The Budget Control Act buys time, but don't repeal it without a replacement

The Budget Control Act buys time, but don't repeal it without a replacement
© Greg Nash

Now that Congress has passed a budget resolution, tax reform and an end-of-year spending bill are the next big budget items on the agenda. Obtaining “relief” from the budget caps will be a major theme.

Sen. Tom CottonThomas (Tom) Bryant CottonNYT says Tom Cotton editorial 'did not meet our standards' Engel says he refuses to seek NYT endorsement over Cotton op-ed Cotton praises NY Times for 'standing up to the woke progressive mob' in publishing opinion piece MORE (R-Ark.) and Rep. Michael Turner (R-Ohio) have introduced legislation to end the enforcement of the budget caps established under the Budget Control Act of 2011 (BCA). They believe that budget constraints are harming military readiness and other national defense capabilities.

Some blame the caps for this year’s tragic military accidents. Although investigations continue, tight budgets may take a back seat to training and leadership shortcomings.

Many Republicans share those views. Many, however, refuse to choose between military readiness and fiscal responsibility. They want both.

And so a new claim has emerged. Freshman Rep. Liz CheneyElizabeth (Liz) Lynn CheneyTrump says he believes Scarborough 'got away with murder' Hillicon Valley: House FISA bill in jeopardy | Democrats drop controversial surveillance measure | GOP working on legislation to strip Twitter of federal liability protections The Hill's Campaign Report: Trump ramps up attacks against Twitter MORE, R-Wyo., said recently that “the Budget Control Act has fundamentally failed at what it was intended to do, which was reduce the debt.”

Strictly speaking, the BCA’s objective was to reduce the growth of debt. That way the debt burden weighs less heavily as U.S. economic production continues to grow.

She also stated, “And I think you repeal it and you say, ‘Look, we all know that we've got to deal with the debt, but you can't deal with the debt on the back of defense.’”

Defending the common good is the most important role of the federal government. That doesn’t excuse Congress using Department of Defence as a pork factory or wasting military resources on peripheral missions, however. But give her credit for recognizing that entitlement spending, also called “direct” spending, is the most significant driver of the federal government’s debt problem.

What’s missing is that enforceable caps are leverage for direct spending reforms. Before sequestration (a one-time event in 2013), they were a stick. Now they are a carrot: Reforming autopilot entitlement programs allows a deal for flexibility in discretionary spending without fueling GOP civil war.

Sequester-enforced caps on annually appropriated spending aren’t ideal. But they’re far better than fiscal crisis, default, and the resulting tremendous economic and political damage.

Has the BCA reduced the debt? Comparing the January 2011 CBO outlook, a few months before the BCA, to the June 2017 CBO outlook shows that the debt held by the public at the end of fiscal 2017 was projected to be $15.1 trillion but ended up around $14.7 trillion.

Digging deeper, direct spending was projected in 2011 to be $2.647 trillion in fiscal 2017, but it was ultimately only about $2.536 trillion, about $111 billion less. Likewise, the discretionary spending to which the BCA applied the most discipline came in around $1.203 trillion, a whopping $250 billion less than CBO projected six years before.

Therefore, primary spending (excluding net interest) was $360 billion less in fiscal 2017 than CBO projected in 2011. (Lower interest cost is mostly from lower rates).

Revenue also came in lower. Total fiscal 2017 revenues were projected to be $4.075 trillion but were only $3.315 trillion. Slow economic growth was a factor, as were tax cuts, especially the American Taxpayer Relief Act of 2013.

Therein lies the challenge. Multiple tax and spending measures over the last six years make it difficult to isolate the BCA’s precise debt impact.

The BCA isn’t simply a law, however. It’s also a mindset. The federal budget is out of control, and it must be brought back within the control of America’s elected representatives. That thinking has shaped most major fiscal decisions since the BCA.

If that incarnation of fiscal prudence has outlived its usefulness, it can’t simply be discarded without a substitute, or politicians’ short-term incentives will ruin us. The way forward must be to develop a thoughtful replacement. Then the BCA can be reformed or even repealed responsibly.

Congress has had six years to craft an alternative set of budget tools. The Budget Committees have proposed reforms, but the basic framework to require, define, and enforce balance (or another goal) is still lacking. Fortunately, best practices can be learned from the states or from other countries.

In the meantime, defense and foreign policy legislators bear some responsibility for problems in the armed services. Budgets are tight, but Congress could have — and should have — streamlined management of the Department of Defense. It also should have updated America’s role in the world to prioritize geopolitical challenges based on national interests and budget constraints.

In any case, the Budget Control Act has helped reduce the debt burden. It has disciplined both annually appropriated spending and direct spending programs. The BCA has bought Congress time to get its house in order.

It isn’t too late. If Congress repeals the BCA without establishing alternative budget controls, however, the path to poverty will be close at hand.

Kurt Couchman is an economist and the vice president of public policy at Defense Priorities. He previously served as a policy expert in congressional offices, most recently as a legislative director for a Republican member of the House of Representatives. Follow him on Twitter @KurtCouchman.