WASHINGTON — Despite the House of Representatives’ disappointing
performance on Rep. Jeff Flake’s Pork-busting amendments, there
are some stirrings in Congress about getting serious on spending.
The most notable is Senator Judd Gregg’s Stop Over Spending (SOS)
Act. Although it has its shortcomings, it incorporates enough
good ideas that it represents considerable improvement over the
current system. Here are some highlights:
Discretionary Spending and Budget Deficit
Limits: The SOS Act limits spending for discretionary
spending to about $872.5 billion for fiscal year 2007, $895.4
billion in 2008 (an increase of 2.6%) and $919.5 in 2009 (an
increase of 2.7%). It limits the budget deficit to a percentage
of the gross domestic product (GDP). The budget deficit can be no
larger than 2.75% of GDP in 2007, and the percentage drops each
year until it reaches 0.5% in 2012. If either the discretionary
spending or budget deficit limits are exceeded, then the Act
triggers across-the-board spending cuts to bring the budget in
line with the limits.
Emergency Spending Reform: In 1997, Congress set
caps on spending, but allowed an exception for emergency
spending. The problem was that Congress never defined emergency
spending leading the institution to spend more and more by
putting additional spending through the emergency-spending
loophole. The SOS Act limits emergency spending to $90 billion in
2007, $50 billion in 2008, and $30 billion in 2009 and
thereafter. Although it still doesn’t define emergency spending,
the Act requires any emergency spending that exceeds the limit to
be offset by an across-the-board cut in discretionary spending.
PAYGO: The SOS Act rules out of order any House
or Senate amendment that either increases spending or reduces
taxes “unless such amendment makes an equivalent reduction in
other specific budget outlays, an equivalent increase in other
specific governmental receipts, or an equivalent combination
thereof.” Known as the “pay-as-you-go” rule (PAYGO for short), it
requires any new spending or tax cuts to be offset by spending
reductions or increased taxes elsewhere. Although it would be
better if this applied to just spending — spending is the
problem, not taxes — it’s much better to have this rule than
not. PAYGO was instituted in the 1990 budget agreement and
continued in the 1993 one, and was effective in holding down
spending. It keeps politicians from doing their favorite thing:
spending money today and putting the bill off until tomorrow.
Line-Item Veto: The line-item veto included in
the SOS Act gives the President the authority to propose spending
cuts in bills passed by Congress. It differs from the 1996
line-item veto law (that was found unconstitutional by the U.S.
Supreme Court) because it does not allow the President’s cuts to
take effect by default. Rather, Congress must vote in favor of
the cuts for the reductions to take place. The President will be
able to make a total of four spending reduction proposals a year,
and Congress will have only ten days to vote on the proposals.
If Congress passes the proposals, the savings generated can only
be used to reduce the deficit and cannot be used to offset other
spending increases. If Congress fails to pass the proposals
(resulting in a deficit that is too large) there will be an
automatic across-the-board cut in spending. This forces Congress
to either budget responsibly or face indiscriminate cuts to
programs.
Commission to Reduce Spending: Another important
aspect of the SOS Act is that it will not only reduce spending,
but it will take serious steps to trim the size of the
government. Under this law, a bipartisan commission (called the
Commission on Congressional Budgetary Accountability and Review
of Federal Agencies) will be created. Its purpose will be to
identify “duplicative, wasteful, inefficient, outdated,
irrelevant, or failed programs” and then make recommendations to
either realign programs or eliminate them entirely. The President
will divide the budget into four parts, and the committee will
deal with each part in tandem. Each year the commission will
release a report dealing with one part, until, at the end of four
years, it has dealt with each part. The report will be sent to
Congress for an expedited review and a simple up/down vote,
without amendments. This fast-track consideration will make it
clear which members of Congress are serious enough to reduce the
deficit by cutting out wasteful big government programs.
ALTHOUGH THE SOS ACT IS, on balance, a big improvement, it is not
without its flaws. First, while it imposes limits on
discretionary spending through 2009, after that it lets Congress
and the President decide those limits. Talk about leaving the
foxes in charge of the henhouse! If the budget returns to a
surplus, you can bet that our noble and wise leaders will pass
legislation that has the phrase “the sky’s the” before the word
“limit.” A better idea would be limiting growth in discretionary
spending beyond 2009 to increases in population and inflation.
Next, the section of the SOS Act that reforms the budget process
comes up short. It switches the budget process from an annual one
to a biennial one in which the resulting budget funds the
government for two years instead of one. One problem with the
current process is that it requires the budget to be passed by
September 30 of each year, a date that is only five-to-six weeks
before an election during election years. This undoubtedly
increases the pressure on members of Congress to increase
spending in order to ensure reelection. While the new biennial
process would require most of the heavy lifting of the budget
process to be completed in a non-election year, the final
legislation authorizing the budget is due on the last day of the
Congressional session during an election year. In short, the SOS
Act does nothing to solve the current problem.
Finally, while the Act may eliminate certain government programs,
it does not let go the government employees associated with those
programs. Rather, those employees are simply reassigned to other
areas of the government. The Act should be improved by providing
those employees with assistance in finding private sector jobs
and ensuring that, if such employees stay in government, their
positions are not replaced when they leave.
While the SOS Act shows that the GOP is making moves in the right
direction, like Flake’s amendments it also shows that they are
not yet serious. The SOS Act has 28
co-sponsors, but the missing from the list of co-sponsors are
some key senators including Senator Thad Cochran, chairman of the
Appropriations Committee, and Senator Chuck Grassley, chairman of
the Finance Committee. The Act did manage to pass out of the
Budget Committee (which Senator Gregg chairs) in late July, but
media reports suggest that less than a majority of Senators
support it, meaning that not all GOP senators support it. On
Wednesday Majority Leader Bill Frist said that there won’t be
enough time remaining in the session to take up the Act.
If you want a reason why the Senate is less than eager to support
the SOS Act, look no further than Senator Gregg’s website, where you will find him
touting the “$300,000 for the reconstruction of the Robert Frost
Farm” and “$1 million for North County Broadband Initiative” that
he secured. If Senator Gregg is a not willing to lead by example,
why should we expect other senators to follow?
David Hogberg is an analyst at the National Center for Public Policy
Research. He also hosts his own website, Hog Haven. Rose Capozzi is an
intern at NCPPR.
