August 22, 2014

Evaluating Plans to Enforce Budget Discipline

  • The national debt has grown significantly in recent years due to rising annual deficits. A deficit occurs in any year the government spends more...

Tomorrow the Senate Finance Committee is scheduled to hold a hearing on budget enforcement mechanisms, a topic that has become popular as members of both parties have recently offered proposals to reduce the deficit by changing the budget process.

The proposals have key differences, though each attempts to reduce the deficit by setting specific spending, revenue or deficit targets. The targets are enforced using some variation of a trigger or sequestration procedure requiring automatic spending cuts or revenue increases if the targets are missed.

Process proposals often appeal to politicians because they usually leave out the specifics of the politically difficult decisions necessary to meet the targets. As a means of actually reducing the deficit, such proposals have had a mixed track record because they have frequently been poorly designed and weakened with exemptions.

For a process proposal to have a meaningful effect on the deficit, it should limit exemptions, consider the entire federal budget to be on the table for deficit reduction, include realistic targets, and be accompanied by a bipartisan commitment both to enforce the targets and support the specific spending and revenue policies necessary to meet them.

Budget process reform is a useful starting point, but it is no substitute for these difficult policy choices.