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SAFE Act Would Cap Growth of Government

Posted By Brian Riedl On May 18, 2010 @ 3:00 pm In Economics | Comments Disabled

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Over the past decade, federal spending has leaped 62 percent faster than inflation, to more than $30,000 per household. Not content with this expansion of government, President Obama’s budget would push inflation-adjusted spending to nearly $37,000 per household [2] by the end of this decade. This would create sustained trillion-dollar budget deficits, likely followed by European-sized tax hikes.

Rep. Lamar Smith (R-TX) has proposed a commonsense approach to avoid such ruinous spending hikes. The Saving America’s Future Economy (SAFE) Act of 2010 would limit the annual growth of government to the inflation rate plus population growth rate (typically around 3.5 percent annually). (Note that this SAFE Act is different from the deficit commission bill with the same name).

The SAFE Act would create a framework for spending control. Such a framework is quite necessary given this Congress’ historic refusal [3] to even pass – much less hold to – a budget. The Democratic majority claims that Pay-As-You-Go (PAYGO) [4] rules put a brake on government, yet PAYGO exempts discretionary spending (40 percent of the budget), as well as the 6 percent annual baseline growth of entitlement spending. And in the rare instances when PAYGO has applied, its been bypassed repeatedly for new spending. Not surprisingly, the deficit has skyrocketed since PAYGO’s implementation.

Those wishing to restrain government are undermined by a federal budget process created 35 years ago to maximize spending. Unlike the 50 state governments, the federal government is not constrained by any enforceable spending limits. This means lawmakers, who often spend entire days listening to an endless parade of special interests pleading for money, can simply add up every spending request and spend that amount without setting priorities and making necessary trade-offs. Because these special interests will continue pressuring them to spend, responsible lawmakers need a budget process that helps them say no.

The SAFE Act would force lawmakers to set priorities and make trade-offs. High priority programs could still grow faster than the inflation rate plus population growth rate, as long as lawmakers are willing to offset the additional growth from lower-priority programs.

True, a restrained government may eventually have trouble incorporating the 5 to 7 percent annual growth rates of Social Security and Medicare. That is the alarm bell signaling that these programs are growing at unsustainable rates, and must be reformed. Lawmakers must eventually deal with these costs anyway, and The SAFE Act would discipline lawmakers to set priorities and reform [5] entitlement programs now.

The SAFE Act would be enforced by sequestrations (automatic spending cuts) of any yearly spending overage. Past sequestration laws have been ignored by Congress, so one possible improvement to the bill would prevent the overages in the first place by requiring a two-thirds vote to pass a budget resolution or spending bill that puts spending over the limit. Lawmakers could require a two-thirds vote for “emergency” spending above the cap (a threshold high enough to prevent abuse, but low enough to clear in a real emergency).

Lawmakers must rein in spending in order to prevent a debt crisis like the one spreading through Europe. This requires a budget process compatible with our budget priorities. The SAFE Act provides a strong first step by capping the growth of government, and creating a framework for priority-setting and trade-offs.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2010/05/18/safe-act-would-cap-growth-of-government/

URLs in this post:

[1] Image: http://www.heritage.org/budgetchartbook/federal-spending-per-household

[2] $37,000 per household: http://www.heritage.org/Research/Reports/2009/09/President-Obamas-Agenda-Would-Bring-13-Trillion-in-Budget-Deficits-Not-9-Trillion

[3] historic refusal: http://www.heritage.org/Research/Reports/2010/04/As-Deficit-Deepens-Congress-Refuses-to-Enact-a-Budget-Blueprint

[4] Pay-As-You-Go (PAYGO): http://www.heritage.org/Research/Commentary/2009/07/PAYGO-is-an-unworkable-gimmick

[5] reform: http://www.heritage.org/Research/Reports/2008/03/A-Guide-to-Fixing-Social-Security-Medicare-and-Medicaid

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