August 1, 2011 / 1:45 AM / in 7 years

U.S. lawmakers reach into the past on budget deal

WASHINGTON, July 31 (Reuters) - U.S. lawmakers reached into the past to find a way to enforce future budget cuts called for in the deal to raise the nation’s $14.3 trillion debt limit, but history shows these enforcement mechanisms do not always work.

The agreement reached by congressional leaders and the White House late Sunday calls up front for roughly $1 trillion in spending cuts over 10 years. Another $1.5 trillion worth of deficit reduction would be based on recommendations of a new bipartisan committee.

A major sticking point in the talks was the enforcement mechanism that would ensure further deficit reductions.

Under the deal, the special bipartisan panel would recommend steps to reduce the deficit. Any impasse by the panel or rejection of its recommendations by Congress would automatically trigger a round of spending cuts.

The spending cuts “should be a sword of equal sharpness and strength hanging over each party’s head,” Democratic Senator Charles Schumer told CNN’s “State of the Union.”

Lawmakers said the triggered cuts would include defense spending dear to Republicans, and Medicare, which is important to Democrats. The idea is to pressure both parties to come to terms on future cuts.

“You want to avoid the trigger,” said Democratic Senator Carl Levin.

The enforcement mechanism is very similar to the so-called Gramm-Rudman-Hollings spending cut trigger enacted in 1985. That law, named after its sponsors, included unrealistic spending targets that were linked to the size of the economy and lawmakers quickly found ways around it, analysts said.

Exceeding the targets was meant to trigger a round of spending cuts.

The law was eventually abandoned in favor of another budget discipline. So-called pay-as-you-go rules required lawmakers to find savings to pay for new spending or tax cuts.

The pay-go discipline worked for a while, but left gaping loopholes for anything that could be deemed emergency spending. Eventually, it too was abandoned by lawmakers.

“The track record is not good on these enforcement mechanisms,” said G. William Hoagland, a former Republican staff director for the Senate Budget Committee Republican.

Some analysts think the current political environment and threat of a credit rating down grade might be enough to ensure the special congressional committee reaches agreement on the second round of deficit reduction and Congress gives its approval.

“Not only is the Tea Party out there pushing on this stuff, there is also the threat of a credit rating loss,” said David Kendall of the Third Way, a centrist Democratic think tank.

The anti-Washington Tea Party movement, which helped Republicans win power in Congress in last year’s election, have been a powerful force behind the push to cut federal spending.

But whatever spending cuts lawmakers put in place over the next 10 years, they can always be reversed by a future Congress.

Steve Bell, a budget expert at the Bipartisan Policy Center, said the latest enforcement mechanism in the debt limit agreement likely has more teeth in it than previous trigger mechanisms “as long as they don’t ignore it.” (Reporting by Donna Smith; editing by Christopher Wilson)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below