How Trump Can Cut Spending If Congress Doesn’t

COMMENTARY Budget and Spending

How Trump Can Cut Spending If Congress Doesn’t

Dec 3rd, 2018 2 min read
COMMENTARY BY
Paul Winfree

Director, Roe Institute for Economic Policy Studies

Paul Winfree serves as director of the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.
President Trump speaks to members of the press. Cheriss May/Sipa USA/Newscom

Key Takeaways

Waste-cutting initiatives in presidential budget requests typically wind up in the waste bins of congressional committee rooms.

The OMB would conduct compliance reviews certifying that proposed administrative actions were budget-neutral -- both in the current year and in the future.

OMB should issue a revised memo, soliciting administrative actions that would achieve not just budget neutrality, but a 5 percent reduction in mandatory spending.

At an Oct. 17 Cabinet meeting, President Trump directed department and agency heads to reduce spending by at least 5 percent in the fiscal year 2020 budget. “Get rid of the fat; get rid of the waste,” he instructed them. 

It’s an honorable goal. But waste-cutting initiatives in presidential budget requests typically wind up in the waste bins of congressional committee rooms. Time and again, Congress has ignored presidential cost-saving recommendations and plowed ahead with budgets that increase both spending and the size of government. 

Just last year, for instance, the president’s budget sought to reduce non-defense discretionary spending by $54 billion. Instead, Congress raised FY 2018 funding for those programs by $63 billion. 

This behavior will only intensify in the new Congress. The Democratic House can be expected to make much-needed defense spending increases contingent on increases in domestic spending. And so the spiral of ever higher spending, deficits and debt will continue. 

But Trump is not entirely powerless to cut excessive spending. In fact, the chief executive can do a lot to rein it in — even without help from Congress. 

Welcome to the Administrative State, where departments and agencies are forever issuing new rules and clarifications about how they will run their programs. These administrative actions can dramatically affect program costs. 

For example, we know that when states require able-bodied food stamp recipients to work — or at least prepare to find jobs — to remain eligible for assistance, many will opt out of the program. In fact, a work requirement is already part of the law. But when the department allows states to discontinue the work requirement during periods of economic growth and low unemployment, program costs go up. 

Recognizing the profound fiscal effect of administrative actions, the Office of Management and Budget under President George W. Bush issued a memo requiring departments and agencies planning to take administrative actions that would increase spending on entitlements to also come up with proposals for actions that would reduce mandatory spending by an equal amount. 

The goal was to make sure that administrative actions would, cumulatively, be budget-neutral. And to make sure that goal was achieved, the OMB would conduct compliance reviews certifying that proposed administrative actions were budget-neutral -- both in the current year and in the future. 

This process, referred to as “administrative pay-as-you-go,” remained on the books — but was ignored — throughout the Obama administration. During that period, administrative rulemaking and guidance helped double the national debt. 

That has changed under the current administration, which affirmed “administrative pay-as-you-go” as its official policy within months of Trump taking office. But that policy can — and should — be taken even further. 

To achieve the president’s goal without relying on Congress, OMB should issue a revised memo, soliciting administrative actions that would achieve not just budget neutrality, but a 5 percent reduction in mandatory spending.

OMB should also freeze all new regulation until it completes a review of all the cost-cutting proposals received in response to the new goal. The freeze will incentivize compliance with the president’s objective to reduce spending. 

What sorts or proposals might surface under this approach? Perhaps it would spark the Department of Energy to fulfill its legal obligations under the Nuclear Waste Policy Act and move forward with building the long-approved nuclear waste repository at Yucca Mountain, Nevada. The agency’s failure to collect and dispose nuclear waste — as required by the law — has so far cost taxpayers nearly $7 billion in legal damages. And the department estimates it will be legally liable for at least $27 billion. 

Or perhaps the Department of Health and Human Services will end its requirement that everyone with Obamacare coverage, including many receiving subsidies, be automatically re-enrolled in the program. Once again, billions of dollars could be saved with a simple administrative action. 

Even if Congress is not inclined to reduce spending, there is much the executive branch can do on its own to stem the tide of red ink. It’s time to turn “administrative pay-as-you-go” into “administrative cut-as-you-go.” 

This piece originally appeared in Real Clear Politics