GOP Debt Deal Already Needs Revisiting

The deal brokered between congressional GOP leaders and the Biden administration to avoid a debt ceiling debacle included a few headline issues that were intended to make that deal look good. Among them: spending caps that would – temporarily – bend the arc of federal spending down, before ticking up again.

The whole idea of spending caps is a popular one in some quarters of official Washington. It offers the appearance of fiscal restraint without actually delivering it. Such is the case with the current “caps,” which lawmakers have already said they intend to breach.

But absent the legal corset of a balanced budget amendment, is there a budget cap that can possibly, and credibly, restrain politicians from spending as they wish (and their career prospects demand)? The Manhattan Institute’s Brian Riedl says it’s possible such caps could work. If they are realistic – neither too draconian nor so high they actually encourage higher spending. Instead, caps should generally follow population growth plus inflation. That keeps spending in line with economic growth:

Sustainable spending caps contain other ingredients. Their levels should be revisited every few years to maintain their credibility with current lawmakers. In order to bend but not break, cap levels should be modestly adjustable for dramatic inflation, recessions, and scoring re-estimates. On the flip side, caps should cover all discretionary spending (including an emergency fund), avoid gimmicks, and require a legislative supermajority to bypass for larger emergencies. Finally, sub-caps for defense and non-defense spending have proven effective in avoiding partisan raids and maintaining credibility with Republicans and Democrats.

Any proposal that even modestly limits the rate of spending growth guarantees cries of doom from one interested party or the other. That, and voters implicitly encouraging such behavior through the ballot box, is how we’ve ended up in our current fiscal mess.

What Riedl suggests is the essence of good policy: It’s realistic, modest, flexible and transparent. Which means it’s going to be hard to find the votes to get anything like it approved. Or at least that’s true in the current political environment, where populists left and right command the federal purse.

That’s bad news for those who still believe in limited government and fiscal responsibility. But we can also hope it’s a temporary situation and both voters and the politicians they install in office come to their fiscal senses.

The opinions expressed in this article are those of the author and do not necessarily reflect the positions of American Liberty News.

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