October 7, 2005

October 7, 2005 | WebMemo on Federal Budget

House Leadership Reacts To Calls For Fiscal Responsibility

Last night, House leadership finally released a promising action plan to offset hurricane relief and rebuilding costs, reduce the growth of spending, and limit government. House Speaker J. Dennis Hastert (R-IL) adamantly declared, "We can and will recover, but it will require some serious belt-tightening throughout the federal government.[1]" Considering the ballooning $2.5 trillion federal budget and the added financial pressure from Hurricanes Katrina and Rita, it will take major offsets and a high degree of accountability to prevent hurricane recovery and rebuilding from becoming the next excuse to expand the size and scope of government. The House leadership's four-point plan is a major step in the right direction-towards fiscal sanity.

This plan, supported by House Republican leadership, committee chairmen, and key conservative members, focuses on four points:

  1. Increasing mandatory savings from $35 billion to $50 billion in this year's budget reconciliation;
  2. Holding the line on discretionary spending through across-the-board cuts;
  3. Working with the President to rescind prior spending authorizations; and
  4. Eliminating duplicative, wasteful, and unnecessary programs.

The President's budget proposal identified potential savings in ineffective programs of $20 billion,[2] and agency managers are well-placed to find additional waste to accommodate across-the-board cuts. Entitlement spending, meanwhile, is the biggest threat to our economy and must be reformed. While there have been no details presented as of yet-this plan is still in its beginning stages-there will be ample opportunity to make these broad proposals a reality.

The House Republican Study Committee (RSC) recently released its "Operation Offset" effort, a menu of over $500 billion in specific cuts to pay for hurricane-related spending. The RSC's long list of offset targets include sensible recommendations that Congress should consider, such as redirecting funding for the 6,000 earmarked projects in the recent highway bill, eliminating the Advanced Technology Program, and reducing farm subsidies.[3]

In addition, Sen. John McCain, (R-AZ) and the RSC have targeted the new Medicare prescription drug benefit and proposed to cancel, or at least delay, its implementation. The drug benefit alone is projected to cost $37.4 billion next year.

If Congress-and the House leadership-is serious about holding the line on spending, Members must follow two key steps:

  1. Redirect funding from all earmarks in the recent highway bill and reject any earmarks in future appropriations bills. If Congress falls short on this, the President must veto any bill that contains earmarks.
  2. At a minimum, postpone the unaffordable Medicare prescription drug benefit for one year to consider how to pay for it or whether it should be substantially reworked.[4]

Rep. Mike Pence (R-IN), Chairman of the RSC, challenged Congress and the President to have "courage to make the tough choices."[5] He's right: writing budgets is about setting priorities and making those tough choices. That should not deter House leadership from following through with its bold proposal. The rest of Congress should join in this effort.

Michelle Muccio is Research Assistant in, and Alison Fraser is Director of, the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

About the Author

Michelle Muccio Research Assistant
Thomas A. Roe Institute for Economic Policy Studies

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

Show references in this report

[1] "Speaker Hastert Comments on Republicans' Initial Spending Cut Proposal," press release, October 6, 2005, at http://releases.usnewswire.com/GetRelease.asp?id=54710.

[2]Brian M. Riedl, "A Victory Over Wasteful Spending-Hardly," Heritage Foundation WebMemo No. 839, September 14, 2005, at http://www.heritage.org/Research/Budget/wm839.cfm.

[3] See Alison Acosta Fraser and Michelle Muccio, "The Growing Disconnect: Federal Spending and Congressional Leadership," Heritage FoundationWebMemo No. 865, September 28, 2005, at http://www.heritage.org/Research/Budget/wm865.cfm.

[4] See Edwin J. Feulner, Ph.D., and Alison Acosta Fraser "A Line in the Sand for Fiscally Responsible Lawmakers" WebMemo #874, October 6, 2005, http://www.heritage.org/Research/Budget/wm874.cfm

[5] Press Office of the Republican Study Committee, "PENCE ADDRESSES SPENDING CUT PLAN OF HOUSE LEADERSHIP" Press Release, October 7, 2005, at http://mikepence.house.gov/News/
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