Another bipartisan group of Senators is introducing legislation to promote fiscal reform. Recently we saw Senators Jeanne Shaheen (D-NH) and Johnny Isakson (R-GA) work together in support of biennial budgeting. Today, Senators Claire McCaskill (D-MO) and Bob Corker (R-TN) are introducing legislation to enact graduated caps on federal spending -- the Commitment to American Prosperity (CAP) Act.
Sen. McCaskill has been an outspoken advocate of spending caps. Last year, she and Sen. Jeff Sessions (R-AL) -- the new ranking member of the Senate Budget Committee -- repeatedly forced votes on a discretionary spending cap. The idea had strong support in the last Congress, but fell just short of the 60 vote threshold.
In this renewed initiative, Sen. McCaskill has joined forces with Sen. Corker, another strong supporter of spending caps. The CAP Act would reduce both discretionary and mandatory spending over a period of 10 years by capping total spending at 20.6 percent of GDP by the end of the decade. Under CBO's current law baseline, spending is projected to be closer to 24 percent of GDP.
In the press release, Sen. 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." Sen. Corker continued,
"Cutting trillions of dollars from the federal budget in the coming years won't be easy or painless; it will require backbone and discipline on the part of policy makers and shared sacrifice for the country. I believe Americans will be willing to make short-term sacrifices for the long-term good of our country and demand commensurate actions from their elected officials."
The CAP Act has seven co-sponsors on board: Sens. Lamar Alexander (R-TN), Richard Burr (R-NC), Saxby Chambliss (R-GA), Jim Inhofe (R-OK), Johnny Isakson (R-GA), Mark Kirk (R-IL), and John McCain (R-AZ).
In the proposal, spending caps would begin in 2013 at an effective rate of 22.25 percent of GDP, and this cap will be incrementally decreased each year over the course of the decade. Caps would be enforced through a sequester, and require a two-thirds vote in both Houses to be exceeded.
CRFB applauds this attempt to address our burgeoning debt, and is a supporter of identifying budget process reforms to help stabilize the debt. Importantly, the CAP Act looks beyond simply cutting spending in 2011 and puts forward a medium term spending framework.
The caps are, however, quite severe -- bringing total spending down to below 21 percent of GDP whereas other fiscal plans out there have had a hard time getting it down to 22 percent. In addition, the plan exempts tax expenditures, which could lead politicians to simply substitute spending through the tax code for traditional spending.
Still, aggregate spending caps such as these certainly merit consideration, and such proposals are quite helpful in moving the fiscal conversation forward. By moving beyond discretionary spending caps, the CAP Act recognizes that all areas of the budget -- not just domestic discretionary spending -- must be subject to scrutiny. We agree.
Note: Blog has been updated from the initial posting