Spending Caps Play Essential Role in Spending Reform

ATR ^ | 2011-08-08 | Center for Fiscal Accountability

[92nina]

The S&P’s downgrade of America’s credit rating has caused those on the left and right to immediately lambast the debt limit deal reached last week for insufficiently tackling the nation’s debt (side bar: S&P warned weeks ago that even in the event that a deal was reached, it would still want to dole out a slap on the wrist of the country’s credit rating. Moreover, the downgrade was based on $2 trillion amateur error that greatly distorted the baseline S&P used. Also, these same credit rating agencies that are now supposedly unquestionably intuitive offered gold-plated ratings to the firms that proliferated the subprime mess and resulting financial crisis in 2008. Food for thought for those of you hysterically fashioning tin foil hats or shoveling your life savings under your mattress). What has been overlooked is the significance of the spending caps enacted in the debt limit deal. The government has not been subject to spending limits since 2002, and the resulting ten years of budget-busting spending should indicate even to the most skeptical that statutory caps are a true step in the right direction. The Budget Control Act of 2011 achieves $917 billion in savings by immediate spending cuts and capping discretionary spending for the next ten years. The spending cap defines a maximum dollar amount in spending, anchoring spending within an approximate range. The spending ceiling is still high, but represents an 8 percent decrease in discretionary spending over the next 10 years. Tethering future federal spending to law with some minor reductions provides the first step in reducing Obama’s 84 percent increase in non-defense discretionary spending...

Read more: http://www.atr.org/spending-caps-play-essential-role-reform-a6395#ixzz1UTGXJZaV

[92nina]

In the wake of S&P downgrade, the importance of spending caps can't be understated.

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