April 26, 2006

April 26, 2006 | Commentary on Federal Budget

Curb Spending Growth

The Senate's larding up of $14 billion to the president's Iraq and Gulf Coast supplemental spending request is yet more evidence our lawmakers have surrendered any pretense of spending restraint.

The numbers are clear: The federal government has expanded by nearly half since 2001; Washington now spends a peacetime record of $23,760 per household. Skyrocketing Social Security, Medicare and Medicaid costs, combined with Iraq reconstruction and domestic spending priorities, push the projected 2015 budget deficit above $800 billion. At that point, merely balancing the budget would require a tax increase of nearly $7,000 per household. And that tab will continue to surge thereafter.

Devastating tax increases aren't the answer. Responsible spending control is.

It's easy to blame lawmakers for avoiding difficult decisions. But when so many reformers "go native" after arriving in Washington, the larger problem becomes clear: The budget process itself makes it virtually impossible even for well-meaning lawmakers to restrain spending.

Indeed, the federal budget process, created 30 years ago, works to maximize spending. Unlike the 50 state legislatures, the federal government has no enforceable spending limits. This means lawmakers, who often spend days at a time listening to special interests plead for money, can simply add up every spending request and spend that amount without setting priorities and making necessary trade-offs.

Special interests will never cease pressing for more money. Lawmakers need a budget process that helps them say no.

Most beneficial would be a government-wide spending cap limiting the growth of the federal government to the inflation rate plus population growth. Any expenditure above this cap would require a two-thirds supermajority vote in both the House and Senate.

The suggested cap would pare annual spending growth to approximately 3.3 percent - less than half the current 7.7 percent rate. That seemingly small change would require lawmakers to save $3.6 trillion over the next decade, more than enough to finance Social Security accounts, make permanent the 2001 and 2003 tax relief and still reduce the budget deficit.

Is limiting annual spending growth to approximately 3.3 percent too much to ask? Not with a bloated federal budget that has expanded 45 percent in five years and funds scores of wasteful and obsolete programs. All current programs in the $2.7 trillion federal budget could continue growing at the inflation rate plus the population growth rate. However, programs that expand faster would need to be offset by slower growth in other programs. To say offsets cannot be found is to assume that every federal program is justified, successful and efficient.

Nor is this spending restraint unprecedented: From 1993 through 2000, spending growth averaged just under 3.3 percent, and the sky did not fall.

But, some will ask, what about escalating Social Security and Medicare costs? These programs' projected 6 to 9 percent annual growth would eventually require tax increases topping 57 percent (the equivalent of $11,000 per household today). Lawmakers must deal with these costs eventually. A spending cap would discipline lawmakers to set priorities and reform entitlement programs sooner rather than later.

Ironically, bolder budget process reforms may be easier to enact than weaker incremental reforms. The balanced budget amendment always received more votes than minor budget reforms because strong public pressure made it politically difficult to oppose. Similarly, spending caps enjoy three-to-one support nationally and are easy for voters to understand and rally around. Even better than the balanced budget amendment, spending caps reflect an understanding that that runaway spending rather than the resulting budget deficit is the real problem.

Of course, no budget process reform is foolproof. Since spending caps would be a statute rather than a constitutional amendment, nothing could prevent a simple majority of lawmakers from routinely passing new laws adjusting the spending limits upward. Political pressure and candidate pledges may prevent lawmakers from abusing that loophole.

Spending caps are a commonsense solution to irresponsible spending. The competition for limited taxpayer dollars would help eliminate obsolete programs and reform wasteful programs, thus averting huge tax hikes needed to kept them going. Already successful at the state level, a federal spending cap is needed to protect the family budget from the federal budget.

Brian Riedl is Grover M. Hermann Fellow in Federal Budgetary Affairs in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

About the Author

Brian M. Riedl Grover Hermann Fellow in Federal Budgetary Affairs
Thomas A. Roe Institute for Economic Policy Studies

Related Issues: Federal Budget

First appeared in the Washington Times