“We cannot bind a future Congress.” That was Utah’s Mike Lee in early July, arguing that most long-term deficit plans have a credibility problem: Who’s to say that spending cuts enacted today won’t just be reversed by future Congresses, especially cuts to discretionary spending, which, by definition, Congress gets to approve each year?
That uncertainty is one reason why Lee and other conservatives are calling for a balanced-budget constitutional amendment — the only guarantee that spending will actually be cut, Lee said. It’s also a reason why many on the right are wary of John Boehner’s proposal, which, according to the CBO, backloads most of its $850 billion in discretionary cuts: just $1 billion in cuts in 2012, versus $111 billion in 2021.
So are deficit-reduction plans with a long time horizon impossible? Not necessarily. But deficit-reduction plans with unrealistic targets tend to fail.
When Republicans fret about future spending caps, they’re thinking of the 1985 Gramm-Rudman-Hollings act. The law said that unless Congress got deficits below a certain percentage of GDP each year, across-the-board cuts would automatically sink in. The goals were unrealistic, and rebellion quickly ensued. “We couldn’t control what GDP was going to be, so the targets were always moving. It quickly became impossible for Congress to get the votes to meet the goals,” says Steve Bell, who was the Republican staff director on the Senate Budget Committee at the time.
Instead, Congress relied on gimmicks, like shifting the timing of spending, in order to sneak in under the yearly limits. The Reagan and Bush White Houses began fudging projections to avoid steep cuts. (As CBO found, the deficit “target” in 1990 was set at $36 billion, while the actual deficit was $220 billion.) The system rapidly become untenable and had to be revamped.
The next decade, though, was a different story. The Budget Enforcement Act of 1990 opted for a simpler approach. Instead of arbitrary deficit-as-percentage-of-GDP targets — which made budgeting subject to the whims of economic growth — the new law just put in place flat dollar caps on the discretionary spending that Congress approved each year. Meanwhile, any new tax cuts or increases to entitlement programs like Medicare had to be fully offset by tax hikes or spending cuts.
It worked. The Center on Budget and Policy Priorities notes that from 1991 to 1997, lawmakers adhered to the caps. That, plus a dot-com boom, is how we got balanced budgets by the end of the Clinton years. Politicians in 1990 couldn’t bind future Congresses, but they were able to nudge them in a particular direction.
The problem, however, is that when a framework like this falls apart, it falls apart pretty quickly. By the late ’90s, the CBO was predicting budget surpluses, Republicans were pushing new tax cuts, and many members of Congress were raring to go above what they saw as the overly severe new spending caps of 1997. New budgetary gimmicks started appearing — famously, outlays for the 2000 Census were classified as “emergency spending,” even though the census has been mandated by the Constitution for centuries and hardly counts as a surprise.
Then George W. Bush became president and pushed through huge tax cuts, even though the bubble had burst and the deficit picture was worsening. Soon, the GOP just gave up on the idea of discretionary caps and pay-as-you-go rules. For fiscal year 2002, Republicans went $100 billion over the spending limit and — claiming emergency — just raised the cap.
There are a few consistent themes here. Overly draconian budget rules imposed on future members of Congress don’t work. Conversely, modest caps and balanced rules like pay-as-you-go seem to appeal to Congress’s status quo bias and work fairly well. (That probably doesn’t apply to the current House Republican rules, where spending increases have to be paid for but tax cuts don’t—as AEI’s Norm Ornstein told me, that just makes it more likely that Congress will resort to tax expenditures to make policy.) So that’s the irony: The steep cuts that Lee and many other conservatives want are exactly the sort of plans most susceptible to the binding problem.