Why the budget matters

COMMENTARY Budget and Spending

Why the budget matters

Mar 25, 2015 3 min read
COMMENTARY BY

Former Director, Grover M. Hermann Center

Romina was a leading fiscal and economic expert at The Heritage Foundation and focused on government spending and the national debt.

Voters often wonder if Congress can ever get spending under control. Well, both the House and Senate have introduced their latest budget blueprints, so we'll soon know if they plan to keep kicking the can down the road - or get serious about reform.

Why care about the budget? Because it's the only legislative document through which Congress addresses the entirety of the federal budget: all spending and taxes.

With more than $18.1 trillion in national debt and an annual deficit projected to grow from more than a half a trillion dollars last year to over a trillion dollars by the end of the decade, the budget presents a critical opportunity for Congress to address the key drivers of spending and debt.

Congress should put the budget on a path to balance to reduce debt and enable economic growth to raise living standards - for all Americans.

In a typical year, Congress addresses only one-third of the federal budget as part of its so-called "discretionary" spending bills (meaning the part of the budget not set to rise automatically, such as Social Security and Medicare). But this discretionary budget, which covers defense and most domestic programs and agencies, has become smaller over the years, both as a share of the economy and of the budget.

Discretionary spending's share of the federal budget fell from two-thirds in 1964 to about one-third of the budget today. This spending is on course to drop to less than one-quarter of the budget within the next 10 years.

The congressional budget has the most direct impact on next year's discretionary spending. It establishes the maximum level allowed for defense and discretionary domestic programs.

Congress should certainly eliminate bad discretionary spending that benefits special interests at the expense of the broader public, although this spending isn't driving the growing debt crisis the way entitlement spending is.

Congress's budget is especially important in its ability to establish new entitlement spending and tax policies. Since the 1970s, Congress has had a fast-track mechanism known as "reconciliation" to enact legislation that reduces the deficit with a simple majority vote in the Senate. Because reconciliation is protected from the filibuster, it is a key mechanism to address out-of-control entitlement spending. Without the filibuster, it's easier, for example, to repeal Obamacare and bring down interest costs by controlling the debt.

Entitlement programs such as Medicare, Medicaid, Obamacare and Social Security, are responsible for more than half of the projected growth in spending over the next decade. Including what the federal government is expected to pay to service the massive and growing debt, the share of projected spending growth due to these areas of the budget rises to 85 percent by 2025.

Unless Congress gets control of entitlement spending and puts the debt on a downward path, it will be impossible to prevent government from expanding and choking off economic growth and depressing personal incomes.

On the tax side, Congress can make the U.S. a more attractive place to do business by lowering America's corporate tax rate (the world's highest). And it can unleash economic growth by simplifying the needlessly complex income tax system to reduce distortions to saving and investing. These pro-growth tax policies will have the added benefit of getting people back to work.

Only when the House and Senate agree on a concurrent budget resolution can reconciliation effectively be evoked to reduce the deficit and to make Congress live within the confines of the budget plan. With governing majorities in both chambers of Congress controlled by the same party, the chances for such an agreement are higher.

On the most fundamental level, the budget enables Congress to establish a comprehensive governing philosophy and to reassert the power of the people's body against the executive. According to budget committee veteran Patrick Knudsen, "Budgeting is an essential act of governing."

Through the budget, Congress can reallocate spending in accordance with constitutional national priorities and free the state, local and private spheres to handle functions that are better and more legitimately suited to their level. Congress can also rearrange current spending priorities to better meet the national interest.

The budget is a critical tool in Congress's legislative arsenal to correct the current fiscal course. It's time to put the budget on a path to balance to protect Americans against undue debt and tax levels, and to unleash economic growth.

The budget affects us all. Lawmakers should act like they understand that.

 - Romina Boccia is the Grover M. Hermann Research Fellow in Federal Budgetary Affairs and research manager of the Institute for Economic Freedom and Opportunity at the Heritage Foundation.

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