The Public Policy

Let’s Not Overdo It

The Senate shows some at least preliminary signs of getting somewhat serious, perhaps, about maybe reining in spending.

By and 8.11.06

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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.

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David Hogberg is a senior fellow at the National Center for Public Policy Research.  Follow David Hogberg on Twitter.