Irresponsible Budgeting: Here We Go Again
By LAWRENCE HAAS,
Posted: May 04, 2011
Facing a choice between doing something hard and something easy, lawmakers invariably choose the latter, which explains why the Senate Finance Committee held a hearing Wednesday morning on how to change the budget process in hopes of reducing deficits and debt.
On deficit cutting, the hard stuff is evaluating particular tax and spending provisions, making policy changes to save money, and facing the wrath of voters who will pay more or get less from their government.
The easy stuff is changing the budget process by, say, setting annual deficit targets or annual limits on federal spending and triggering automatic, across-the-board spending cuts if the targets are breached. That gives any lawmaker the politically convenient excuse to tell angry constituents that he or she would have made the cuts more thoughtfully but, alas, the law wouldn’t allow it.
We’ve been here before. Policymakers enacted the Gramm-Rudman law in 1985, setting annual deficit targets for the next five years and requiring across-the-board spending cuts in most programs to ensure that Congress hit the targets. When the time came, however, Congress used accounting gimmicks to pretend to reach the targets, then revised the targets to make them easier to reach, then scrapped the law entirely. Policymakers replaced Gramm-Rudman with the 1990 Budget Enforcement Act (BEA), setting annual limits on discretionary spending and forcing lawmakers who wanted to cut taxes or expand entitlements to offset the costs by making other changes in taxes or entitlements.
What moved the budget from huge deficits in the early 1990s to surpluses by the late 1990s, however, was not budget process changes of this type but, instead, real fiscal action – the budget deals of 1990, 1993, and 1997 that cut real spending and raised real taxes.
Today’s looming deficits make those of the 1990s pale by comparison. So, not surprisingly, lawmakers who face the politically perilous question of how to reduce them are gravitating toward a new series of budget process changes.
Senators Bob Corker, R-Tenn., and Claire McCaskill, D-Mo., have proposed limiting annual federal spending to 20.6 percent of Gross Domestic Product (GDP) – the average for most of the last four decades – and enforcing the limit through what would be enormous across-the-board cuts. Senate Republicans have proposed a balanced budget amendment to the Constitution that would limit total spending to 18 percent of GDP, making the required cuts even more severe. Republicans say they will insist that Congress attach a version of these measures to any legislation that would raise the federal debt limit in the coming weeks.
Don’t get your hopes up that a new measure will work. Congress won’t likely have the guts to let the automatic cuts in Social Security, Medicare, Medicaid, and other key programs required by, say, the Corker-McCaskill proposal take effect. Their constituents wouldn’t stand for it.
Eventually, the White House and Congress will have to cut spending and raise taxes more thoughtfully. Here’s hoping that “eventually” comes soon.
Lawrence J. Haas is former Communications Director to Vice President Gore and, before that, to the White House Office of Management and Budget. He's now a public affairs consultant who writes widely about foreign and domestic affairs, including fiscal policy.
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