New Budget Deal Reveals Need for Federal Balanced Budget Amendment

The recent budget deal that was agreed to by President Trump and Congressional leaders has fiscal conservatives livid. This deal raises discretionary spending caps by over $300 billion over two years and effectively repeals the budget caps that were established as part of the Budget Control Act in 2011. The frustration of budget hawks is certainly understandable. While the rest of the budget has grown in recent years, non-defense discretionary spending has actually fallen in constant dollars since 2011. However, seasoned observers of fiscal policy knew it was unlikely to last. After all, there is plenty of evidence that legislatures, including Congress, have been unable to place effective long term limits on the growth of spending.Indeed, after triple digit budget deficits became commonplace in the 1980s, Congress adopted the Gramm Rudman Hollings Act in 1985. This piece of legislation established declining deficit targets every year and triggered automatic spending cuts if those targets were not met. Half the cuts were to come from defense spending, and half the cuts were to come from domestic programs. While Gramm Rudman Hollings did result in some short term spending cuts, its main outcome was creative accounting. Congress often pushed spending into future fiscal years to create phantom spending cuts to stay within the deficit targets. When the economy slowed down, the deficit targets became too difficult to reach, and the legislation was scrapped in 1990.Additionally in t...

Source: Cato-at-liberty - July 31, 2019 Category: American Health Authors: Michael J. New Source Type: blogs