Yet again, the federal government has abused a crisis to expand federal power and steal from younger generations. Bailouts have rained down upon lockdown states, unions, and green energy producers, echoing the handouts to Wall Street and automakers a decade ago. Overspending and overreach have even revived long-dormant inflation.
The rising backlash sets up next year as a real chance to enact well-structured budget targets. Such clear, reasonable guideposts can help Congress stay on track and provide better value for the public.
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IF DEMOCRATS WANT TO FIND THE CAUSE OF INFLATION, THEY SHOULD LOOK IN THE MIRROR
The Budget Control Act of 2011, apparently written over a weekend, capped the one-third of spending in annual appropriations with token savings on autopilot spending. Yet Congress kept changing the caps, so most appropriations savings never happened, nor did other promised restraint.
The 2010 reboot of the Statutory Pay-as-You-Go Act of 1990 hasn’t worked either. It’s supposed to cut certain spending programs automatically if Congress increases deficits outside of appropriations, but Congress simply waives the cuts and moves on.
Recent decades have been littered with poorly designed, enacted, and proposed budget rules. Annual balance, the idea that this year’s spending should match this year’s revenue, is among the worst recurring ideas. It would turn economic fluctuations into major policy instability, creating uncertainty for the public and management headaches for Congress. Ask any state legislator.
To do better, Congress needs budget targets that are comprehensive, neutral, practical, and adaptable to changing circumstances.
In a recent paper, I explain two viable prospects.
With structural primary balance, like the Responsible Budget Targets Act, non-interest spending (primary spending) could grow with trend economic growth. Surpluses during good years would offset deficits during recessions, and that provides policy stability and predictability across booms and recessions. Congress could focus more on long-term needs with advance notice of adjustments. The budget (other than interest) would balance in the medium term, not every year, which would reduce the debt burden and restore fiscal health while charting a smooth policy path through business cycles.
Medium-term debt-to-GDP targets have promise, too. Congress could, for example, reduce the ratio of debt held by the public to gross domestic product (debt-to-GDP ratio) by 1 percentage point by the end of each five-year period. That is, the fiscal 2023 budget cycle would include program changes to make the debt-to-GDP ratio at the end of fiscal 2027 98.98% of GDP instead of 99.98%. Compounding savings would get debt under control, and the medium-term focus gives Congress room to account for the condition of the economy.
Both are neutral, leaving the details of policy changes to the annual process. They are comprehensive: Structural primary balance excludes only interest on the debt, and debt-to-GDP targets include everything. They are practical and consistent with the congressional calendar.
Both should have broad bipartisan appeal. Sen. Tim Kaine (D-VA), a former governor, has said, “We had targets, and Democrats and Republicans, we accepted the targets, and we fought like heck about how to reach the targets. We had targets that we stuck to. That was what surprised me coming to the United States Senate, that we had no targets.”
In addition, these features are similar to a balanced budget amendment I wrote that once had 45 Republican and 14 Democratic co-sponsors. Of course, a well-crafted BBA would complement statutory budget goals, as would enforcement tools.
A neutral rule doesn’t suggest neutrality between spending restraint and revenue increases. As the Heritage Foundation shows, the federal government is overgrown with low-value spending. Budget targets and a real budget would help Congress root out the waste.
Smart budget goals can help control debt and promote stability over the economic cycle. Having fully developed concepts and legislation well in advance of a legislative opportunity is key to being ready.
This means that Congress is in an excellent position to upgrade federal budgeting next year with well-designed budget goals. Instead of budget blowouts, bailouts, and inflation, reasonable budget targets can not only help refocus the federal government on the most valuable activities but also restore fiscal and monetary stability for generations to come.
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Kurt Couchman is a senior fellow in fiscal policy at Americans for Prosperity.
