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Budget War

by James C. Capretta

Strategy and tactics for the new House majority

The 2010 midterm election was a decisive victory for Republicans. From where they now sit — with a strong majority in the House and a much-improved position in the Senate — they can finally provide an effective counter to the Obama administration. At a minimum, their increased numbers in Congress should put a stop to the hyper-activist period ushered in by President Obama’s inauguration. For that alone, many voters will be grateful that the Republicans are back in positions of power and relieved that the recent period of unchecked liberal dominance at both ends of Pennsylvania Avenue is over.

But Republicans will need to do more than just block the never-ending Democratic quest for more government. They will need to present their own agenda, especially in the House, and especially with respect to spending — the issue that so animated their supporters throughout 2010.

Republicans will need to weigh the competing risks they now face. Voters returned them to power, but they cannot have forgotten that Republicans controlled Congress for a dozen years not so long ago and participated enthusiastically in several substantial spending increases along the way. The first priority for the new House majority must be to reestablish Republicans’ spending-restraint credentials. Republicans need to show the electorate that they have learned their lesson and are willing to implement real cuts in spending.

At the same time, they must go into the budget battles aware that some tactics are more dangerous politically than others. That shouldn’t be too hard, since many of them were in Congress the last time their party went from the minority to the majority, in 1995. At that time, Newt Gingrich and House Budget Committee chairman John Kasich pushed through an aggressive balanced-budget plan with deep cuts in domestic spending, including in Medicare and Medicaid.

The problem was not with the substance of their proposal. The Clinton administration launched a predictable barrage of attacks on the budget plan, arguing that devastation would follow if Gingrich got his way, but Republicans were largely able to weather that political storm. Democrats got the upper hand only after Republicans allowed the perception to harden that they were eager to shut down the government just to get their way. As the shutdown lengthened, public pressure built for the government to reopen, and the Republican ranks began to splinter. Eventually, Congress was forced to give in to many of Clinton’s spending demands.

Clinton carried the resulting momentum to reelection later in 1996 — and the Republican majority lost its stomach for budget fights. Instead, it overcompensated for its mistakes by avoiding any confrontation whatsoever with the president. The result was a steady stream of spending increases, all approved by a Republican Congress.

To win this time around, Republicans need to convince voters, especially independents, that their plan is one of sensible, pragmatic stewardship of the taxpayers’ money, and that the president and his allies in Congress instead are intent on continuing their reckless spending binge. They will have the opportunity to begin drawing that distinction with the 2011 budget. The lame-duck 111th Congress tried to pass a monstrous, bloated, earmark-laden omnibus appropriations measure, just before adjourning, to fund the government through September. Thankfully, some wavering Senate Republicans came to their senses and blocked the effort at the last minute. The result is that the government is now operating under a continuing resolution (CR), which means agencies are operating at their 2010 levels in the early months of fiscal year 2011. The current CR expires in early March.

Instead of writing their own version of a 2,000-page omnibus spending measure — a project that would surely take months, not weeks — House Republicans, working with their counterparts in the Senate, should focus on extending the CR (perhaps with a reduction below 2010 levels) all the way through the fiscal year. That would allow them to demonstrate their commitment to keeping the government open, even as they impose some spending discipline. Obama would be hard pressed to find a compelling rationale to block such an approach. But regardless of what the president does (by either signing or vetoing a full-year CR), House Republicans should make it clear they have no intention of shutting down the government, by passing as many CRs as necessary to keep it running.

True, funding government at current levels is not significant spending restraint, and would not satisfy those in the Tea Party movement who expect much more from the new House and Congress. Republicans will therefore need to assemble right away an ambitious and far-reaching rescissions package that would cut some programs and agencies far below their 2010 funding levels. Here, Republicans should be as aggressive as their numbers allow.

They should start with the low-hanging fruit: reducing the costs of the federal payroll (with hiring and pay freezes), eliminating earmark funding, canceling any remaining funds from the stimulus bill, and defunding public broadcasting. But the Republicans shouldn’t stop there. They need to terminate low-value programs and agencies in other parts of the government too, such as job training and education, business subsidies through the Small Business Administration, and certain welfare programs with long track records of failure or mediocrity. These cuts could be coupled with new, enforceable caps on appropriated spending that would lock in the spending cuts over a number of years.

The savings would not be trivial. Cuts of tens of billions of dollars in 2011 are entirely possible, especially given the large run-up in spending since 2008. Deep cuts in appropriations that were implemented this year could save taxpayers hundreds of billions of dollars over the coming decade.

No doubt such a package would meet stiff resistance from most Democrats, and certainly from President Obama. But it would also put many Democrats from moderate districts in an uncomfortable position. Voters delivered a stinging rebuke to big-spending Democrats in November: Do those who escaped in 2010 really want to carry the big-spending label into the 2012 election? Republicans could very well find a sizable number of Democrats willing and even eager to work with them on a package of cuts. If that is the case, Republicans should welcome them — indeed they should do whatever can be done, short of abandoning principle, to bring as many as possible on board their effort. The best outcome for Republicans would be a strong bipartisan coalition in support of a significant spending-cut package, with opposition coming only from the most entrenched liberals in Washington, one of whom is Barack Obama.

Cutting back on domestic appropriations won’t balance the budget. That will require more far-reaching health-care and entitlement reforms. Later this spring, Rep. Paul Ryan will present a budget plan to the House Budget Committee. Inevitably, that plan will be viewed as the Republican alternative to the Obama budget, and Ryan is likely to push his colleagues to be bold in what they propose. That means repealing Obamacare and replacing it with a reformed Medicare and other measures that promote cost-conscious consumers and a functioning marketplace. It means embracing Social Security reforms that promote personal savings, longer working lives, and less reliance by high-wage workers on government pensions. Endorsing such reforms will carry substantial political risks, but it will also demonstrate that Republicans have a credible plan to bring long-term spending in line with available revenue, which is absolutely necessary to head off fiscal calamity. And there’s never been a better time to offer such ideas, since the president’s own debt commission has recently recommended Social Security and health-care-entitlement cuts.

First things first: Decisions need to be made about 2011 funding. That presents an opportunity for Republicans. They need to get off on the right foot, and they can do that by demonstrating their commitment to cut appropriated spending right away, even as they also recognize that the battle they are in is a long one — one they will ultimately win only if the public is on their side.

– Mr. Capretta is a fellow at the Ethics and Public Policy Center. He was an associate director of the Office of Management and Budget from 2001 to 2004.

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