Simple Steps to Rein in Federal Spending

Plans to reduce American federal spending are few and controversial but there are several simple solutions lawmakers could enact.

With nearly $14 trillion in debt and spending many billions more than it has, the American federal government has to brace for deep austerity measures. Even if plans to seriously rein in spending are few and controversial, there are simple yet effective solutions lawmakers could enact.

One is to freeze federal spending altogether. Revenues collapsed to barely 15 percent of the national income as a result of the recession but the Congressional Budget Office estimates that tax revenues will grow by an average of 7.3 percent annually over the next decade.

Without an increase in government spending, the budget will balance itself by 2014. Even if spending is allowed to keep pace with inflation and grow at 2 percent a year, the budget balances before 2020.

Chris Edwards of the libertarian Cato Institute’s Downsizing the federal government has a similar proposal: a legal cap on overall federal spending. “A simple form of such a cap would specify that total federal outlays cannot rise more than inflation plus population growth each year,” he writes.

If it did, the law would require that the president sequester, or cut, spending across the board to meet the limit.

With a cap in place, federal spending would grow at just 3 percent a year for the next ten years. Without a need to raise taxes, the balance would almost balance itself by 2020 when total spending could be $1 trillion less than projected under current trends.

Edwards calls it a “cut and cap” and recommends Republicans to condition their vote for raising the federal debt ceiling this spring on implementing such a measure.