Congress Should Support the Trump Administration’s Balanced Budget … and Sustain It

 

The Trump Administration released its first full budget proposal on Tuesday. It is a good proposal. First, it balances the federal budget by the end of the 10-year budget period. Second, its gets a handle on the federal government’s accelerating debt and interest costs. Finally, it is pro-growth. This final point is critical because achieving the goal of the restoration of a responsible federal fiscal policy will be a practical impossibility in the midst of a stagnant economy.

The immediate task for Congress is to adopt a budget that matches the general parameters of the Trump Administration’s proposal. This is to say, the budget Congress adopts should include the same numbers for the total outlays, the total revenues, deficits, debt, and interest costs (both on debt held by the public and debt held by other government accounts) in each fiscal year. On the other hand, it is appropriate for Congress to modify the budget proposed by the Administration in terms of the individual accounts under these general numbers. The Trump Administration cannot expect to get everything it wants. Most important for President Trump is that he limit himself to issuing veto threats against any appropriations bill and reconciliation bill that follows from such a budget to very few matters—those that are at the very top of his policy priorities.

Sustainability Is Key

It is not sufficient, however, for Congress simply to adopt a budget resolution in keeping with the general terms of the Trump proposal and to pass appropriations bills and a reconciliation bill this year. The proposal must be sustained over the entire 10-year period … and beyond. History demonstrates that a successful effort to advance fiscal responsibility in a single year is too easily reversed during the years that follow. For example, this is exactly what happened following the enactment of the Budget Control Act of 2011.

How may Congress sustain the Trump budget? This will require that at the same time it considers the budget itself, to adopt a package of budget process reforms. The current process is practically an incentive system for increasing spending, and so it must end. This package should include changes to House and Senate rules as well as statutory changes. Ultimately, however, only a state-of-the-art balanced budget amendment to the Constitution that imposes a practical limit on the debt the federal government may run up — accompanied by enhanced impoundment powers to control spending at any time the debt approaches the applicable ceiling — will be sturdy enough to withstand the political pressures to spend more than permitted by this budget.

The States’ Compact

Fortunately, the states are already pursuing an appropriate enforcement mechanism through a compact they have established solely for the purpose of advancing a specific amendment with these features—already enacted by five states. Congress should encourage the states to continue this effort by adopting a resolution this year that activates the state-initiated amendment process once 38 states join the Compact. Even if such an amendment is not ratified until a year or two from now, the effect of the advancement of the amendment will markedly improve the chances that the essential Trump budget will be sustained.

Published in Economics
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  1. Stina Member
    Stina
    @CM

    Baker Spring: The current process is practically an incentive system for increasing spending, and so it must end.

    I really do not understand why saving for future large projects is such a huge no-no outside personal budgeting. If you don’t use it, you lose it. If you overspend, you get more. It is a completely asinine approach to responsible budgeting.

    Is there a cogent reason for this or is it simply “that’s not how it’s done” mentality?

    • #1
  2. The King Prawn Inactive
    The King Prawn
    @TheKingPrawn

    Baker Spring: First, it balances the federal budget by the end of the 10-year budget period.

    Hahahahahaha.

    What is the one part he’s not willing to touch?

    Baker Spring: The proposal must be sustained over the entire 10-year period

    Which is impossible since each congress does its own appropriations bills.

     

    • #2
  3. Baker Spring Contributor
    Baker Spring
    @BakerSpring

    @Stina

    I think I understand your question, but I am not certain. Let me say, however, that what I was referring to here is baseline budgeting, where an increase in spending may be still be described as a cut. Taking your comments in reverse order, however, it is completely asinine in the sense that it incentivizes the bureaucracy to spend every cent the budget authority permits to justify the applicable program. On the other hand, there is a logic to this that results from the appropriations process used under the Constitution by Congress. Congress, for good reason, does not want the bureaucracy to incur spending obligations and simply hand the bill to Congress in order to force Congress to fund the obligations. This is why Congress enacted the Anti-Deficiency Act. Some have recommended establishing a system of separate capital accounts under the budget. Many states take this approach. This could work, but it could also lead to abuses by the bureaucracy. It is a close call. If I have misinterpreted your comment, let me know and we can go from there.

    • #3
  4. Stina Member
    Stina
    @CM

    The King Prawn (View Comment):
    What is the one part he’s not willing to touch?

    We might be grateful for that graph in the upcoming weeks as Dems are already pounding on it as cutting to deeply from entitlements.

    What happened to his FICA tax cuts? Did they not make it into the budget proposal? I thought that was a pretty good mechanism for eventually eliminating (at the very least making deep cuts into) it.

    • #4
  5. The King Prawn Inactive
    The King Prawn
    @TheKingPrawn

    Stina (View Comment):
    We might be grateful for that graph in the upcoming weeks as Dems are already pounding on it as cutting to deeply from entitlements.

    More grandmas and cliffs I suspect. We need a spinach and broccoli budget.

    • #5
  6. OccupantCDN Coolidge
    OccupantCDN
    @OccupantCDN

    Stina (View Comment):

    Baker Spring: The current process is practically an incentive system for increasing spending, and so it must end.

    I really do not understand why saving for future large projects is such a huge no-no outside personal budgeting. If you don’t use it, you lose it. If you overspend, you get more. It is a completely asinine approach to responsible budgeting.

    Is there a cogent reason for this or is it simply “that’s not how it’s done” mentality?

    Its not just a government thing. Ive seen companies have store rooms full of servers that they bought with fat IT budgets. Many of these servers ($7 to $10K each, and up) had never been plugged in – and will likely end up going into recycle when the support contracts on them expire. Millions of dollars get wasted like this.

    If I where in management, I would institute a bonus system based on how much money you can save the company. (A dollar saved is $1.60 earned)

    • #6
  7. Jamie Lockett Inactive
    Jamie Lockett
    @JamieLockett

    I think the Trump budget is a good start, but not touching entitlements is a mistake.

    • #7
  8. OccupantCDN Coolidge
    OccupantCDN
    @OccupantCDN

    Jamie Lockett (View Comment):
    I think the Trump budget is a good start, but not touching entitlements is a mistake.

    It is, but its a campaign promise. What he could do is apply credit card fraud examination techniques to Medicaid in order to cut the fraud… I bet 20% of medicaid spending is fraudulent.

    • #8
  9. Hypatia Inactive
    Hypatia
    @Hypatia

    OccupantCDN (View Comment):

    Jamie Lockett (View Comment):
    I think the Trump budget is a good start, but not touching entitlements is a mistake.

    It is, but its a campaign promise. What he could do is apply credit card fraud examination techniques to Medicaid in order to cut the fraud… I bet 20% of medicaid spending is fraudulent.

    Yes, it was an express campaign promise not to take away Medicare and SS.  So we have to applaud the Trump team for this.  But of course no one is.

    The Dems’ caterwauling about  cruelty and heartlessness reminds me of when Bill Clinton tied welfare to work.  Didn’t Ted Kennedy accost him on the Capitol steps, wailing that he was a child killer?  And got his ultimate revenge by supporting Omega the first time Hillary ran?   But now I think it s generally recognized that was a good idea.

    Its like Trumps budget director said.  We can afford to take care of everybody who needs talking care of.  We can’t afford to take care of people who don’t need it.

    • #9
  10. Pony Convertible Inactive
    Pony Convertible
    @PonyConvertible

    I don’t understand why a President submits a budget at all.  Congress doesn’t pay attention to them.  Heck, with several of Obama’s budgets he couldn’t even get one person from his own party to vote in favor of it.

    If I were President I will issue a general outline (no numbers) of what I would like the budget to contain, and what it must contain for me to sign it. Then I would tell the House to do their constitutional duty and create, and pass, a budget.

    • #10
  11. I Walton Member
    I Walton
    @IWalton

    Here we go again.  A balanced budget amendment just kicks the can down the road and won’t do a thing.  Congress is hung up on this revenue neutral nonsense and a balanced budget would raise that to a rigid law.  It’s a gimmick.  It would have to have loopholes for crises.   Do we want to give the Democrats more incentives for crises?  It will turn them into the war party.    So they’ll be the nanny party, the welfare party, the regulatory party and the military industrial  party.   Moreover, it won’t do any good. Spending is what matters.   We should not care if the budget balances.  Balance just means we borrow less and tax more.   A bad tax harms the economy while borrowing is market conforming and does less damage to real output.     What we need is zero based budgeting that leads to real reductions in spending.   We can cut spending but it must take place in an administration, not in Congress.  They have to approve it but they must be presented with a specific budget which includes  specific cuts, cuts, not slower growth.  Load it up with cuts to really stupid spending so that when Congress fiddles and log roles the Administration can ridicule them.

    • #11
  12. Jamie Lockett Inactive
    Jamie Lockett
    @JamieLockett

    Why do we have the applaud the administration for keeping the campaign promise not to touch SS and Medicare? It was a bad promise. A dangerous promise. If Bernie Sanders ran and won promising single payer healthcare would we applaud when he got it done? No. Bad policy is bad policy and not touching entitlements is bad policy.

    • #12
  13. Columbo Member
    Columbo
    @Columbo

    McCain: Trump’s Budget Is Dead On Arrival

    • #13
  14. Baker Spring Contributor
    Baker Spring
    @BakerSpring

    @The King Prawn

    While I wish the Trump budget proposal had done more on entitlement reform, it does not ignore the entitlement accounts completely. There is significant spending restraints in the Medicaid program and the Social Security Disability program. Further, the Trump Administration remains committed to reducing rather significantly the outlays for Obamacare. The outlay reductions, largely speaking, were confirmed for the House bill by the Congressional Budget Office this week.

    Regarding the impossibility of sustaining the budget, assuming it is adopted, I believe it can be done under different budget rules. I have found the appropriators to observe firmly established ceilings in adopted budgets, as long as those budgets remain in place.

    • #14
  15. Baker Spring Contributor
    Baker Spring
    @BakerSpring

    @ Stina

    Regarding the FICA tax reduction, the budget includes a revenue line that assumes tax reform. The details are not provided here because the tax reform proposal is under serious discussion between the Trump Administration and congressional leaders, particularly the House Ways and Means Committee leaders. The outcome may include changes in FICA.

     

     

    • #15
  16. Baker Spring Contributor
    Baker Spring
    @BakerSpring

    @ OccupantCDN

    Providing bonuses to people in the departments and agencies who find and realize savings is a proposal that is being kicked around. It may end up in a package of budget process reforms offered by both the House and Senate Budget Committees. I know this because the Senate Budget Committee staff was working on such a proposal when I was Fellow there in 2014. Also, I believe Senator Rand Paul has a particular interest in this kind of reform.

    • #16
  17. Jamie Lockett Inactive
    Jamie Lockett
    @JamieLockett

    Baker Spring (View Comment):
    @ Stina

    Regarding the FICA tax reduction, the budget includes a revenue line that assumes tax reform. The details are not provided here because the tax reform proposal is under serious discussion between the Trump Administration and congressional leaders, particularly the House Ways and Means Committee leaders. The outcome may include changes in FICA.

    Right but the budget seems to assume that whatever tax reform is passed will generate over 2 trillion in extra revenue over the 10yr period. That points to either a tax reform that grows revenue significantly or an extremely powerful growth fairy sprinkling its pixie dust over the economy.

    • #17
  18. Baker Spring Contributor
    Baker Spring
    @BakerSpring

    @ I Walton

    I wish that what you say about leaving the cuts up the Administration and not Congress could happen, but it cannot under current law and some say the Constitution. This is the core problem. In 1974, Congress enacted the Impoundment Control Act to all but prohibit such executive branch reductions, commonly referred to as impoundments. This Act makes it all but certain that money appropriated by Congress goes out the door. Further, some in Congress hold the view that all executive branch impoundments are a form of line item veto that violates the presentment clause of the Constitution under the Supreme Court’s Clinton v. New York decision throwing out the line item veto law, believe it or not enacted by Congress. We need to change the law, at both the statutory level and the constitutional level.

    • #18
  19. Theodoric of Freiberg Member
    Theodoric of Freiberg
    @TheodoricofFreiberg

    The 800-pound gorilla in the room is entitlements. Trump’s budget doesn’t touch them, so I will guarantee you that our national debt will continue to increase at an alarming rate during his presidency. If you’d like to bet on that, I’ll put up any amount you like.

    • #19
  20. Baker Spring Contributor
    Baker Spring
    @BakerSpring

    @ Columbo

    Senator McCain and others in Congress are saying the budget is dead on arrival, but I expect the House and Senate Budget Committees will attempt to draft and get broader congressional adoption of a budget resolution. If they are successful, and I acknowledge that this a big if, Senator McCain may find that the budget resolution will have more in common with the Trump proposal than his current rhetoric implies. The is particularly the case with regard to the key broad numbers, which are: 1) the date of balance; 2) total revenues; 3) total outlays; 4) deficits/surpluses; 5) debt levels; and 6) interest costs. Now, Senator McCain is right if he is referring to each of the line items within the budget proposal. The specific line items will not be the same.

    • #20
  21. Hypatia Inactive
    Hypatia
    @Hypatia

    Columbo (View Comment):
    McCain: Trump’s Budget Is Dead On Arrival

    McCain’t.

    • #21
  22. Columbo Member
    Columbo
    @Columbo

    Baker Spring (View Comment):
    @ Columbo

    Senator McCain and others in Congress are saying the budget is dead on arrival, but I expect the House and Senate Budget Committees will attempt to draft and get broader congressional adoption of a budget resolution. If they are successful, and I acknowledge that this a big if, Senator McCain may find that the budget resolution will have more in common with the Trump proposal than his current rhetoric implies. The is particularly the case with regard to the key broad numbers, which are: 1) the date of balance; 2) total revenues; 3) total outlays; 4) deficits/surpluses; 5) debt levels; and 6) interest costs. Now, Senator McCain is right if he is referring to each of the line items within the budget proposal. The specific line items will not be the same.

    Thank you for this informed response. I do hope that you are right. However, if I look at the House-passed Obamacare reform as an example (again, already a watered-down, tepid piece of legislation to even get it out of the House), what happened to that bill on its arrival in the Senate? Won’t the Budget get this same treatment?

    Senator Collins: We’re Going To Draft Our Own Healthcare Bill

    If it’s possible, I may trust Senator Collins less than I trust Senator Schumer.

    • #22
  23. The King Prawn Inactive
    The King Prawn
    @TheKingPrawn

    Baker Spring (View Comment):
    There is significant spending restraints in the Medicaid program and the Social Security Disability program.

    This is where we have our pants on backwards with entitlements. Medicaid and SSDI (properly understood and administered) are the types of social welfare programs we proclaim to be for (needs based and targeted), and yet we cut the legs off those while ignoring the real drivers of our public fiscal mess, namely social welfare programs that take from the young and give directly to the old and (generally) wealthier people of our society. It’s disingenuous vote buying, not fiscally sound thinking or even ideologically consistent. Realpolitik aside, this is asinine.

    • #23
  24. Stina Member
    Stina
    @CM

    The King Prawn (View Comment):
    Medicaid and SSDI (properly understood and administered) are the types of social welfare programs we proclaim to be for (needs based and targeted), and yet we cut the legs off those while ignoring the real drivers of our public fiscal mess, namely social welfare programs that take from the young and give directly to the old and (generally) wealthier people of our society.

    I’ve gotten so used to having SS and Medicaid the only things we’ve been talking about in reference to entitlements that I thought welfare was under a different umbrella.

    Even if there had been cuts to welfare, would we be happy with SS and Medicaid being untouched?

    • #24
  25. The King Prawn Inactive
    The King Prawn
    @TheKingPrawn

    Stina (View Comment):
    Even if there had been cuts to welfare, would we be happy with SS and Medicaid being untouched?

    I won’t be happy until we erase the lie of SS and treat it like the welfare program it has always been.

    • #25
  26. Jamie Lockett Inactive
    Jamie Lockett
    @JamieLockett

    Well this is certainly timely:

    • #26
  27. Jamie Lockett Inactive
    Jamie Lockett
    @JamieLockett

    I have to say that @peterrobinson‘s interview with Mick Mulvaney made me feel a lot better about this budget and the administration as a whole.

    • #27
  28. I Walton Member
    I Walton
    @IWalton

    Baker Spring (View Comment):
    @ I Walton

    I wish that what you say about leaving the cuts up the Administration and not Congress could happen, but it cannot under current law and some say the Constitution.

    That’s true technically but irrelevant.  It’s a matter of political leadership and working with key Congressmen.   Budgets must begin, like tax law, in the House, but all of these things emerge with input from lots of places, most especially organized interests.    The Administration can present a suggested  budget, or tax or health care proposal and Congress takes it up and mangles it with help from special interests.  It actually helps responsible members of Congress if an administration gives them  strong positions from which to defend rational cuts.  Only an administration can actually know what should be cut. Congress incorporates and passes a budget worked out after submission or recommendations.  Let me give you an example.  When we presented a zero based budget that included closing a consulate and twenty percent cuts in the embassy we were told that State could not do that without Congressional approval.  So I just fired all the local employees  in the consulate offering them jobs in the Embassy if they wanted them, told State and other agencies which positions should be moved from our Embassy and consulate and why and  said nobody could be assigned to our mission until our proposal  had been  reviewed and responded to.  State went along with leaving the Consulate open, i.e. flag flying but without employees they were, as usual broke because they were opening missions throughout Eastern Europe.  But they ignored the proposed 20% personnel cuts.  (how all this was feasible is a longer and irrelevant story.) Then we received notice of the arrival of an air attache coming out of language training.  The only real power you have is to refuse assignments.  I refused and they all went bonkers, I was just the Charge and couldn’t do anything, and didn’t know (I lied)where the Ambassador was on home leave.    It held because every point they could make justifying the position I could answer with specific refutations based on their own reporting.   Imagine what a President could do if all of his Secretaries, Assistant Secretaries and Deputy Secretaries knew that cutting waste, redundant and old, weak useless programs, was an essential part of their job and that if they couldn’t present a zero based budget in, say 3 to 6 months to submit their resignations.  Moreover, any DAS or Agency head that just put popular programs on the block, should be declared redundant and removed.

    • #28
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