The most surprising aspect of the debt-ceiling debate is less its endless focus on whether or not the U.S. will default on its obligations or bond markets will be rattled unless we raise the limit than the lack of acknowledgement of why we are where we are today. Kevin Williamson explains that problem well:
In truth, the federal government expects to collect $2.2 trillion in revenue this year. The problem is that it wants to spend $3.8 trillion.
However, I would argue that while spending cuts are great, real institutional reforms to constrain government spending and return to a sustainable fiscal position are even more important. In fact, real institutional reforms that put the U.S. on a more sustainable path should be undertaken before default, or postponing payments, or raising the debt ceiling becomes a necessity. Institutional reforms, as opposed to one-time cuts, change the trajectory of fiscal policy. That is what is at stake right now.
My colleague Jason Fichtner and I have suggested implementing some or all of the following reforms in order to constraint spending:
1. A constitutional amendment to limit spending: Lawmakers’ inability to constraint their own spending makes spending limits enforced through the U.S. Constitution preferable.
2. Implement meaningful budget reforms to limit lawmakers tendency to spend. In the absence of constitutional rules, budget rules should have broad scope withfew and high-hurdle escape clauses, and minimal accounting discretion.
3. Implement a strict CUT-AS-YOU-GO system: For CUTGO to be effective, it must apply to the entire federal budget, not just to a small portion of it: there could be no new spending without offsetting cuts.
4. End all budget gimmicks: there is evidence that creative bookkeeping is at the center of many countries’ financial troubles. Abuse of the emergency spending rule, of rosy scenarios and all other gimmicks should end to restore a transparent budget process.
6. Mandated annual real spending caps: Research shows that if Congress cut 1 cent out of every dollar it currently spends and did it for the next 5 years, the budget would be balanced before the end of the decade.
This list is far from exhaustive and I would welcome your ideas for additional items to add to it.