Tag Archives: GRH

The CAP Act: A Glass Half-Full?

Aaron Merrill is “very pessimistic” about the new “CAP Act” proposal. I’m mildly pessimistic.

First, a few things that I think are good signs:

  1. Unlike PAYGO, the law isn’t just about making sure spending is paid for. It is an attempt to actually limit spending. Also unlike PAYGO, the law targets existing, not just new programs.
  2. In the event that Congress can’t agree on where to cut, the act would trigger automatic, evenly distributed cuts across all categories of spending. This is good. Across-the-board cuts are sufficiently unpleasant to make legislators want to prioritize. But since the cuts will be evenly-distributed, Congress won’t have a strong incentive to scuttle the bill altogether. The last time something like this was tried (the Gramm-Rudman-Hollings (GRH) Act of 1985), a number of programs were exempted from the automatic cuts. These included: Social Security (which was actually in surplus at the time), veterans’ pensions, the earned income tax credit, the president’s compensation, the postal service, welfare payments, and (for the most part) Medicare. This meant that the cuts had to be concentrated on a relatively few programs. David Primo writes (p. 111) that: “At one point, GRH authorized the [office of management and budget (OMB)] to make cuts of over 30 percent to both defense and unprotected discretionary spending.” Faced with this option, Congress found it much more palatable to simply repeal GRH.
  3. It is smart to give OMB—an executive branch agency—the authority to execute the automatic cuts. The goal here is to tie legislators’ hands so that they don’t have to police themselves. GRH initially gave Congress’s Government Accountability Office the authority to execute the automatic cuts. But when a court struck that provision down, the fallback provision was for a joint committee of Congress to execute the cuts. As Primo explained (p. 111), this meant that Congress had “to pass legislation each time it wanted to trigger a sequester.” You can imagine how eager they were to do that. Ultimately, GRH was amended so that the OMB would make the cuts. And to me, that makes sense.   
  4. The CAP Act would permit legislators to avoid the cuts if they can muster a supermajority in both houses. This, too, is a step in the right direction, though I share Aaron’s concern that it is not enough. Normal legislation, of course, can always be repealed with 60 votes in the Senate and a simple majority in the House, plus the President’s signature. By requiring a supermajority in both chambers, this raises the hurdle a bit. But I would be much happier if it were a higher bar (90% of lawmakers?). Of course, even a 90% hurdle could be overcome by repealing the law. In the end, a Constitutional Amendment may be the only way to really bind.    
  5. The cuts are gradual which means that they are more likely to happen. As the GRH experience shows, spending reduction plans that call for cuts that are too dramatic often end up being repealed or ignored.

But it isn’t all sunlight and rainbows. I still have some concerns:

  1. As Aaron points out, the bill is enforced via a “budgetary point of order.” As my friend Jim Musser explained to me, the House Rules Committee can and often does waive all points of order when they consider certain pieces of legislation. In this case, this evidently means that a simple majority of a committee can basically suspend this rule whenever it so chooses.
  2. The reductions are not enough to solve the problem. They want to get spending down to its historical average, but I’d point out that the historical spending average is greater than the historical revenue average and this is a formula of unsustainable debt accumulation.
  3. The reduction in the growth of spending doesn’t start until 2013 and even then, the glide path is so shallow that after 10 years, the national debt will still be well above 100 percent of GDP (assuming revenue remains at its 10 year average).
  4. It is possible that the CAP Act could—perversely—act as an excuse to spend up to the limit. 20.6% may have been the norm for the last 40 years, but I don’t think it is the ideal by any stretch.