“Cut, Cap, and Balance” Is Anything But Balanced

The U.S. House of Representatives is scheduled to vote tomorrow, and the Senate may vote as soon as Wednesday, on a proposal that would result in extreme cuts to virtually all areas of the federal budget. The “Cut, Cap, and Balance” proposal advanced by the House Republican leadership would impose strict limits on federal spending as a share of the economy beginning on October 1, 2011 that would increase over time. The reductions that would be required under “Cut, Cap, and Balance” are at least as severe as those required under the budget plan that we wrote about here. The House Republican proposal would also prevent an increase in the federal debt ceiling until both houses of Congress approve a “balanced budget” amendment to the Constitution, thereby placing the country in extreme danger of default. Moreover, the House proposal would also impose a two-thirds vote requirement for any measure that increases federal taxes.

We at the California Budget Project have often quoted former Congressional Budget Office chief Robert Reischauer who once noted, “The process isn’t the problem, the problem is the problem.” And in this instance the “process proposals” – strict limits on spending and supermajority vote requirements – are likely to make the problem of reducing the federal budget deficit more difficult, not easier. How could limits on spending make the federal deficit worse? Many economists note that drastic budget cuts in the near term could increase unemployment and slow, or even reverse, the economic recovery, thereby reducing federal revenues and increasing the size of the deficit.

California’s own history with restrictive budget rules – the state has had a strict spending limit since 1979 and a two-thirds vote requirement for tax increases since 1978 – demonstrates that such rules don’t prevent chronic budget problems and, in fact, often lead to budgets that rely on overly optimistic revenue assumptions, one-time “solutions,” and other gimmicks.

Congress should soundly reject the extreme “Cut, Cap, and Balance Act.” This measure would protect ineffective tax breaks for the wealthy, while setting in place policies that would, over time, require deep cuts in the public services and structures that all Americans depend on.

— Jean Ross