March 20, 2012

Mercatus Center Economists on the House Republican Budget

David M. Primo

Senior Affiliated Scholar

Jason J. Fichtner

Former Senior Research Fellow

Charles Blahous

J. Fish and Lillian F. Smith Chair

Veronique de Rugy

Senior Research Fellow
Summary

Mercatus Center scholars respond to House Republicans’ budget release.

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Mercatus Center scholars respond to House Republicans’ budget release:

Discretionary Spending Loopholes

“It’s an overstatement to call the proposed discretionary spending reductions and caps ‘fiscal discipline.’ Congress blows through budget limits every year by designating items as ‘emergency’ and ‘disaster’ spending that often have nothing to do with either. These loopholes are big enough to walk through. At a minimum, these should have been significantly tightened. Better yet, Congress should begin serious consideration of constitutional budget rules that would truly constrain federal spending. In the absence of these rules, determined legislators will always find a way to spend more.” David Primo, Mercatus Center Senior Scholar

Social Security

“We cannot simply ‘leave Social Security alone.' It will grow right into insolvency, leaving the most vulnerable Americans without reliable retirement benefits. The failure by both parties to reform the program is particularly irresponsible as Congress is simultaneously tapping its sole designated funding source—the payroll tax—to finance more ‘temporary’ stimulus." Jason Fichtner, Mercatus Center Senior Research Fellow

Medicare and Health Care Spending

“The most fiscally significant thing this budget would do is to repeal the massive, subsidized coverage expansion in the health care law. As my forthcoming paper shows, the law will add more than $340 billion to federal deficits and more than $1.15 trillion to federal spending over the next decade under the most optimistic scenarios. The only hope of preventing this is to scale back these subsidies before people become dependent on them in 2014.” Chuck Blahous, Mercatus Center Senior Research Fellow

Taxes

“Simplifying and lowering income tax rates, and reducing the corporate tax rate to the OECD average will go a long way toward improving American competitiveness and growth. But we also need to end the ridiculously anti-competitive practice of double-taxing exports, and eliminate all of the special-interest provisions. If you leave the door open to tax breaks to some, you leave it open to tax breaks for all, and soon enough we're right back where we started." Jason Fichtner

Fiscal Sustainability

“The House Republican budget would restrain the growth of spending to below 20 percent of GDP, enabling spending rates to remain within historical norms even after the Baby Boomers swell Social Security and Medicare. With no budget coming out of the Senate, and with the President’s budget allowing spending to grow faster than the American economy, this budget is now the only fiscally responsible approach on the table.” Chuck Blahous

Defense Sequester

“It sets a terrible precedent to simply let the Pentagon off the hook. If the military were to agree to a 2013 defense budget that spends $492 billion or less—the amount it would have after sequestration—defense officials could choose which programs to cut rather than enduring a cut across the board. Under this scenario, Congress could alter the BCA to spread the planned savings over time, avoiding a sudden bite.”

“We’re not a year out from the Budget Control Act, and already both the President and House Republicans are attempting to exempt their own favored programs from the sequester cuts they agreed to in exchange for the debt-limit increase. This is a perfect example of why we must never buy into this so-called ‘balanced approach’ of tax-and-spend today, save tomorrow. When it comes to Washington budget deals, tomorrow’s promises of fiscal virtue seldom materialize.”  Veronique de Rugy, Mercatus Center Senior Research Fellow