The Heritage Foundation

Executive Summary #1262es

March 17, 1999

March 17, 1999 | Executive Summary on

Executive Summary: Time to Hold the Line on Spending Caps

The budget framework agreed to by the chairmen of the House and Senate Budget Committees of the 106th Congress rests on three central pillars:

  • Committing 100 percent of the off-budget surplus to Social Security;

  • Maintaining the agreed-on spending caps contained in the Balanced Budget Act (BBA) of 1997; and

  • Using on-budget surpluses, when they become available, for tax relief.

These congressional leaders wisely stated their commitment to maintaining fiscal discipline by restricting discretionary spending to the levels in the BBA. These annual spending caps represented a historic turning point in federal fiscal policy and fiscal accountability, and they must be maintained. Unfortunately, in periods of budget surpluses, the President and Congress easily can be tempted to spend more tax dollars simply because they are available. This year, the Clinton Administration and some Members of Congress again are suggesting spending levels that would break the BBA. Not only would this make a mockery of an agreement supposedly etched in stone--and further increase public cynicism about Washington's true intentions--but it would also risk a surge of red ink and budget crises in the future.

To be sure, concerns about the ability of the U.S. Department of Defense to deal with today's military concerns and foreign commitments have increased pressure to exceed previous spending plans. A larger defense budget, however, can and should be achieved by making reductions in other programs, in order to keep the spending caps intact. Although there is near-universal recognition of the need to increase defense spending, domestic programs are healthy and do not need additional funding. There are indications in the world economy that current budget surpluses may be as ephemeral as spare change found on the sidewalk; it would be foolish for Congress to make long-term commitments based on short-term prosperity. Abandoning spending caps and increasing domestic spending beyond BBA levels is a recipe for chaos--undercutting public confidence and risking an increase in the public debt.

The strong spending limits of the BBA produced the current budget surpluses, and equally strong spending limits will be required to protect them. While making spending decisions for FY 2000, Congress should keep in mind the following key points:

  1. Discretionary spending caps are credited by the Congressional Budget Office (CBO) with eliminating deficits and producing surpluses;

  2. Failure to protect current surpluses will cause federal debt held by the public to exceed 100 percent of gross domestic product by 2033, according to the CBO;

  3. All major decision makers, including President Bill Clinton, have agreed on the need to increase spending on defense and national security areas; and

  4. Increases in defense expenditures can and should be offset with reductions in domestic spending.

Today, the economy is strong and most domestic government programs have little need of increased taxpayer support. Instead of raiding the surplus for redundant or unneeded domestic programs, Congress should take advantage of these economic good times to:

  • Concentrate on investing in the country's long-term defense needs while reducing spending on wasteful, unnecessary, new or expanded domestic programs;

  • Reaffirm clearly the distinction of responsibilities among the federal, state, and local governments by devolving to the states programs that are better administered at the local level, such as education, community law enforcement, environmental protection and enforcement, land use planning, and social services;

  • Amend the rules in both House and Senate to allow Members to make points of order against individual line items within appropriations bills; and

  • Reconfirm Congress's commitment to "hard" spending caps and budget process rules that focus on setting priorities and keeping spending under control.

Although the current budget surpluses provide the illusion that fiscal discipline no longer is necessary, CBO projections clearly indicate this is not the case. Congress must choose between going down in history as the Congress that secured the federal government's financial health beyond this generation, or the Congress that squandered the largest surplus in U.S. history.

Peter Sperry is a former Budget Policy Analyst in The Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

About the Author