http://www.wsj.com/article_email/blocking-the-budget-busters-1443740462-lMyQjAxMTA1MTA0MjIwMTI4WjIf you want to measure the impact of tea-party voters, look no further. Oct. 1 marked the beginning of a new fiscal year in Washington, and the deficit for 2015 came in below $500 billion, according to the Congressional Budget Office. Although that kind of overspending is still irresponsible, it’s a far cry from the $1 trillion annual deficits during Barack Obama’s first term.
But it looks as if budget restraint in D.C. is beginning to waver. Congress and the White House are quietly negotiating a deal for the new fiscal year that would bust the spending caps that have brought down the deficit. Breaking the caps yet again—this would be the third violation in four years—is lousy policy. It’s also bad politics for Republicans, who won control of Congress by promising budgetary discipline.
Yet the GOP is reportedly forging a compromise with Mr. Obama that would raise the caps by $70 billion to $100 billion. “We are inevitably going to end up in a negotiation that will crack the Budget Control Act once again,” Senate Majority Leader Mitch McConnell said last month. “There’s a lot of pressure in Congress to spend more.” Alas, pressure from both parties.
My congressional sources tell me that half of the extra money would go to social programs and half to defense. This would represent a year-over-year increase in federal discretionary expenditures of about 7%, when inflation is only 2%. What’s worse, the deal would likely raise the spending caps permanently, meaning it could add nearly $1 trillion to the debt over the next decade.
The mystery is why Republicans are so ready to throw away their best fiscal weapon against Mr. Obama and the Democrats. These caps on discretionary spending were established under the Budget Control Act of 2011, the compromise that ended that summer’s standoff over the debt ceiling. The BCA is enforced by sequestration: automatic, across-the-board cuts that go into effect if spending exceeds the caps.
Liberals hate the sequester because it squeezes their favorite programs, from transit grants to Head Start. But it is the law of the land. President Obama can do nothing to circumvent the sequester—unless Republicans in Congress cave in.
As The Journal has pointed out, the Budget Control Act helped slam the brakes on Mr. Obama’s first-term spending spree. When the law was adopted, annual federal expenditures stood at $3.6 trillion. Outlays tumbled in fiscal 2012 to $3.54 trillion and in 2013 to $3.45 trillion, before rising slightly in 2014 to $3.51 trillion. This was the first three-year reduction in federal spending since the 1950s.
The drop is even more impressive when viewed as a share of GDP. In 2009 the federal government accounted for nearly a quarter of the American economy, 24.4%. That fell by 2014 to 20.3% of GDP. The figure was up slightly in 2015 to 20.6%, thanks to an increase in the caps and the cost of ObamaCare.
It has been amusing to see President Obama try to take credit, without even blushing, for the nearly $1 trillion decline in the deficit, caused in large part by the fiscal straitjacket he has desperately tried to slip out of. Indeed, the administration’s wild claims of damage the sequester would do have not panned out.
In early 2013 the commissioner of the Food and Drug Administration told reporters that fewer inspectors could make America’s food supply less safe. The FBI director fretted publicly that his agency’s “ability to proactively penetrate and disrupt terrorist plans and groups prior to an attack would be impacted.” In retrospect, calmer minds can admit that cuts to domestic programs of about 5% have been easily absorbed.
Budget hawks rightly complain that entitlements—which gobble up about half of all tax revenues—are exempt from the caps. Mr. Obama has repeatedly refused to accept a penny of reductions to Medicare, Social Security, ObamaCare or welfare without a corresponding tax hike. Departing House Speaker John Boehner has been wise to reject such a deal, since raising taxes would slow the economy when growth is already pitiful.
The rub for many Republicans is the military budget. A little more than half of the Budget Control Act cuts fell on the Pentagon, though defense represents less than 20% of the budget overall. The world has become a more dangerous place, and now isn’t the time to reduce the size of the U.S. armed forces.
But much of the drop in military spending would have happened anyway given the drawdown of operations in Afghanistan and Iraq. With any luck, the new president moving into the White House in 2017 will be a Republican. The best strategy for the GOP is to keep the caps and sequester in place, and hope a more reasonable president will help rebuild the military by shifting dollars out of wasteful domestic programs.
Conservatives like House Budget Committee Chairman Tom Price want to stick to the caps, but they appear to be outnumbered. “This is our fiscal equivalent of the Battle of the Bulge,” Rep. Mark Sanford (R., S.C.) told me this week. “If we Republicans can’t hold the line on spending—by simply holding Obama to the caps he himself signed into law—everything else around here is an exercise in futility.”
He’s right. Busting the spending caps will only reverse progress toward a balanced budget, fatten liberal social programs, and confirm what many tea-party voters have been shouting for years: that Republicans break their promises once elected. If party leaders take that route, they shouldn’t need to scratch their heads and wonder why people are so angry.
