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January 16, 2013

Freezing Out the Deficit

 

Almost everyone in Washington acknowledges (at least rhetorically) the need to get spending under control in order to balance the budget. For conservatives, spending cuts have replaced tax cuts as an economic priority in the current fiscal and political environment.

And the American people agree. Exit polling from the last election suggest that 51% of those who voted agreed that government was too big and spends too much money, while only 43% disagreed.

But it’s proven to be almost impossible to build a political consensus for spending controls. This is due to three major factors.

First, the numbers have become so large as to be meaningless for most people. Second, politicians pit special interests against each other in order to maintain the status quo stalemate. In other words, we can’t ask seniors to swallow a freeze on Social Security and Medicare payments when they know that spending on college loans and defense are going up by 5%. They want theirs, too.

And third, the federal government’s practice of baseline budgeting has resulted in a deceptive vocabulary. Because of baseline budgeting, any departure from the projected growth baseline of government spending is considered a “cut,” even if spending would continue to grow.

What we need, of course, are real spending cuts—cuts that are reductions from the previous year’s spending, not simply slight reductions in the rate of spending increase. And the outright elimination of programs that are redundant, that are no longer necessary, or that can be left to the states. Ultimately, we need reform of the 1974 Budget Act that enshrined baseline budgeting into federal practice. But little or none of that can happen in the current political environment.

In the meantime, the budget can be balanced without any further tax increases simply by modest spending restraint. A real, across-the-board spending freeze at current levels, for instance, could balance the budget sometime in 2016 or 2017, without any further harmful tax increases.

Impossible to get past the President, you say? Well, consider that in last year’s State of the Union Address, the President called for a five year spending freeze on at least a portion of federal spending.

Our best hope for fiscal sanity in the current environment may be simply a real, across-the-board spending freeze at current levels. It’s easy to communicate to the public, it seems reasonable, and so long as all federal spending is included, it’s hard to demagogue.


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