Avatar of admin


A So-So Republican Budget

May 27, 2015 in Economics

By Michael D. Tanner

Michael D. Tanner

There was none of the sturm und drang that has accompanied past budget battles, but earlier this month the Republican-controlled Congress passed the first fully Republican budget since 2005. A historic event, to be sure, but, given that it has been a decade since Republicans had this ability to shape federal tax and spending policy, it is disappointing that the end result was such mediocre gruel.

First the good news: The budget would spend $6 billion less over the next 10 years than the current baselines, and would, in theory, balance by 2024. The agreement at least ostensibly sticks to the budget caps agreed to under sequestration, although it circumvents them in a way by shifting more funds to “overseas contingency operations” (OCO), which are not subject to the caps.

It contains some positive steps, but also some sleight-of-hand and increased spending.”

Moreover, as valuable as the sequester caps have proven to be in restraining spending, they remain a blunt instrument that allows Congress to avoid truly tough decisions. As one bad sign, the budget agreement takes note of $140 billion in needed health-care savings to offset the cost of the recent “doc fix” agreement, but doesn’t actually propose any specific cuts. On the other hand, the budget resolution establishes a deficit-neutral reserve fund that could allow for some reallocations that would give policymakers flexibility to replace sequestration with other cuts as long as those actions don’t increase the ten-year deficit. We will have to see how this plays out in a practical sense, but if the deficit-neutrality is strict enough, it could potentially be an improvement.

The budget resolution also engages in some serious sleight-of-hand when it comes to defense spending. The resolution keeps the sequester caps on defense in place, but only by shifting some $38 billion in spending for next year to the OCO account, essentially using this war-fighting appropriation as a slush fund. The final budget agreement also removed a Senate provision requiring 60 votes to add future funds to the OCO without offsetting spending cuts.

We should also remember that, while a balanced budget is important, it is not as important as reducing overall levels of federal spending. And the GOP budget envisions spending $1.14 trillion more (in nominal dollars) by 2025. That is not a good thing just because tax revenues will rise fast enough to offset the increases.

The budget’s biggest failing …read more

Source: OP-EDS

Leave a reply

You must be logged in to post a comment.