There hasn’t been a wealth of good fiscal news lately, but tomorrow, the House of Representatives will consider a bill that has the potential to target some of the root causes of ever-rising spending and debt.
Representative Kenny Marchant’s bill, H.R. 3442, the Debt Management and Fiscal Responsibility Act, would require Treasury to keep Congress and the public informed on the federal government stands in relation to reaching the debt limit, and to propose solutions.
We’re proud to support this legislation and commend Rep. Marchant for seeking long-term solutions to our nation’s spending problem.
It’s no secret that government shutdowns can be bad news for politicians and financial markets alike. Standoffs over debt limit hikes and other government funding battles can put fiscal conservatives in a difficult spot. But news this week shows that the spot was deliberately made just a little tougher recently.
The Obama administration considered prioritizing debt payments if the nation hit its borrowing cap, despite public assurances from the Treasury Department that such a plan would be unworkable, according to a congressional probe.
The Republican leadership of the House Financial Services Committee charged Monday that Treasury Secretary Jack Lew and other department officials misled the public when it came to the risks of the debt ceiling.
Citing subpoenaed documents, the lawmakers found that Treasury consulted with Federal Reserve officials about prioritizing payments and deliberately worked to keep lawmakers in the dark.
One internal email from the Federal Reserve Bank of New York showed that “Treasury wants to maximize pressure on Congress by limiting communications about contingency planning.”
In other words, even though some in Congress floated plans to prioritize payments and lessen the risk to the nation’s creditworthiness, Treasury may have misled lawmakers — and the public — on just how much flexibility really existed in order to discourage conversations to begin with.
House Financial Services investigations subcommittee will hold a hearing on the controversy on Tuesday.
In last night’s Republican Presidential debate, Senator Rand Paul sounded a familiar tone in seeking to distinguish himself among the crowded field.
“I am the one true fiscal conservative who will look at all spending,” Senator Paul said, “And that’s the only way we’ll ever balance our budget.”
Paul, who is regularly attacked for his efforts to curb government waste including in the Pentagon, has not ruled out spending increases in the nation’s largest bureaucracy. However, he is somewhat unique in his attempts to push for offsetting cuts, not just hikes.
In an era of ever-rising entitlement spending and looming threats abroad, is Senator Paul correct that one must target all spending in order to balance the budget? Here’s our take:
- Balancing the budget without addressing all spending is theoretically possible. Even a quick read of the latest CBO report shows a rather striking takeaway: The nation’s entitlement programs — namely, Medicare and Social Security — are a huge problem. The Pentagon is the largest chunk of discretionary spending by far, but stacked up against the massive liabilities on the mandatory side, there’s little comparison. Reining in entitlement spending while keeping the status quo on all other spending could theoretically lead to balance.
- …But trying to do so is not wise and probably not feasible, for both philosophical and practical reasons. No fiscal conservative can defend waste like an unused $43 million gas station or a trillion-dollar plane that doesn’t work and hope to maintain any credibility. In a more practical sense, taking one huge chunk of spending off the table for cuts can damage bipartisan coalitions that are necessary to get politically difficult spending cuts passed and maintained. A recent example of this phenomenon in practice is the so-called “parity” principle in the Budget Control Act. This key provision forces equal Defense and non-Defense spending cuts and is largely responsible for holding together whatever bipartisan support for this embattled package of spending limits still remains. While the comparison is not exact, Republicans who take the Pentagon off the table would undoubtedly damage bipartisan support for any spending reform, not to mention their own credibility.
- It remains to be seen whether all of Paul’s rivals will take the Pentagon off the table. While many candidates including Governor Jeb Bush and Senator Marco Rubio have been relatively upfront with their opposition to trimming Pentagon spending, there are a few exceptions. Ohio Governor John Kasich often touts his experience in Congress balancing the budget and ending Pentagon waste, while Senator Ted Cruz has come under fire for previous willingness to address Pentagon spending along with other parts of the budget. At the end of the day…
- Senator Paul’s approach is right, but it remains to be seen whether he’s the only one who will take it. Senator Rand Paul may be right that he’s the only candidate who truly believes in considering all spending, but at least for a few of his rivals, there’s reason to expect a willingness to take a similarly holistic approach. While not an absolute requirement, putting all spending on the table is a necessary part of balancing the budget in the political reality that exists.
Note: This post originally appeared at the Institute to Reduce Spending.
Senator Rand Paul (R-KY) recently introduced two bills that would help fight wasteful or redundant federal programs. Paul then stressed the bipartisanship of the spending issue, adding “My bill will lead to real savings right away by cutting wasteful duplicate spending, which is something everyone should agree on.”
One bill would limit authorizations to four years, although specific programs could receive longer authorizations upon request. The legislation would aim to make lawmakers think twice before authorizing a new program. Mike Enzi (R-WY) said the bill would force Congress, “to reexamine what we are actually funding in order to improve or eliminate government programs not delivering results.”
The second bill Paul introduced would require the Obama administration to find $10 billion in savings by eliminating and consolidating government programs within 150 days of the legislation being signed into law. Potential overlapping programs would be identified through reports from the Government Accountability Office.
With these efforts, Paul and others aim to take on the growing national debt, stopping what Paul said is the United States “leveraging our children’s future for wasteful spending today.”
The Congressional Budget Office is out with a new Budget and Economic Outlook today, and it’s bad news for those who’d like to believe all is well with the economy.
Some key takeaways:
- The economy will grow for this year and next, and continue at a slower rate in future years based on a shrinking labor supply.
- For the first time since 2009, the deficit-to-GDP ratio will rise faster than GDP does. In other words, deficits will grow faster than economic output.
- Major changes exist in this report compared to last one. It projects deficit levels roughly one-and-a-half trillion dollars more than the last report did. A key difference? Fall’s budget deals.
- Mandatory programs are still squeezing the budget, on track to be 15% of the economy by 2025
Read the full summary here.