March 18, 2004

March 18, 2004 | WebMemo on Federal Budget

Republican Study Committee Budget Sets the Right Priorities

The fiscal year 2005 budget resolution proposed by the Republican Study Committee (RSC) represents real progress towards fiscal responsibility. Although full details are not yet available, this budget should be seriously considered by lawmakers interested in restraining runaway federal spending.

This budget is strong in four key areas:

  1. Limiting discretionary spending. The RSC budget sets priorities by fully funding the President's defense and homeland security requests, while calling for a 1 percent reduction in the rest of the discretionary budget. With discretionary spending up 39 percent since 2001, many of these programs can afford to tighten their belts. This proposal would save $6.1 billion in the first year alone.
  2. Reforming entitlements. The RSC budget includes instructions to reduce non-Social Security mandatory spending by a modest 1 percent. Given that the government's own auditors have identified over $100 billion in waste, fraud, and abuse in entitlement programs, lawmakers should not consider unreasonable these savings of $7.7 billion in the first year.
  3. Protecting and expanding tax relief. Unless Congress takes direct action, recent tax cuts for working families, parents, and married couples will expire this year. The RSC budget provides instructions to extend the current expiring tax cuts and also to provide new tax relief that is necessary to strengthen the economic recovery.
  4. Fixing the federal budget process. Budget process reform is perhaps the most important aspect of the RSC budget. The current budget process is in such shambles that budget decisions are rarely enforced, loopholes are routinely abused, and no real spending limits exist. In order to assure real enforcement, the RSC budget would require a stand-alone vote to bypass any of its restrictions. It would also make it more difficult for lawmakers to bypass their spending ceilings by labeling regular spending as "emergencies." Finally, it would allow lawmakers to apply appropriations savings to tax relief or deficit reduction, rather than automatically redirecting it to other spending.

The Goals of A Responsible Budget

The RSC budget represents important progress towards fiscal responsibility. Congress should build on the proposal and seek a final budget that accomplishes key goals:

  • Freeze discretionary spending at its 2004 level. Lawmakers regularly spend billions on outdated, wasteful, lower-priority programs. Congress should do what millions of families do: set priorities and balance every higher-priority spending increase with a lower-priority spending cut.[1]
  • Achieve significant entitlement reform. Entitlement programs such as Social Security and Medicare are projected to nearly double in cost over the next decade on their way to eventually overwhelming the rest of the federal budget.It is impossible to rein in federal spending without serious, structural entitlement reform, including delaying the implementation of the new Medicare drug benefit until its costs are fully known.
  • Make the tax cuts permanent. Recent tax rate reductions have provided incentives to work, save, and invest that helped bring surging productivity and will lead to more new jobs. However, the uncertainty of whether the tax cuts will expire creates difficulties for businesses making long-term investment plans and for families worried about their taxes increasing sharply. Making the tax cuts permanent would help families, businesses, and the economy.
  • Overhaul the federal budget process. Lawmakers still cling to a budget process created in 1974. Over the past 30 years, successive Congresses have punched this process full of holes, and federal spending has correspondingly tripled. The current budget process provides no workable tools to limit spending, no restrictions on passing massive costs onto future generations, and no incentive to bring all parties to the table early in the budget process to set a framework. Real reform, such as the Family Budget Protection Act (HR 3800), would assure that the budget process reflects the nation's budget priorities.[2]

Conclusion

Federal spending currently tops $20,000 per household and is rising every year. Reining in runaway spending requires setting priorities and making difficult decisions. The RSC budget represents a strong first step back to fiscal responsibility.

Brian M. 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

Show references in this report

[1] For specific spending cut recommendations, see Brian M. Riedl, "How to Get Federal Spending Under Control," Heritage Foundation Backgrounder No. 1733, March 10, 2004, located at http://www.heritage.org/Research/Budget/bg1733.cfm.

[2] See Brian M. Riedl, "The Family Budget Protection Act: A Bold Step to Fix the Federal Budget Process," Heritage Foundation Webmemo No. 425, February 13, 2004, located at http://www.heritage.org/About/Staff/BrianRiedlpapers.cfm.