Economy & Budget

Congress can keep its bipartisan spending promise

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The federal government will again run out of money on April 28—meaning Congress must reach a budget agreement in the coming days to avoid a government shutdown. As the national debt approaches $20 trillion, lawmakers should adhere to the responsible and bipartisan spending caps enacted in 2011. 

The need for such restraint has never been greater. National public debt now totals over three quarters the size of America’s economy, according to a recent report by the Congressional Budget Office (CBO). CBO projects debt to nearly double relative to gross domestic product over three decades, growing to 150 percent of our entire economy—five percentage points higher than estimated just two months ago.

{mosads}Simply put: America’s current fiscal path is unsustainable.


That is why it is critical that Congress stick to its promise to limit spending through budget caps. Similar policies have helped other countries get their debt under control, with significant economic benefits to boot.

Consider just a few examples. When our northern neighbors faced mounting national debt in the early 90s, their economy stagnated. Canada’s unemployment rate jumped by over 50 percent in the span of three years and real wages took nearly a decade to start growing again. To dodge greater disaster, Canada established legal limits on government spending and rebounded to now hold one of the lowest debt ratios among developed economies.

A similar story played out in Switzerland, whose debt ratio peaked in the 90s at about 70 percent—just slightly lower than America’s today. The Swiss enacted a constitutional limit on the pace of government spending and cut the debt ratio by half in about ten years.

More recently, Iceland faced near economic collapse when its debt peaked at 86 percent of the nation’s economy. Since then, Iceland has employed spending caps that have gotten its debt-to-GDP ratio back under 50 percent, and has been rewarded with credit ratings upgrades that will save even more money via lower interest rates. This policy has been so successful that voters just elected a new government on the promise that debt will be reduced at an even faster rate.

The United States started on a similar path in 2011 when Republicans and Democrats worked with President Obama to enact the Budget Control Act. Though the main drivers of debt—entitlement programs like Social Security and Medicare—were effectively exempted, the bill established modest caps on discretionary spending, which makes up 31 percent of total federal funding. These caps have been the only meaningful check on government expenditures this decade.

And to little surprise, the caps worked. From 2012 to 2013, federal spending decreased for the first time in consecutive years since Dwight Eisenhower was president in the 1950s, while the nation’s fiscal outlook improved.

Unfortunately, it didn’t take long for Congress to reverse course. Succumbing to pressure from special interests, Congress broke through the spending caps to the tune of $146 billion with legislation in 2013 and 2015. This only continued the path to unsustainable spending we’ve seen in recent years, with our fiscal situation becoming worse by the day.

Both of these increases were unfortunate. The 2011 spending caps proved that Washington can overcome its political polarization and make the fiscal reforms necessary to address our looming debt crisis. Right-of-center debt hawks tend to be most worried about the size of national debt, while those on the left are often troubled by the mounting interest payments.

Both are valid concerns. High levels of debt impede private sector investment, reducing job creation and limiting wage growth. Meanwhile, taxpayer dollars being used for growing interest payments on the debt means there are less funds available for core government services like national defense.

Sticking to the spending caps will not solve all our nation’s fiscal woes—far from it. But is will send a clear signal that lawmakers take our national debt crisis seriously. It was good policy when it passed with bipartisan support in 2011, and it remains good policy today.

Al Downs is a senior economic analyst at Americans for Prosperity.

The views expressed by contributors are their own and are not the views of The Hill.

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