The Corner

There Are At Least Two Big Problems with the Republican Budgets

The Republican chairmen of the House and Senate Budget Committees put out their budgets recently, and have succeeded in passing the respective proposals. The House proposal is here and the Senate proposal is here; both plans are roughly the same. It’s nice to see the budget process follow its “regular order,” although there’s still a long way to go in terms of appropriations committees coming up with their own legislation. But it’s a start, after six years of ignoring regular order.

These two proposals are vastly superior to the president’s budget. Obama’s budget would impose new taxes and spend some $50 trillion over the next ten years, hitting $6.2 trillion in spending in 2025 by hiking spending about 5 percent a year. It ignores the spending caps set in 2011, breaking the commitment that the president and Congress made to the American people to control spending in exchange for more borrowing authority. The president’s budget vision is clear: He wants government to grow faster than the economy.

The Republican budgets spend much less over time: On the House side, spending goes from $3.7 trillion in 2016 to $5 trillion in 2025, spending $43 trillion over ten years. At least on paper, the Republican budgets grow spending more slowly than the economy and they maintain the BCA caps. In addition, they are an improvement over the current law — on paper. 

Now, unfortunately, that’s where my praises stop. The biggest problem with the budgets is not their spending levels but the gimmicks involved: The budgets, for instance, eliminate Obamacare’s spending but keep Obamacare levels of revenue. They also assume that Congress will not extend “temporary” tax breaks (“tax extenders”) even though, when the time comes, Congress will almost surely rush to extend them. So, basically, these budgets balance within ten years on paper, but that’s about it.

As Dan Mitchell notes, an honest accounting to get the budget to balance over that time would require spending to grow just 2.7 percent on average per year, versus 3.3 percent in the Republican budgets. Is that really too much to ask?

Second, Republicans maintain the budget caps in theory but go around them by spending a vast amount of money through the war budget, known as the Overseas Contingency Operations (OCO) budget. OCO doesn’t count against the caps, but it’s spending just like any other kind. The increase in defense spending wasn’t offset by spending cuts else where. Heres a good summary:

But Harrison suggested that even with another round of the across-the-board cuts, things will not be that bad for the Defense Department.

“We’re not going to see the previous problems. There aren’t going to be furloughs and training cancellations,” Harrison said. “The money in OCO is flexible. Yes, there are some restrictions. But if you have $35 billion more there, you can find ways to appropriate money for other things. It’s a shell game.”

That’s exactly what the House GOP defense hawks, who secured a budget resolution that defied deficit-minded conservatives by not requiring the extra war funding to be offset with other federal cuts, intend to do.

“We’re going to mark it. … We’re going to change the way it’s used,” House Armed Services Committee member Rep. Duncan Hunter, R-Calif., told reporters last week. “It’s OCO but it’s not going to be OCO.”

Not all defense spending is a good thing — far from it. There’s a lot of wasteful and outdated military spending in the Pentagon budget. I understand it’s not easy to close bases or cut off funding for failed weapons projects. But it’s not fair to future generations to continue to spend money on unnecessary military priorities – and other areas of federal spending, too — just because it’s politically difficult to stop it.

The OCO gimmick is yet another abuse of the emergency-spending procedures Congress loves, which I have been complaining about for years. Representative Mick Mulvaney notes in an excellent piece in the Wall Street Journal today that even Senator John McCain has complained about it:

The OCO should trouble Republicans. The so-called war budget, set up when the U.S. invaded Afghanistan in 2001, has been decried for years as a slush fund, and rightly so. No less a defense hawk than Sen. John McCain has called it a gimmick. The OCO is perhaps the worst way to fund the military. It lacks oversight and accountability within a Pentagon already famous for its inability to know where the money is going.

The whole thing is here

For more on the abuse of emergency-spending measures, my paper on the topic is here.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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