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What Do You Call $2.5 Trillion in Spending Cuts? A Good Start

Posted By Kathryn Nix On January 20, 2011 @ 5:00 pm In Economics | Comments Disabled

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The new Congress has made spending reduction a priority. This week, Members are getting to work on that promise.

Yesterday, by a vote of 245–189, the House passed legislation to fully repeal Obamacare. The new health law represents unsustainable new spending, including an expansion of Medicaid and the creation of a new health entitlement. On paper, this massive growth in government is paid for by burdensome new taxes and unrealistic cuts to Medicare. But at the end of the day, Obamacare will explode the deficit [2], and its repeal is the only fiscally responsible way to move forward.

Today, the Republican Study Committee (RSC) will advance its promise to cut federal spending and reduce the size of government by introducing the Spending Reduction Act of 2011 [3]. Representative Jim Jordan (R–OH), RSC Chairman, visited The Heritage Foundation today [4] to unveil the details of the proposal, of which he is the main sponsor.

Jordan warned that the United States follows close behind countries like Ireland and Greece on the road to financial crisis. Steps must be taken now to avoid such an outcome. The proposal would cap non-defense discretionary spending at 2008 levels for the remainder of this fiscal year. From then on, the cap would be reduced to 2006 levels. The legislation would rescind unspent stimulus and reduce or eliminate upwards of 50 government programs. Reductions in the federal workforce by 15 percent and a freeze on government employee salaries for five years are also included. More details will be needed to reach the target, but these are good steps toward that goal.

Altogether, the legislation would create $2.5 trillion in savings over the next decade, significantly reducing the federal budget. But Jordan says this proposal should be seen as the beginning, not the final solution. He also hopes to see enacted the full $100 billion in cuts that were promised by congressional leadership, not a prorated amount as a result of the passing of almost half of the fiscal year. By setting a good, necessary target for the new Congress’s first steps toward controlling spending, this goal sets an excellent precedent for fiscal responsibility.

Budgets are about setting priorities and making tradeoffs to achieve those priorities. One priority that must be met is keeping America strong, which means adequately funding defense. In its Solutions for America series [5], Heritage set a goal for Congress to achieve a minimum of $170 billion in annual savings by fiscal year 2012. The $100 billion in non-defense spending is a good start, but more will be necessary. Congress should also reclaim unspent taxpayer funds in unobligated balances of appropriations. They should ensure that future unemployment assistance be offset by spending cuts elsewhere and establish reasonable limits on welfare spending [6]. Finally, it is impossible to tackle runaway spending without transforming entitlement programs—Medicare, Medicaid, and Social Security—so that they operate in a more effective and affordable manner. If nothing is done, these programs will be the source of skyrocketing deficits projected in decades to come.

The Spending Reduction Act of 2011 is a good first step to putting the nation’s fiscal house back in order. Moving forward, more details will be needed to enact these cuts and additional cuts will have to be made in following years. As Jordan told the Heritage audience, discipline will mean doing what is needed, not what is convenient. This is what the American people expect as a result of the November 2010 elections, and Congress should ensure that it happens.


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

URL to article: http://blog.heritage.org/2011/01/20/what-do-you-call-2-5-trillion-in-spending-cuts-a-good-start/

URLs in this post:

[1] Image: http://www.foundry.org/wp-content/uploads/spending-cut.jpg

[2] Obamacare will explode the deficit: http://www.foundry.org/2011/01/06/take-cbo-report-with-a-grain-of-salt-obamacare-repeal-would-not-increase-deficits

[3] Spending Reduction Act of 2011: http://rsc.jordan.house.gov/News/DocumentSingle.aspx?DocumentID=220713

[4] visited The Heritage Foundation today: http://www.youtube.com/watch?v=1HRRuOiZeiA

[5] In its Solutions for America series: http://www.heritage.org/Research/Factsheets/2010/11/Get-to-Work-Freeze-and-Cut-Spending

[6] reasonable limits on welfare spending: http://www.heritage.org/Research/Factsheets/The-Unsustainable-Welfare-State-Reform-is-Necessary

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