America is in fiscal peril in the short run because of a 10-year spending binge by Bush and Obama and in the long run because of a toxic combination of entitlement programs and demographics.
Congressman Paul Ryan has introduced a budget plan to address America's fiscal crisis, but Senator Reid and President Obama have summarily rejected his proposal, so it appears the United States will continue to drift in the wrong direction.
Something is needed to compel action. One might think that such an impetus would have been provided by the recent decision by Standard & Poor's to downgrade the fiscal outlook for the United States. But this development hasn't affected the spending culture in Washington.
But there is hope. Senator Corker has legislation that would force Congress to act -- and automatically impose fiscal discipline if they don't. His bill caps -- and then slowly reduces -- government spending as a share of national economic output (gross domestic product).
I've already written about the merits of this proposal, including an explanation of the all-important enforcement mechanism of sequestration (automatic spending cuts). Here's Senator Corker's description of his plan, as delivered at a Cato Institute conference on the Economic Impact of Government Spending.
To build on the Senator's comments, there are two things that deserve special emphasis.
- He correctly understands that the problem is the size of government. As explained in this video, spending is the problem and deficits are a symptom of that problem.
Unfortunately, many policy makers focus on the budget deficit, which often makes them susceptible to misguided policies such as higher taxes. At best, such an approach merely substitutes one bad way of financing federal spending with another bad way of financing federal spending. And it’s much more likely that higher taxes will simply lead to more spending, thus exacerbating the real problem.
- Senator Corker’s legislation has a real enforcement mechanism. If Congress fails to produce a budget that meets the annual spending cap, there is a “sequester” provision that automatically takes a slice out of almost every federal program.
Modeled after a similar provision in the successful Gramm-Rudman-Hollings law of the 1980s, this sequester puts real teeth in the CAP Act and ensures that the burden of government spending actually would be reduced.
Some people complain that Senator Corker's plan is too timid and that it doesn't balance the budget by 2021. While it would be desirable to impose additional fiscal restraint, the Tennessee Senator has deliberately chosen a more modest goal in order to attract support from colleagues on the other side of the aisle. And he does have Democratic co-sponsors, something that is critical given the composition of the Senate.
Since I'm just a policy wonk, I'll leave it to the other people to argue about what's feasible in the current political environment. My final comment, though, is that we're on an unsustainable path that will lead to the end of American exceptionalism and turn the United States into a decrepit, European-style welfare state. So I'm not going to complain if someone has a plan that finally moves policy in the right direction, albeit not quite as fast as I prefer.