Senators Introduce Spending ‘Straightjacket’
A Republican and Democratic Senator introduced a bill Tuesday that would force Congress to make difficult long-term spending cuts by capping the amount of money the federal government could spend relative to the country’s Gross Domestic Product.
Sen. Bob Corker, R-Tenn., and Sen. Claire McCaskill, D-Mo., introduced their bill, the Commitment to American Prosperity Act, with seven Republican senators co-sponsoring the legislation.
Corker said the CAP bill would force Congress to dramatically cut spending over 10 years.
“As we approach our debt limit of $14.29 trillion and more and more Americans – Republicans, Democrats and Independents – call on Washington to get spending under control and reduce our deficit, I see no better time to change course,” Corker said.
McCaskill said the bill was intended to “cause waves” on Capitol Hill.
“This is the kind of bill people ought to be willing to go home over. Because this is the time in our history that’s it’s going to take some courage and something way more important than whether we get reelected. What ought to be front and center is – are we going to continue on an unsustainable path, or are we going to make the kind of decisions that our grandchildren would be proud of?” McCaskill said at a news conference.
The proposal is the first major piece of legislation introduced in the 112th Congress that attempts to address how much the federal government will spend over the long-term, in light of a recent Congressional Budget Office report that the 2011 fiscal year deficit would be $1.5 trillion. President Obama raised the spending issue in his recent State of the Union address by calling for a three-year freeze on discretionary spending levels, and Tea Party activists helped make government spending and debt big issues in the 2010 midterm elections.
It would gradually lower the percentage of the GDP that the federal government is allowed to spend – eventually moving the spending level from the current 24.7 percent of GDP level to 20.6 percent. The proposal leaves some ways out of the cap, including allowing the House and Senate to get around the limits via a supermajority vote in both chambers.
McCaskill says that in their approach to curbing spending, there are no accounting gimmicks and everything is on the table, including Social Security and Medicare, an idea met with sharp disapproval by fellow Democrat and Senate Majority Leader Harry Reid. Sen. Reid said he would throw “my legislative body in front of any efforts to weaken Social Security,” which “has not contributed one penny to the debt.”
The bill does not attempt to figure out how spending would be reduced to meet that limit. In a Senate Budget Committee hearing elsewhere in the Capitol complex Tuesday, Chairman Sen. Kent Conrad, D-N.D., heard from three economists about the long-term fiscal health of the country and called for a summit between the White House and congressional leaders to develop a fiscal policy.
“We have been borrowing about 40 cents of every dollar that we spend. That is clearly not sustainable. Spending is at its highest level as a share of the economy in 60 years. Revenue is at its lowest level as a share of the economy in 60 years. It seems to me..that we have to work on both sides of the equation,” Conrad said.
Conrad added that he hopes a summit can meet before the federal government reaches its $14.3 trillion debt ceiling limit, which he predicts will happen in May of this year.
One of the economists, Dr. Simon Johnson of MIT’s Sloan School of Management, told the committee that even hundreds of billions of spending cuts now will not make much of a difference if the U.S. wants to avoid ruining its credit. He suggested that retooling an antiquated and “messed up” tax system to improve economic incentives, and reforming health care spending, especially Medicare, are keys to solving the problem.
Johnson criticized the deal to extend the Bush tax cuts for two years as a “bipartisan consensus away from fiscal responsibility.”
Dr. David Malpass of Encima Global, who supported more short-term cuts as soon as possible, more in line with Republican proposals, endorsed the idea of changing the debt limit to a percentage of GDP, echoing the Corker/McCaskill proposal, instead of tying the debt limit to a specific dollar number.
Malpass told the committee that the country faced a full-blown fiscal crisis and had been “kicking the can down the road.”
“We need to start cutting spending now,” he said.