The national debt ceiling is capped at yesterday’s level, having hit the March 15 suspension deadline in the Bipartisan Budget Act of 2015. Accounting creativity to keep spending flat will exhaust itself around October, creating the pressure to raise the limit to avoid default.
The national debt now stands at $19.918 trillion.
But there’s little new news about it today. Washington is instead talking about frozen, non-blooming cherry blossoms.
And, of course, President Donald Trump’s new America First: A Budget Blueprint to Make America Great Again.
NASHVILLE, TN – MARCH 15: President Donald Trump speaks at a rally on March 15, 2017 in Nashville, Tennessee. (Photo by Andrea Morales/Getty Images)
Most notable is the Environmental Protection Agency’s (EPA) nearly 1/3 cut, or as the budget proposal puts it, “a savings of $2.6 billion, or 31 percent, from the 2017 annualized CR [continuing resolution] level” (p. 41). The big increase is Department of Defense spending of 10 percent, or $52 billion (p. 15).
It’s remarkable how big the federal government has become, and how it has been auto-piloted to grow more and absorb ever more private activity. The president’s proposal today doesn’t cover the “mandatory” or “non-discretionary” spending like Medicare and Social Security which is actually over 70 percent of the whole.
In January, the Congressional Budget Office (CBO) reported that fiscal year 2016 federal spending was $3.854 trillion. We ran a $587 billion deficit.
So there’s a lot more cutting to do beyond what we see in Trump’s approximately 27 percent discretionary piece today. Zeroing out Big Bird and the Corporation for Public Broadcasting (p. 5) along with EPA cuts still won’t get us there.
The debt ceiling issue is being downplayed in a way not imaginable during the divided government of the Obama administration. Once upon a time, a balanced budget was said to be a prerequisite for an increase in the debt limit, and Mr. Trump himself had criticized Republicans for agreeing to ceiling increases before.
Treasury Secretary Steven T. Mnuchin said in a March 8, 2017 letter to congressional leadership that he could keep the government open for a time with “extraordinary measures” that will “continue until the debt limit is either raised or suspended.” Several news reports called it a “warning,” but it seems to have been taken as a signal that nothing need be done right this second.
As Mark Meadows (R-NC) was quoted in Bloomberg, “I don’t see a showdown … I think that all us believe that a debt ceiling increase with the appropriate amount of real balanced-budget directives is accomplishable under this president and a unified government.”
Time flies, but there’s a lot on the plate — the Obamacare replacement proposal the big one. Congress will need to prepare for tying a late summer or early fall authorization increasing the debt ceiling, or heaven forbid another suspension, with more cuts in federal spending and regulatory programs in addition to what Mr. Trump has called for to have “the appropriate amount of real balanced-budget directives.”
Getting control of regulatory overreach can improve prospects for getting spending under control. The new budget Blueprint contains a brief chapter on “Regulation” (pp. 9-10), highlighting key Trump executive orders: a temporary regulatory moratorium; a one-rule-in, two-rules-out proposal; and a directive to establish “a Regulatory Reform Officer and a Regulatory Reform Task Force to carry out the President’s regulatory reform priorities” (p. 9).
Rolling back federal red tape and over-regulation can spur dynamic growth, and that could lessen deficits (and future debt) indirectly.
Since the OMB has to figure out regulatory cuts to meet Trump’s one-in, two-out regulatory agenda anyway, it’s a good time to crowd source that over to Congress, because there’s an interesting idea just reintroduced this week by Sens. Cory Gardner (R-Colorado) and Mike Lee (R-Utah) called the Reducing Excessive Government (or REG Act; S. 634).
It’s a regulatory bill that addresses the debt limit question.
Sen. Lee already has the most prominent “regulatory budgeting” proposal with respect to limiting amounts agencies require the private sector to spend on rule compliance, called the Article I Regulatory Budget Act.
However, for present purposes, these two senators propose making increases in the debt ceiling contingent upon proportional cuts in spending by regulatory agencies. (I must also note there’s another excellent “REG Act” in the 115th Congress, H.R. 462, the Reforming Executive Guidance Act by Rep. Jason Lewis (R-Minnesota) to make significant guidance documents subject to notice-and-comment before they take effect.)
The Gardner-Lee REG Act stipulates that for any debt limit increase or suspension, the “direct cost of Federal regulation” would need to be cut by at least 15 percent over the following ten year period.
For example, according to a one-page summary, “Congress raises the debt limit by $1 trillion, the REG Act would require a reduction in regulatory costs of $150 billion.”
These regulatory costs refer to federal agency costs of “issuing and enforcing federal regulations, rules, statements and legislation.” Savings to the private sector would be a bonus, as would any ripple effects to the federal budget and debt owing to a healthier economy and business environment.
Also important and highly complementary to an effort such as this is Sen. Dan Sullivan’s (R-Alaska) version is S. 56, the RED Tape Act, (or, Regulations Endanger Democracy), which would basically codify Trump’s executive order on ejecting two rules for each new rule. It also incorporates the guidance documents, bulletins, notices, circulars, memoranda, manuals agencies issue.
In all cases, we’ll need to identify the major and minor rules and guidance being cut; the REG Act would have the Government Accountability Office (GAO) report on which rules cost the economy over $100 million. Congress would consider a package of cuts that would be privileged, voted on via an expedited basis similar to the Congressional Review Act (CRA) process.
If the rule cuts don’t pass, a “snapback” tamps down the debt limit increase, freezing things like they are right now.
Congress and the White House see fiscal health and regulatory restraint as operating hand in hand. The necessity of addressing the debt limit could bring both issues to the forefront, since knowing which rules need rollback helps inform which agency budgets to rethink, bringing federal spending under better control.
— Buzz Gawker (@BuzzGawker) March 20, 2017
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