,270 buying pallets of the caffeinated drinks at grocery stores in downtown San Diego and Riverside.

The transactions were large enough that members of the group had to make special arrangements with store managers ahead of time and pick up the drinks in the Smart & Final loading docks. They presumably resold the drinks at a profit — and the profit would be high since the money didn’t even come out of their own pockets.

Instead, the purchases were made with money pilfered from low-income public benefits recipients.

Last week, a member of the group pleaded guilty in San Diego federal court to one count related to the scheme. Beatrice Mihai, a 25-year-old Romanian citizen who lived in Anaheim, admitted in her plea agreement that she and her co-conspirators stole and misused the Electronic Benefit Transfer funds intended for nearly 175 victims in California, New York, Florida and Rhode Island.

… More recently, Romanian organized crime groups have plundered taxpayer-funded programs for low-income Californians, targeting those swiping state-issued cards loaded with EBT and unemployment benefits. Investigators believe those accounts are being targeted because the state-issued benefit cards are more vulnerable because they lack the chips embedded on most bank-issued cards. The theft has become a huge problem.

… On a near-weekly basis, news reports from across the U.S. — citing police records, prosecutors, court evidence and news releases — demonstrate the links between Romanian groups and ATM skimming operations.

… A few months later, investigators learned about the energy drink scheme at the San Diego and Riverside Smart & Final stores. Prosecutors alleged the group made at least 16 bulk purchases between the two locations in October and November, swiping multiple EBT cards to complete each purchase.

Let me summarize how this works. Gangs put skimmers on card machines at check-outs in retail stores. They gain dozens or hundreds of card numbers and PINs before the skimmers are discovered. They encode the numbers on new cards and drain food stamp accounts by buying high-value goods such as energy drinks. They resell the goods for cash to other retailers, typically for 50 cents on the dollar.

EBT card skimming has become a particularly severe problem in recent years. But SNAP is difficult to police in general because it includes 250,000 retailers and 42 million recipients. The program has exploded in cost from $63 billion in 2019 to about $145 billion in 2023.

The solution is to get the federal government out of food stamps and allow the states to fund their own food programs if they choose. State lawmakers must balance their budgets, and so they have strong incentives to minimize fraud and waste when funding their own programs.

More on food stamps here, here, here, here, here, here, and here.