Revised March 24, 2004


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The House Budget Committee adopted legislation on March 17 that would set caps on discretionary programs for each of the next five years.  This legislation raises serious concerns.

The caps in the legislation are designed to lock in the steep cuts in domestic discretionary programs outside homeland security that are featured in the House Budget Committee’s new budget plan (i.e., in the budget resolution the Committee approved) and in the budget the Senate adopted on March 12.  (The legislation the House Budget Committee approved would set the caps at the discretionary spending levels included in the final budget resolution that the House and Senate work out in conference.)  The House Budget Committee plan calls for $113 billion in funding reductions over five years in domestic discretionary programs outside homeland security.  The Senate plan calls for $117 billion in cuts in these programs.


Caps Would Be Used To Pay For Tax Cuts, Not To Achieve Deficit Reduction


Unrealistic Caps Can Undermine Fiscal Discipline

The proposed discretionary caps, however, would necessitate such large reductions that further discretionary cuts over the next five years would almost certainly be out of the question.  That would mean there would be nothing left to give on the discretionary side of the budget to help induce tax-cut advocates to agree to a comprehensive deficit-reduction package that restores some revenues.  The proposed five-year discretionary caps consequently are likely to set back the cause of deficit reduction by making it harder to develop and pass a major, multi-year deficit-reduction package that covers all parts of the budget.

Moreover, it is impossible to know at this point at what levels to set five-year caps, because reliable estimates of defense costs in years after 2005 are lacking.  As noted, the Administration has apparently “low-balled” the out-year numbers for defense spending in its budget.  Despite this uncertainty and the lesson that caps need to be realistic to be enforceable, the House Budget Committee has endorsed caps that are more severe, and would require even deeper cuts, than the unrealistic 1997 caps that could not be sustained.