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Republicans Open New Round Of Budget Negotiations By Proving They Don’t Care About Deficits

By Pat Garofalo on May 5, 2011 at 11:45 am

"Republicans Open New Round Of Budget Negotiations By Proving They Don’t Care About Deficits"

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Spending caps don't reduce deficits.

Vice President Joe Biden will preside over a new round of budget negotiations today at the Blair House, with several budget related issues needing to be resolved, including raising the nation’s debt ceiling. In return for their vote to increase the debt ceiling, Republicans have been proposing various caps on spending, in an attempt to prove that they’re serious about the deficit.

President Obama, along with Senate Majority Leader Harry Reid (D-NV), have countered with a proposal for a “deficit trigger”: a mechanism that would enact automatic spending cuts and tax increases if the deficit grows too large. According to The Hill, Republicans are balking:

While Democrats back a White House approach that would force automatic tax increases or spending cuts to ensure the government hits thresholds for reducing the debt, Republicans want a hard cap on spending that would not force tax increases of any kind.

The divide on discussing taxes appears to be one of the central obstacles in talks that will convene Thursday between Vice President Joe Biden and representatives from both parties.

This is one more piece of evidence proving that Congressional Republicans are fundamentally uninterested in reducing the deficit. After all, if you’re trying to reduce the deficit and the debt, why would you not cap…well, the deficit. Following a spending cap to the absolute letter of the law could still, easily, result in a huge deficit and a growing debt, as it ignores the other side of the budget equation: revenue.

Republican plans to cap spending have taken various forms, including Sen. Bob Corker’s (R-TN) CAP Act, which would cap federal spending at 20.6 percent. Even if this were strictly adhered to, the deficit could still be huge, depending on how much revenue the government brings in. Capping spending at 20.6 percent wouldn’t balance the budget if revenue were consistently 16 percent of GDP. Making matters worse, as the Center on Budget and Policy Priorities explained, a spending cap would push the government into taking actions that would make recessions worse:

Imposing an arbitrary limit on federal spending would risk tipping faltering economies into recession, make recessions deeper, and make recovery from a recession more difficult. Spending for some important federal programs — including unemployment insurance, food stamps, and Social Security — increases automatically during a recession, when the need for assistance grows. Since GDP [Gross Domestic Product] also shrinks during a recession and remains below its trend level during the early stages of recovery, federal spending increases significantly as a share of GDP during periods of economic weakness.

It’s worth mentioning that relying on automatic triggers, in general, is not an ideal way to budget. The budget is riddled with provisions that were supposed to enforce certain restrictions, but simply get waived by Congress year after year, like the Alternative Minimum Tax or the doc-fix. But if you’re going to try implementing an cap, it makes sense to design a cap that actually addresses the problem at hand. Instead, Republicans have designed one that will simply further their goal of making the government as small as possible, without regard for the deficit.

Update

House Budget Committee Chairman Paul Ryan (R-WI) called a deficit trigger a “cop-out,” while pushing for spending caps and unnamed budget cuts in return for voting to raise the debt ceiling.

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