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New Ideas for Regaining Control over Mandatory Spending

Monday October 24th, 2016   •   Posted by Craig Eyermann at 6:35am PDT   •  

44348788 - man fingers setting cost button on minimum position. concept image for illustration of cost management. Now that four years of falling budget deficits have officially come to an end, how can the U.S. Congress regain control over federal spending?

Previously, we looked at one basic common sense proposal that could slow the spending for the U.S.’ fastest growing mandatory expenditure, Medicaid, but what tools does the U.S. Congress have to deal with all of the federal government’s other mandatory expenditures that will dominate the nation’s budget deficits for the foreseeable future?

That’s an interesting question posed and answered by Rudolph Penner and Eugene Steurle in a recent paper sponsored jointly by the Mercatus Center and the Urban Institute. Penner and Steurle recognize that mandatory spending will be responsible for virtually all of the projected increases in U.S. government spending over the next 10 years.

In fact, the projected growth of that mandatory spending—which goes to expenditures like Net Interest on the national debt, Social Security, Medicare, Medicaid and also the Affordable Care Act—will absorb so much of the money that the U.S. government will either collect in taxes or will borrow, that the government will force Congress to reduce the discretionary spending that lawmakers vote on every year.

That means instead of being addressing problems like badly needed highway and bridge repairs, the U.S. government would instead be compelled to continue putting money into Obamacare, whether that’s a good idea or not, because of how the nation’s budget and spending laws are currently set up.

To fix that problem, Penner and Steurle propose the following fixes to the nation’s budget laws, which would return some degree of control over federal spending back to Congress:

  1. Use carefully designed triggers to slow the growth of rapidly growing entitlements and tax expenditures.
  2. Remove rules that prevent reconciliation procedures from being used for Social Security reform and that limit reconciliation procedures to policy changes that reduce deficits, and change House rules to eliminate the use of reconciliation for deficit-increasing tax cuts.
  3. Subject more government programs to periodic review and reauthorization.
  4. Lengthen the federal budget window from 10 years to between 20 and 30 years.
  5. Adopt more informative up-front displays of real future changes in revenues and spending, whether implied by current law or policy changes.
  6. Require the President to present an annual Financial State of the Union report.
  7. Specify long-run goals for spending on entitlements and the size of tax expenditures, wiht most attention paid to the entitlements and tax expenditures that are growing faster than the economy.

In many ways, the U.S. government’s inability to deal with its worsening fiscal problems is the direct result of handcuffs it has put on the members of the U.S. Congress to prevent them from making hard choices. Penner and Steurle’s suggested reforms would be an important step toward ensuring that Congress has the tools needed to bring federal spending under control.

But only if the U.S. Congress is willing to use them.

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October 2016