share
Print this page

Problems with Global Spending Caps

[“Global Spending Cap” refers to a limit Congress places on the amount of money the government is allowed to spend each year.  It can be one cap affecting the overall amount, or it might refer to placing a cap on each part of federal spending (for instance, housing and defense).]

Deficit reduction is an imperative! The federal government is spending roughly 40 percent more each year than it receives in revenue. Both spending and revenue changes need to be made in order to meet current and future needs. Every entity that gains profit (individually or corporately) shares the responsibility to support what we are committed to in the Constitution, what we are called to by faith, and what America values – allowing all members of our communities to live in human dignity.

Many see global caps on spending as a simple way to reduce spending. However, proponents do not specify how the strands of the safety-net would be cut. A global cap freezes spending in every area, across the board, at a point in time. Current spending is at 24.7 percent of Gross Domestic Product (GDP). The global caps, as proposed in the Corker-McCaskill plan, would cap overall spending at 20.6 percent of GDP. In contrast, spending during the Reagan administration averaged 22% of GDP - at a time prior to facing these challenges:

  • Aging population – the percentage of Americans over the age of 65 will grow by more than half in the next 25 years
  • Two (or three) unpaid-for wars
  • Homeland Security
  • Ever-increasing interest on the debt
  • Ten years of reduced revenues due to the tax benefits provided in 2001 and 2003
  • Decreased revenue due to the recession and high unemployment
  • Veterans returning with far greater health care needs than ever in our history, and in higher numbers.

Proposals for global spending caps would, indeed, reduce spending.  However, the question of “at what cost” must be addressed

Impact of Capping Spending at 20% - 22% OF GDP

 To achieve the proposed levels (in the range of 20 to 22 percent of GDP), the safety-net would need to be shredded. Programs, which have already experienced cuts, would be far further slashed. Medicaid, Medicare and Social Security would become unrecognizable. 

  • In order to not exceed these caps, Medicaid would have to be made into a block grant program, with $547 billion being cut from the program in the first nine years. States would be given tremendous discretion in determining who would receive assistance, and what would be covered.
  • Medicare would no longer be a guaranteed program for those who have paid into it throughout his/her lifetime.
  • Non-defense discretionary spending would be decimated to fit these caps. Successful programs such as LIHEAP, WIC and housing assistance programs would be nearly eliminated.
  • SNAP (Supplemental Nutrition Assistance Program, formerly known as food stamps), currently mandated to serve all eligible persons, is proposed to become a block grant program with limited funding. 
  • Social Security would, for the first time, would face unprecedented cuts.
  • The House and Senate would be forced to take politically difficult votes to respond to national emergencies like natural disasters and recessions, which would turn crises into political theatre. A case in point is the disasters of late April in which tornadoes devastated many towns, killed over 300 members of those communities, and left tens of thousands without homes or infrastructure. The federal government is now determining how to best meet the needs of families and communities – to the cost of billions of dollars. These are responsibilities we all share.
  • Members of the House and the Senate Appropriations Committees will give up much of their power to determine how money will be spent. 

Mechanisms of Global Spending Caps

 The following enforcement mechanisms are anticipated if global spending caps are established:

  • If Congress fails to meet the annual cap, the Office of Management and Budget is authorized to make evenly distributed, simultaneous cuts throughout the federal budget to bring spending down to the pre-determined level.
  • It would take a supermajority (2/3 vote) of Senate and House to undo spending caps
  • It puts in place a 10-year glide path to cap all spending – discretionary and mandatory – to a declining percentage of the country’s gross domestic product, eventually bringing spending down from the current level, 24.7 percent of GDP, to the 40-year historical level of 20.6 percent

Conclusion

NETWORK believes that long-term deficits and debt must be brought under control. However, this must be done in a responsible manner. Increasing revenues, cutting defense spending, and maintaining safety net programs must all be considered. Continuing to fund tax benefits for millionaires and weapons at the expense of homes, healthcare and food is morally reprehensible – and also unsustainable and detrimental to the long-term health of our country.