NCPA - National Center for Policy Analysis

Zombie Spending

September 25, 2014

Aficionados of horror movies know that the monster is never really dead when you think it is. It may be down, but it will inevitably climb back from the dead at least one more time before the final credits. So it is with government programs.

  • A tax long-distance telephone calls was enacted in 1898 to help pay for the Spanish-American War. That tax wasn't repealed for good until 2006.
  • In 1954, wool as a "strategic material" since it was used to make military uniforms, making it eligible for wool and mohair subsidies. In 1993 Congress noticed that military uniforms were actually made from synthetic fibers and began phasing out the subsidies. But by 2002, military necessities aside, the subsidies were back, and this year's farm bill extends them until at least 2018, at a cost to taxpayers of $5 million.
  • Likewise, the Rural Electrification Administration was created in 1935 to bring electricity to farm country. There aren't many farms without electricity anymore, but the REA, now called the Rural Utilities Service, still spent almost $800 million last year.

Now we are seeing two more examples of programmatic immortality.

  • Under the complex rules for food-stamp eligibility, a family can qualify for higher benefits if it also receives benefits from the Low Income Heating Assistance Program (LIHEAP). A number of states have discovered that they could extract extra federal food-stamp funding for their states by providing families with a nominal amount of LIHEAP funding, in some cases as little as one dollar.
  • Congressional Republicans sought to eliminate this loophole as part of the 2014 farm bill, but failed. They were able, however, to increase the eligibility threshold to require states to pay at least $20 in heating assistance before recipients could take advantage of the increased eligibility. It was expected that few states would continue trying to leverage the loophole once more of their own money was on the line, ultimately saving taxpayers $8.6 billion over tenyears.

But that underestimated the ingenuity of state governments when the lure of federal money is on the line.

  • Of the 16 states that had been taking advantage of the "heat and eat" loophole before this year, twelve have announced their intention to continue the program.
  • Eleven will rearrange their federal LIHEAP funds in order to keep the program going, while California will use its own money to maintain the loophole. The result will be to keep federal food-stamp money flowing to these states.

A second federal program poised to rise from the dead is the Children's Health Insurance Program (CHIP), which provides health care to children in families with incomes too high to qualify for Medicaid. The program is funded jointly by federal and state governments and, depending on the state, can cover children in families with incomes up to $96,592 for a family of four.

However, those families are now eligible for subsidies under Obamacare, making the program redundant. It was, therefore, scheduled to end in September 2015. Already legislation has been introduced to extend CHIP until at least 2019. In fact, not only would the program be extended, but the federal share of its costs would rise from 71 percent to 94 percent. Taxpayers could be on the hook for both increased CHIP spending and replacing the foregone Obamacare funding.

This is how we end up with our massive welfare state and a $3.5 trillion federal budget. It's not just that we constantly add new government programs, it is that we seem fundamentally incapable of ever doing away with the ones we have.

Source:  Michael Tanner, "Zombie Spending," National Review, September 24, 2014.

 

Browse more articles on Tax and Spending Issues