January 20, 2010

BUDGET GAMES

By Idaho Senator Mike Crapo

The President will release his budget request for Fiscal Year (FY) 2011 in early February. As a member of the Senate Budget Committee, I will be reviewing the proposal and questioning Administration officials when they appear before the Committee. I will approach the hearings with the faint hope that the Administration recognizes that we cannot spend our way to prosperity. Initial indications, however, are not promising.

Rather than controlling spending, the Administration priority seems to be raising taxes to support additional spending. The full details of the President's budget aren't available yet, but it is troubling that the first official budget proposal announced is a tax increase on selected banks, including some that did not receive government bailout funds. Unfortunately, this is a clear signal from the Administration that tax increases on individuals and businesses alike will continue to form the backbone of its fiscal policy. In addition, the non-partisan budget experts at the Congressional Budget Office will likely repeat what they already determined on the health care bill: that the fees imposed on various health care industries would likely be passed on to consumers.

There have also been reports suggesting that the White House may make a proposal claiming fiscal responsibility for holding discretionary spending flat, based on the levels of last year's spending. Unfortunately, such a proposal would not be a sign of fiscal responsibility because such a "flat" budget would be based on last year's inflated baseline. Despite the difficult fiscal situation we were already facing, Congressional leadership significantly increased discretionary spending in the recently enacted FY 2010 spending bills---in some cases, more than 23 percent over Fiscal Year (FY) 2009 levels.

These massive increases do not even take into account the hundreds of billions of dollars in un-offset discretionary funding provided in last year's stimulus bill, which had the effect of providing many government programs with an extra year's worth of spending. Taking this into account, it is clear that the proposal to hold next year's spending at these inflated levels does not show true fiscal responsibility. It shows a willingness to play games with the budget to disguise the overspending already incurred.

Moreover, there have been no proposals from the Administration to address the biggest challenge we face: $70 trillion in unfunded liabilities over the next 75 years for entitlement programs. Instead, we have the Democrats' health care reform proposal, which provides for a major expansion of Medicaid and the creation of a massive new entitlement program.

Just last month, Congress voted to raise the debt limit to an all-time record high of nearly $12.4 trillion. Now, we are back again this month with a proposal before us to raise the debt ceiling to more than $14 trillion. Of the portion of our debt that is held by the public, foreign governments and private entities hold nearly half. China alone holds 11 percent of our debt held by the public. Recently, Moody's suggested that the U.S. could ultimately lose its AAA rating if fiscal deficits and heavy debts are not effectively managed.

There are serious economic consequences for not restraining our deficits and debt. Our budget situation is not something we can paper over simply to move on to the next issue. We cannot continue to play political games with the budget. But to claim fiscal responsibility for proposing to hold spending flat after having increased it by substantial amounts, both in the appropriations process and with the stimulus bill, the previous year is doing just that. Please go to http://crapo.senate.gov for more on my policies and record on the budget.

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