Why would a Republican House, a Republican Senate and a Republican president repeal the best weapon against runaway federal spending in 30 years?
That may happen later this year if Congress doesn’t extend the Budget Control Act of 2011 (BCA), which includes spending caps and sequester spending cuts if those caps are violated. The BCA has been one of the most successful anti-spending policies of modern times and it helped bring the spending blitz during Barack Obama’s first two years in office to a screeching halt.
The evidence of the BCA’s success is nearly incontrovertible. In 2009, President Obama and the Democrats rang up an elephantine $1.3 trillion deficit, which amounted to 9.8 percent of gross domestic product (GDP). By 2015 after the BCA was enacted, the deficit fell to 3 percent of GDP. This two-thirds decline in borrowing was gigantic progress in four years. It was the most sizable cut in deficit spending since the demobilization of the military after we won World War II.
Federal spending fell for three years in a row, the first time that happened since the 1950s and despite the most liberal, pro-spending president in Mr. Obama since Lyndon Johnson. Even the much-maligned sequester cuts of 2013 had a positive effect in cutting government domestic and defense spending by 3 or 4 percent across the board. Most Americans hardly noticed these modest cuts.
But both parties have come to hate budget caps and the threat of sequesters. There has always been a bipartisan urge on Capitol Hill to play Santa Claus — no more so than now. Republicans complain of the Pentagon cuts and Democrats object to the domestic agency reductions. In 2015, congressional Republicans foolishly agreed to raise the spending caps by about $1 trillion over 10 years. Those caps have been raised or suspended with impunity several times since then. But even elevated caps are better than the previous regime of an unlimited credit card.
Now Republicans want to scrap caps completely and return to the wild west of spending. Democrats are all too happy to go along. If this happens, you can toss all remaining dreams of spending discipline out the window. The debt will accelerate if there are no spending guard rails. To borrow a phrase from P.J. O’Rourke: This would be about as wise as handing a teenager the car keys and a bottle of booze.
So the BCA caps and sequester need to be retained. They also need to be fixed. Three sensible changes would improve and modernize the law:
• Remove the defense-nondefense “firewall.” If Congress removes the firewall between defense and nondefense spending and instead imposes one overall cap, lawmakers will have more flexibility in staying under the cap each year.
• Repeal sequestration exemptions. If a sequester kicks in, cuts should apply equally to all programs, including Medicaid, Medicare and food stamps. Social Security benefits should be exempt. Allowing all non-Social Security programs to come under the automatic enforcement mechanisms would incentivize Congress to make rational cuts and spread the pain more equally if sequester cuts are necessary.
• Prohibit gimmicks, such as “emergency” spending exemptions to breach the caps. This year Congress has approved roughly $50 billion of spending for hurricane relief — with no offsetting cuts in other programs. The Overseas Contingency Operation also has been used as a slush fund to spend an extra half-trillion on the military. This should stop immediately.
Too many in Congress want to be unleashed from the BCA spending limits, while they hypocritically bemoan our $20 trillion national debt. That debt is expected to spiral to $30 trillion by 2030 and our debt as a share of GDP heads to 150 percent. That is Greece and Detroit territory. Many BCA critics say the debt won’t be restrained until Congress tackles the big welfare programs like food stamps and Medicaid. That may be true, but the BCA caps are what will create the political pressure for these reforms.
If Congress can restrain spending to 2.5 percent annual growth (which is less than the rate of inflation) and keep the economy on a 3 percent growth path, up from 2 percent under Mr. Obama, the budget will be balanced with the Trump tax cuts.
If they scrap the caps, the only party to blame for the coming spending and debt blow out will be the late, great fiscally conservative Republicans.
• Stephen Moore is a senior fellow at the Heritage Foundation and an economic consultant with Freedom Works. Andrew Wofford is a Heritage research associate.