Why “Back to the Future” Budgeting Doesn’t Work

2018-05-15T21:09:27+00:00February 2nd, 2011|Budget, Social Security|

The Center for Budget and Policy Priorities calls the McCaskill-Corker spending bill a ?look Ma no hands? approach to budgeting. We also see it as a dangerous trip ?Back to the Future?. That?s because , rather than making specific budget choices based on 2011 realities, their bill sends us back to the spending levels of the ?80s, only to then impose across-the board cuts when our ?Back to the Future? DeLorean breaks down. The Associated Press describes their budget plan this way:

?The legislation doesn’t actually propose cuts but instead sets spending caps and enforces them with the threat of automatic, across-the-board reductions. The target of 20.6 percent of gross domestic product is the average of federal spending over 1970-2008. A recent Congressional Budget Office report projects spending under current policies reaching 24 percent of GDP in 2021, which would require more than $800 billion in budget cuts in that year alone. That is significantly deeper than the recent proposal by President Barack Obama’s deficit commission, which recommended raising Social Security and Medicare retirement ages, and cutting military pensions, farm subsidies and a variety of other popular programs.?At a time when many families have been forced to tighten their pocketbooks, Congress must also learn to do the same,” McCaskill said. “This bill isn’t just about cutting back this year or next year; it’s about instilling permanent discipline to keep spending at a responsible level.?

There are so many problems with this Congressional budget axe approach and the families? analogy. Consider this; let?s say you need to cut your household spending by 15% to ?tighten your pocketbook?. Does that mean you can just tell your bank, “I?ll be sending you 15% less this year for my mortgage?? Of course not, because you have a financial obligation to pay back the money you borrowed from the bank just as the federal government has an obligation to pay Social Security beneficiaries what was borrowed from the Trust Fund. When families have to clamp down on spending, they make certain to keep paying their debts while looking for other ways to trim expenses. That?s real fiscal discipline. American families don?t have the luxury of backing out of their financial obligations.In its analysis of the McCaskill-Corker plan, the Center for Budget and Policy Priorities more eloquently says:

The proposal from Senators Bob Corker (R-TN) and Claire McCaskill (D-MO) to limit total federal spending to 20.6 percent of gross domestic product (GDP), the average from 1970 to 2008, would force draconian cuts in Social Security, Medicare, and many other programs while making it harder for the nation to recover from recession.That?s because the proposal, which would take effect in 2013 and phase in over 10 years, does not account for fundamental changes in society and government: the aging of the population, substantial increases in health care costs, and new federal responsibilities in areas such as homeland security, veterans? health care, and prescription drug coverage for seniors. These factors make the spending levels of an earlier era inapplicable for today?s discussions about how to reduce looming budget deficits and put the budget on a sustainable path in the coming years

Conservative think-tanks like the Heritage Foundation have pushed these kinds of time-warp budget solutions for years because it?s the easiest way to garner the largest cuts in Social Security and Medicare. No other Democrats have signed on to this plan and Majority Leader Harry Reid says:

“I will do everything that I can in throwing my legislative body in front of any efforts to weaken Social Security,” Senate Majority Leader Harry Reid said. “Social Security has not contributed one penny to the debt, and as I’ve said before, people should leave Social Security alone.”