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Four Steps on the Road to a Balanced Budget

Posted on January 15, 2015
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"Uscapitolindaylight" by Kevin McCoy. Licensed under CC BY-SA 2.0 via Wikimedia Commons.



(This originally appeared in the Wall Street Journal’s Think Tank)

Congressional Republicans will be meeting in Hershey, Pa., the next couple of days, and the budget is sure to be discussed. Despite the improving numbers, balancing the federal budget in 10 years won’t be easy.

The budget process is purely a congressional effort. The president doesn’t sign the resolution, though his signature is required to approve the annual spending bills and the reconciliation bills that often flow from the budget.

Democrats may offer alternatives, but it is highly unlikely that they would offer any votes to help the GOP in efforts to pass a balanced budget. The congressional budget process is usually a partisan effort, as both sides offer their governing visions for the coming year.

Here are four things that members of Congress have to consider as they try to balance the budget:

1. Discretionary spending. This is the amount that the federal government spends through the appropriations process, the 12 bills that should be passed individually but are often packaged in one big omnibus. Conservatives rightly hate the omnibus, but they also insist on unrealistic spending levels that make it impossible to pass the individual bills. Getting real on discretionary numbers would help make it possible to return to regular order.

2. Entitlement spending. The real problem in the out-years comes with automatic spending that makes up the biggest portion of the federal budget. Social Security and Medicare are popular middle-class programs, and it’s politically risky for Republicans to tinker with them. The GOP usually tries to root out waste and fraud in welfare programs aimed at helping the poor; but in the process, Republicans are often accused of being insensitive to the needs of the poor. Yet you can’t balance the budget by not touching entitlements.

3. Revenue. Republicans usually like to cut taxes in their budgets, and they argue that the economic growth that comes from those taxcuts will help spur greater revenue. They are likely to hire a scorekeeper who generally agrees with this philosophy, though there is a limit to how much that scorekeeper–the head of the Congressional Budget Office–can help. In the 1995 budget, the taxcut proposed by Republicans equaled exactly the Medicare cuts that they also proposed. It would be helpful if the GOP didn’t replicate that decision this time around.

4. Reconciliation. The House usually likes to tell the Senate what to do on budget reconciliation, but it is up to Senate Majority Leader Mitch McConnell to decide whether he is going to need those instructions and for what items he would use them. The Senate used this budget procedure to pass Obamacare, so it seems fair to use reconciliation to put a repeal of the health-care law on the president’s desk. But using reconciliation for tax reform could be mistake and precipitate a White House veto.