One of the most crucial issues confronting the nation is the debt and spending crisis. Standard & Poor’s downgraded the nation’s credit rating in August, while Moody’s put the U.S. on watch for a possible future downgrade. America is hemorrhaging debt, and bold steps are needed now to get spending under control.
Toward that end, the House passed one of the boldest budget plans in decades this past spring. It was a clear statement outlining the steps we must take to stem the toxic red ink spilling across the federal budget today and well into the future. It examined nearly every area of the budget, including—and especially—entitlements. It wasn’t perfect, but it steered the nation away from the perilous course it is on today, onto a different and better path. Necessarily, the plan started with small but measurable spending reductions in 2012. In the normal course of events, this plan would guide both the appropriations process and the authorizing committee’s work on substantive policy and programmatic changes. Of course, this year has been anything but normal.
It became clear during the debt limit negotiations that the President and the Senate were unwilling to make the kinds of changes necessary to start fiscal rehab—the kinds of changes laid forth in the House’s budget plan. These first steps are important because they would lay the foundation for a long, hard overhaul of the federal government. But the debt limit debate birthed a discouraging new plan that still resulted in the U.S. credit rating being downgraded. The Budget Control Act made comparatively small changes in spending in return for major increases in the debt limit. And those spending cuts were heavily skewed toward the latter years of the 10-year plan, requiring only minor actions in 2012.
Now we are fast approaching the end of the federal fiscal year with no budget in sight. Not one appropriations bill has even been sent to the President. So, once again, the vast, behemoth federal government will not have a true budget plan for next year. Instead, it will have a simple Band-Aid—a continuing resolution (CR) that establishes funding to keep it operating until Congress can pass a budget bill for the full year. In the past, some have argued that a CR is good policy. Because Congress does not have the time to pass a series of new spending bills, a CR typically funds government at last year’s (lower) levels. But in today’s environment, that will not get the job done; the 2012 CR should actually cut spending at least along the lines laid out in the House Budget Resolution.
That would have resulted in cuts of $31 billion. But instead, the House retreated to the miniscule targets set by the Budget Control Act (BCA), funding the government through November 18 at the level in the BCA. To be sure, the House-proposed CR did deliver cuts, and this is an accomplishment in and of itself. According to Heritage budget expert Patrick Louis Knudsen,
…the CR appears basically free of spending loopholes and other tricks; and it does reflect a real year-to-year spending cut (not just “baseline” savings) of $7 billion—a rare, if not unique, occurrence in recent budget experience—even if only because the BCA requires it.
Though it is basically free of non-spending items, there are several additional policy issues tacked onto the CR. The treatment of one—disaster relief funding—is very positive. Of this funding , $1 billion is offset by cutting other spending (the Advanced Technology Vehicles Manufacturing Loan Program in Department of Energy) and the remaining $1.5 billion appears—rightly—to be included in the bill’s total spending cap (an important departure from past practices of declaring such funds “emergency” in order to blast through the spending caps). This treatment of disaster funding recognizes that the Obama Administration already set a record for disaster declarations before the first hurricane of the year even made landfall. Senate Majority Leader Harry Reid (D–NV), however, wants closer to $7 billion (without offsets) and has even threatened a government shutdown over this reasonable approach to disaster relief.
A second policy issue tacked onto the CR is quite discouraging. The CR postpones until November 18 the payment the Postal Service is required to make before October 1 into the Postal Service Retiree Health Benefits Fund. Both the Postal Service and this fund are off-budget and thus are not germane to an appropriations bill. The Postal Service’s finances are abysmal, and the entire system needs to be reformed. This issue should not be tacked onto a “must-pass” piece of legislation, but rather dealt with directly as a separate issue.
The House CR does set a welcome new departure from Congress’s spending cuts gimmicks of the past—which simply reduced the growth in spending—and it delivers a $7 billion real cut from the prior year. It is also freer of the egregious practices of hiding new programs, new policies, and other shenanigans typical of “must-pass” legislation. But in the end, the target is too low and delivers too little savings.
If this legislation passes, Congress must then decide what to do when it expires, whether they pass appropriations bills, an omnibus funding bill, or another CR. Each option will require significant additional spending cuts commensurate—at a minimum—with the House budget.
This would be considered only a first step, though. Much, much more is needed if the nation is going to recapture its AAA credit rating.