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If Senate Budget Committee Chairman Judd Gregg has his way, Senate Republicans are about to stand at a historic crossroads.
Resident Scholar Kevin A. Hassett
For the past six years, the federal government has spent with more reckless abandon than a drunk with a platinum credit card. Between the 2000 and 2005 fiscal years, real spending increased an astonishing $415 billion, a 23 percent increase. Under the latest projections, by 2015 government outlays will be almost $2 trillion more than when President George W. Bush took office.
This spending binge has been partly attributable to the costly wars on terror and Iraq, but non-defense spending has boomed as well. Most egregiously, Congress has allowed countless earmarks for special projects, and has ladled extra “emergency spending” into almost every corner of the budget.
This has created a palpable unease in the libertarian wing of the Republican Party. Summarizing the current sentiment, Rich Lowry recently ran a story in National Review Online under the headline, “Bloated and Incompetent, Republicans Need to Be Cut Off.”
So what can they do about it?
In Homer’s Odyssey, when Odysseus sailed past the sirens, he had his crew put wax in their ears and lashed him to the mast so he could listen to the song without being lured to his doom.
In the past, politicians have enacted budget rules that similarly restrain them from temptation.
For example, Congress passed the Balanced Budget and Emergency Deficit Control Act of 1985, commonly known as the Gramm-Rudman-Hollings Act, which set maximum amounts for the deficit. Each year, the deficit targets would decrease, until the budget was balanced in fiscal 1991. If the deficit limits were exceeded, the president was required to cut non-exempt spending by a uniform percentage to bring the budget back in balance, a process called sequestration.
Facing large deficits in 1990, Congress passed the Budget Enforcement Act, which enacted pay-as-you-go rules that required across-the-board cuts in non-exempt mandatory spending if proposed new spending and revenue measures would increase the deficit. The law also imposed discretionary spending caps. These provisions were allowed to expire in 2002.
Did those budget rules work? Critics have argued that they can’t work, because Congress can always vote to ignore any constraints it puts on itself. That would be like tying Odysseus to the mast, but giving him a knife to cut his way out.
But a review of the literature conducted by Massachusetts Institute of Technology economics professor James Poterba concluded that budget rules do work. While Congress could in principle ignore budget rules, in practice they have tended not to do so, which have historically led to smaller deficits.
That’s why fiscal conservatives have been trying to rally support for stringent new budget rules, and that’s where Senator Gregg comes in. Last week, he announced a new proposal, the “Stop Over-Spending Act.” A look at the cleverly abbreviated “S.O.S. Act” suggests that it is exactly the type of legislation that might help.
The most important feature of the bill is that it gives the president a line-item veto. If such a device can be constitutionally inserted into the process, it would go a long way toward ending the embarrassing earmarks. Why would any senator or representative take all the negative publicity about a “bridge to nowhere” if the president is going to nix it?
After that, the bill establishes a goal of reducing the deficit to 0.5 percent of gross domestic product, compared to the Congressional Budget Office’s projection of 2.8 percent for this year.
Should Congress be unable to control itself, and not meet that goal, the bill would require that virtually all spending be reduced across the board.
The bill addresses the profusion of emergency spending bills by capping emergency spending at a low level, and establishes a Commission on Accountability and Review of Federal Agencies to identify and help eliminate wasteful expenditures.
Finally, it converts the annual budget process into a biennial one, on the grounds that extending the budget to two years will give Congress more time to scrutinize each program.
Gregg has really done his homework on this one, crafting a bill that indisputably would get the job done. But some of his colleagues might not be rejoicing about his skillful budget play.
The problem is, Gregg may force the hand of big government Republicans, and put them on the record before the next election.
The speculation on Capitol Hill is that the bill will come to the floor for a vote soon. If it does, then I believe the Republican congressional revolution begun in the 1990s will face a crucial test. Should these reforms become law, then Republicans may yet convince voters to continue to support them.
But if, because of their appetite for pork, they torpedo these reforms, then it is hard to imagine why any conservative would support this particular cast of characters in November — or ever again, for that matter.
Kevin A. Hassett is a resident scholar and director of economic policy studies at AEI.
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