Cut, Cap, and Balance

Posted June 6th, 2011 at 12:22pm in Entitlements

The House Republican Study Committee (RSC) has deployed a new theme to be introduced into the debt limit increase debate: “Cut, Cap, and Balance.” The debt limit is expected to be considered by both chambers of Congress by August 2. House conservatives have drawn up a list of demands in consideration for allowing the debt limit to be increased.

The fault lines are clear in the debate right now. The Los Angeles Times reports today that there is a standoff between the two parties on a debt limit deal, and no comprehensive deal on taxes and entitlement reform is expected.

The standoff over raising the nation’s nearly $14.3-trillion debt limit may conclude this summer with a more limited round of spending cuts and promises of future reform, pushing off the tough choices about taxes and Medicare until after next year’s election. Republicans, by not compromising on taxes, can continue to campaign on the no-new-taxes stance that is a cornerstone of their political strategy, while attacking Democrats and President Obama for their proposed tax increases on the wealthy. Democrats, whose political prospects have brightened since House Republicans proposed deep cuts in Medicare, have all but ruled out any deal that would relinquish the issue as a political weapon.

Liberals want to increase taxes to balance the budget. They seek to remove entitlement reform from the debt limit debate, because they fear any changes to these programs. Liberals are pushing right now to divorce the debate over spending cuts from the debate over increasing the debt limit. They don’t want spending cuts to be attached to the debt limit increase.

Another liberal idea introduced into the debate was President Obama’s mechanism for automatic tax increases if the budget was not in balance starting in Fiscal Year 2014. Obama deployed the idea of a “Debt Failsafe Trigger” as a means to automatically increase taxes and cut spending when the budget is not in balance. Of course, this idea would exempt entitlement programs from the automatic cuts, and one should not expect that these cuts would end up balancing the budget.

Conservatives want to shrink government and are dead set against raising taxes as a means to balance the budget. The opponents of big government want to pass a Balanced Budget Amendment to the Constitution, set up a tough budgetary mechanism to control spending, and/or implement entitlement reforms.

Between liberals and conservatives, there is not much common ground on a debt limit deal or on the future of government spending. The Republican Study Committee has taken a different approach to this debate: Put out a list of demands and pledge to stop any increased debt limit unless these demands are met. Instead of cutting secret deals with the Vice President behind closed doors, the RSC is opting for a transparent public negotiation on the debt limit increase that includes the participation of the American people.

The RSC is gathering signatures for the following Cut, Cap, and Balance Pledge list of demand on the debt limit increase:

1. Cut. We must make discretionary and mandatory spending reductions that would cut the deficit in half next year.
2. Cap. We need statutory, enforceable caps to align federal spending with average revenues at 18 percent of Gross Domestic Product (GDP), with automatic spending reductions if the caps are breached.
3. Balance. We must send to the states a Balanced Budget Amendment (BBA) with strong protections against federal tax increases and a Spending Limitation Amendment (SLA) that aligns spending with average revenues as described above.

The RSC recognizes that there does not have to be a bipartisan deal on the debt limit increase if conservatives can make it a condition that their list of demands must be met before the debt limit is increased. Conservatives recognize that this may be the one opportunity in a lifetime for Congress to marry strong spending restraint measures to an increase in the debt limit.

In a letter to Speaker of the House John Boehner (R–OH), conservatives in the House are joining the call for a stop to “out-of-control spending”:

We must state unequivocally that we will not vote for a “clean” debt ceiling increase. We share your belief, as articulated in your speech in New York on May 9^th, Mr. Speaker, that if we do not reverse the out-of-control spending that has led us here, it would be grossly irresponsible for us to extend the limit on the national credit card.

We shall see over the next month if Congress has the stomach for some real cuts to spending or whether it merely wants to rubber-stamp the credit limit of the U.S. government with no restraint on the appetite for spending that has added $14.3 trillion in excess weight.