March 11, 2004

March 11, 2004 | News Releases on Federal Budget

Analyst Offers Five Steps For Budget Reform

WASHINGTON, MARCH 11, 2004 - President Bush took a positive first step toward reining in federal spending with his 2005 budget, but Congress must go much further. And lawmakers can, according to a new paper from The Heritage Foundation, if they are willing to make some tough - if not necessarily complex - choices.

In the paper, Brian Riedl, Heritage's expert on the federal budget, recommends five steps lawmakers can take if they are serious about controlling spending:
  • Stop digging. If lawmakers want to slow the rate of increase in federal spending-now at its fastest since the 1960s-they can't talk about spending restraint then vote for a bill that would increase highway spending by 72 percent or another that would increase special education spending by 151 percent or another that would extend unemployment benefits in a rapidly growing economy. Cut spending now, Riedl says. Choose to trim or eliminate these programs this year.

  • Commit to a balanced budget by 2014. Deficits are a symptom of two larger problems-a sluggish economy and runaway spending, Riedl says. Both the pro-growth tax relief needed to stimulate the economy and the additional funds that will be needed for Medicare and Social Security when the 77 million baby boomers begin to retire in 2011 require that we cut spending.

  • Freeze discretionary spending in 2005. Discretionary spending jumped 39 percent between 2001 and 2004 and has climbed 7 percent annually if we exclude defense and Sept. 11 costs. It's time for most non-defense federal agencies to forego spending increases for a year and for those increases that must be approved for high-priority items and agencies be offset by decreases for low-priority items, Riedl says.

  • Reform entitlements. The problem can't be eliminated merely through cutting discretionary spending, not when entitlements account for two-thirds of federal spending. Everything must be put on the table-particularly the 2003 Medicare drug bill and the subsidy-laden 2002 farm bill. Absent reform, Riedl says, entitlement spending will grow by 6 percent a year for the next decade, and it will be virtually impossible to balance the budget in 2014.

  • Fix the budget process. Close the loopholes. Include the president throughout the process, not just at the beginning and end, and construct meaningful, enforceable, realistic spending caps, Riedl says.
    If Congress can do these things and avoid the usual traps, it can return fiscal sanity to Washington, says Riedl, who included in the paper hundreds of specific examples of possible spending cuts. "But lawmakers can't count on an economic boom to balance the budget-the economy is not going to grow at the 9 percent a year it would take," he says.
I nstead of looking for no-pain accounting gimmicks, Congress should make some hard-nosed decisions to reduce spending, he says. "Lawmakers don't want to offend anyone by ending or downsizing a program," Riedl says. "But the time has come to do what families do-set priorities, make tradeoffs and spend within our means."

Riedl's paper is online.

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