The prevalence of automatic spending in the Federal budget threatens to overwhelm fiscal policy and the economy. More than two-thirds of Federal spending (including interest payments) runs on effectively permanent authorizations, and Congress sets no limits on the totals. This form of spending, mostly for the government’s entitlement programs, is the sole cause of spending growth as a share of the economy, and the main contributor to the government’s mounting debt – which has reached its highest levels since just after World War II, and continues to grow.
When the Congressional Budget Act was written in 1974, its authors did not anticipate automatic spending and chronic deficits would become so dominant. Over the years, additional measures were developed to gain control of this spending – such as “pay-as-you-go” and sequestration – but have proved inadequate. In addition, numerous Federal programs continue to receive appropriations even though they have never been authorized or their authorizations have expired. Thus, they represent another form of automatic spending, and a further abdication of Congress’s fiscal responsibilities.
Washington’s entitlement programs have grown cumbersome and costly, and require fundamental reform. Budget procedures can help by creating or enhancing incentives and disciplines that drive reform. A central aim of a new budget process must be to gain control of the government’s automatic spending.
Read the full paper here.