March 6, 2004

March 6, 2004 | WebMemo on Federal Budget

Senate Budget Resolution Sounds a Positive Note

The Chairman of the Senate Budget Committee is to be commended for fashioning a budget resolution that curbs the growth in spending. Likewise, the Chairman of the House Budget Committee, now grappling to set a spending plan for the House, is shooting for similar results. Following three years of rapidly increasing spending growth - spending is up by 39 percent since 2001 - the President and Congress are turning their sights to instituting fiscal discipline. Today's budget discussions represent good steps along those lines. Policymakers serious about reining in spending must set priorities and make disciplined choices before they dive into the federal checkbook.

Positive Steps in the Senate

Chairman Nickels's budget resolution passed by the Budget Committee on March 4th will hold 2005 discretionary spending to the cap set in last year's budget of $814 billion, an increase of 3.3 percent over the 2004 budget. Holding spending growth to less than the President's budget - accomplished by funding priorities for homeland security and defense, and trimming in other areas - is a step in the right direction.

Nickles's proposal also takes into account a likely supplemental appropriation of $30 billion for military operations in Iraq and Afghanistan. Although the exact size of this appropriation is not now known, making a provision for it now is essential if the budget process is to proceed in a disciplined manner.

The budget resolution also caps 2006 discretionary spending at $852 billion. Budget caps are laid out to trim spending growth in future years.

Finally, Senator Nickels has outlined plans to prevent tax increases by extending the tax cuts set to expire this year:

  • The child tax credit;
  • Expansion of the 10 percent income tax bracket; and
  • Elimination of the marriage penalty.

Chairman Nussle and the House Budget Committee are purportedly aiming for similar restraint as they hammer out plans for the House resolution.


To make real progress in trimming the budget, Congress must adhere to these limits in a strict, transparent way. This means avoiding any accounting and procedural gimmicks to ramp up spending, such as hiding increases by moving budget authority between years, loading up supplemental appropriations with special interest goodies or funding for ongoing operations that should be included in reconciliation bills, or craftily timing new initiatives so that their costs kick in after the budget period has elapsed.

Most importantly, no new entitlements should be considered.

Bolder Actions Needed

Discretionary spending caps are needed to enforce spending discipline by providing a framework within which to trade-off spending priorities. If Congress is to get its voracious appetite for spending under control, bolder steps are needed. With billions of discretionary dollars spent each year on wasteful, outdated, duplicative, and ineffective programs, lawmakers should enact a total freeze in discretionary spending and reduce the 2006 spending cap to a level that will fund only priority programs. Making tough choices is always important, but times of war require even tougher decisions to avoid running up the government tab. History has good precedent for policymakers to follow: both Roosevelt, in World War II, and Truman, in the Korean War, actually decreased non-defense spending in order to fund these vital operations.

The Real Danger

Still, these choices pale in comparison to the problems we face from huge cost increases in the cost of entitlement programs. Growth in the Medicare and Social Security programs will soon start to spiral out of control, sending a tidal wave of massive liabilities our way. Certainly, it is necessary to address waste, fraud, and abuse, but unless the fundamental weaknesses of these programs are addressed with real reforms are addressed now, today's modest efforts in spending discipline will seem like throwing deck chairs off the Titanic to try to stop it from sinking.

The Senate resolution contains only a modest attempt to bring these programs under control by trimming some $4.6 billion in mandatory spending over five years. Compared to the $1.3 trillion entitlements are expected to cost this year, those savings are a paltry 0.4 percent and are truly insignificant spread out over five years.

Congress should start to address entitlement spending by repealing the Medicare prescription drug benefit and rolling back the 2002 farm bill.

A budget resolution matters only when it is enforced. Unfortunately, some lawmakers are already boasting about their plans to use legislative loopholes to bypass spending limits. Loopholes and accounting gimmicks played a role in last year's 9 percent discretionary spending hike, and they threaten fiscal responsibility again this year. The Senate budget resolution takes positive steps to enforce spending discipline, such as:

  • Limiting advanced appropriations that allow lawmakers to spend above their limits;
  • Requiring 60 votes to provide "emergency" designation to exempt an expenditure from spending caps; and
  • Capping the expected 2005 defense supplemental bill at $30 billion.

But these positive budget enforcement reforms cannot substitute for real budget process reform. Congress remains saddled with an outdated budget process that was created in 1974, when the federal budget was only one-third of its current size. After thirty years of legislative abuse, 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 create a framework. Lawmakers should create a budget process that reflects America's budget priorities of sound planning, responsible spending, and low taxes.

Alison Acosta Fraser is Director of the Thomas A. Roe Institute for Economic Policy Studies, and Brian M. Riedl is Grover M. Hermann Fellow in Federal Budgetary Affairs, at The Heritage Foundation.

About the Author

Alison Acosta Fraser Senior Fellow and Director of Government Finance Programs
Domestic and Economic Policy

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