Peanut butter and jelly. Fred Astaire and Ginger Rogers. Budget limits and budget cuts. Some things just pair perfectly together.
Here at the Texas Public Policy Foundation, I’m sometimes asked why my focus lately has been on budget limits—as seen in our Conservative Texas Budget (the model for which has been adopted by other states) and our Responsible American Budget. Both of these set hard maximum limits for what can be considered as conservative, “no government growth” budgets.
A state or national budget should grow less than the simple formula of population growth plus inflation. Beyond that, budget writers truly are increasing the size and scope of government, which crowds out the average American’s opportunities to prosper.
But why am I not talking more about budget cuts, I’ve been asked. I am! If I had my way, the federal budget would be about a quarter of its size. The actual budget proposal I worked on during my year at the White House (for FY 2021) proposed a record of $4.6 trillion in less national debt over a decade, made most of the Trump tax cuts permanent, and would have balanced the budget over time.
The truth is that budget limits and budget cuts aren’t mutually exclusive—they’re a perfect pairing. Budget limits tell budget writers, “This much, and no further.” Budget cuts are an opportunity for those writers to demonstrate real fiscal conservatism by reducing the size and scope of government.
And over time, budget limits will cut the budget as a share of the nation’s Gross Domestic Product (GDP), because the GDP tends to grow faster than population-plus-inflation.
At the national level, the U.S. budget picture would be much improved if the federal government had spent no more than population-plus-inflation since 2000. Instead of increasing our national debt by $16.2 trillion in that time, we would instead have seen a surplus of $2.6 trillion.
Budget cuts—which could have been achieved by, say, sticking with the welfare reforms enacted in 1996—would make that picture even brighter.
Here’s what we know: Irresponsible government spending damages the productive private sector through redistribution of resources, higher taxes, higher price inflation, and higher interest rates, reducing Americans’ real incomes, job opportunities, and prosperity.
Budget limits and budget cuts are both ways to attack government spending—from different directions. Both are useful; both are needed. Supporting budget limits doesn’t mean supporting more spending; limits and cuts can be embraced at the same time and for the same purpose—to allow more Americans the freedom to prosper.
Vance Ginn, Ph.D.