In Search of Fiscal Leadership

Weekly WastebasketIn Search of Fiscal Leadership

Budget & Tax  | Quick Takes
Jan 30, 2015  | 5 min read

Monday the President’s proposed budget for fiscal year 2016 will be released. As usual, some of the details have leaked, including that the President is planning to ask for $74 billion more than the existing spending caps allow. Sticking to spending levels set in the Budget Control Act of 2011 (BCA) isn’t the only path to fiscal discipline, but it is one way – and the agreed upon way. How the President proposes to change this agreement, and the Republican response, will go a long way toward showing whether taxpayers can expect anyone in Washington to exert fiscal discipline in light of our now $18 trillion debt.

Normally, if different groups reach an agreement, everyone is supposed to stick to the agreement unless everyone comes to a different one. This is apparently not true with the Budget Control Act. While on a bipartisan basis the President and Congress agreed —by the Republican House and Democratic Senate passing a bill and the President signing it into law – on a process to find $1.2 trillion in deficit reduction over the next ten years through either spending cuts, revenue raisers, or both. That process (remember the Super Committee?) failed. So, as part of the backup plan within the BCA, Congress’ and the President’s failure to make tough choices meant they had to save the $1.2 trillion the hard way – budget caps in future years. After a few years of steep cuts (which policymakers actually reduced by extending some of the cuts beyond the initial ten years and making specific program cuts instead) the capped amount for FY2016 is set to rise a modest (by Washington standards) $2.1 billion above last year’s spending.  The only way the across-the-board cut (sequester) occurs is if Congress and the President ignore the BCA and choose to spend beyond the agreed upon cap.  Remember, when this plan was agreed to, sequestration was considered so awful, so unthinkable, that negotiators would do anything to avoid it.

Evidently a $2 billion increase was $72 billion too little for the White House. But the White House isn’t alone as defense hawks in Congress are calling for dramatic increases in defense spending. And some defense/budget hawks want to cut non-defense discretionary spending even further than what was agreed to in the BCA and shift that money to defense.  It’s worth noting that breaking the caps isn’t the only way that policymakers have gotten around the BCA in the context of defense spending – the Overseas Contingency Operations account has already been used as a slush fund full of non-overseas, non-contingency defense spending.  No matter. The law of the land is the BCA and if Congress and/or the President want to change it, they have to affirmatively do so. That includes altering the balance between defense and non-defense discretionary levels of spending. Otherwise any extra spending gets lopped off by the sequester boogeyman.

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What the country really needs is leadership on fiscal issues. Again, spending levels agreed to in the BCA are not the only path to fiscal discipline, but they are one path forward – and they are the law. The President will certainly have some revenue offsets for his proposed increase in spending. But if they’re the same offsets that were rejected by the last couple Congresses – that had a Senate controlled by Democrats – it is unlikely the President actually believes these proposals will fly in a Congress fully controlled by Republicans. And will the “new blood” on Capitol Hill provide fiscal leadership? We will be waiting to see if Congress is serious about pursuing durable, bipartisan approaches to tackle entitlements and comprehensive tax reform.

People think budgets are about money. They’re about more than that. They’re about priorities. Where are policymakers’ priorities? Do they put their money where their mouth is? Come Monday we’ll see where President Obama puts his priorities and if the Republican majorities agree.

We will be digging through the budget all day Monday and for several days after that. We hope you will come to the TCS web site and check out our work. We’ll keep updating, so you keep checking.