In the last two years, total federal debt surged by nearly $6 trillion, a 25% increase. In December 2020, congressional Democrats increased the debt limit by yet another $2.5 trillion (about $7,700 per person in the U.S.), and they are still trying to push through a massive, up to $5 trillion package of unaffordable and unwise subsidies.
The fruits of this debt burden — inflation, slower growth, and uncertainty — are already hurting American families, but it can get worse. Profligate spending can’t go on much longer without courting disaster.
Fortunately, Indiana’s newest U.S. senator and former businessperson Senator Mike Braun has put forward two well-designed paths to getting the federal budgets back on track. In fact, few members of Congress have done more to propose specific fixes to the federal government’s broken budgeting than Sen. Braun has.
People are also reading…
Sen. Braun introduced his latest proposal, the Responsible Budget Targets Act, with Rep. Tom Emmer. It would set reasonable annual spending caps, seemingly drawing inspiration from the successful and popular spending targets in peaceful and prosperous Switzerland.
These caps would gently slow spending growth until the budget reaches “primary balance,” that is, excluding interest on the debt. The federal debt burden would stop growing after a few years and then the debt would gradually decline as a share of national output.
Both in the transition to balance and after, the Responsible Budget Targets Act would balance the budget over the business cycle. This has clear advantages over annual balance. Revenue bounces around with the economy’s booms and busts. Trying to match spending and revenue every year is like riding a bull —it’s not easy, and sooner or later it’ll throw you.
The bill would instead let spending grow with a rolling average of economic growth from the last few years. This stabilizes spending as a percentage of GDP and promotes stability for both spending and revenue policies. In other words, businesses, households, and state governments wouldn’t have to worry about constant program changes solely due to the business cycle.
Spending growth would slow down just a little after primary deficits. That connects spending to revenues and makes sure that Congress gets control of deficits and debt. It would require offsets for emergency spending over the next six years, wisely not right away.
In February, Sen. Braun also proposed a constitutional amendment, the Business Cycle Balanced Budget Amendment (BCBBA) with Rep. Jodey Arrington. The BCBBA is far better written than other BBAs.
An earlier version of the BCBBA had the support of 46 House Republicans and 14 House Democrats. When they were members of the House, cosponsors included former White House chief of staff Mick Mulvaney (R-SC), Senator Cynthia Lummis (R-WY), Governor Jared Polis (D-CO), House Budget Committee Chair John Yarmuth (D-KY), and all six of Indiana’s House Republicans at the time: Larry Bucshon, Todd Rokita, Marlin Stutzman, Dan Burton, Mike Pence, and Todd Young.
The BCBBA would limit spending to the average revenue of the three prior years, adjusted for inflation and population growth. Spending would be far more stable and predictable than annual balance, as would revenue policy. Moreover, fiscal policy would be countercyclical: spending would be based on revenue from the boom years before a recession.
Emergency spending would require two-thirds support in both houses. Congress has easily met this threshold for real emergencies, yet it is high enough to preserve this escape valve for situations when it is truly needed.
Finally, it would let Congress phase out deficits over an entire decade. This is a long time, but Congress has let the budget get so out of control that that’s what it’ll take to get back on track.
Both proposals embrace balancing over the business cycle instead of every year. This approach is the gold standard for budget rules and should have broad, bipartisan support. It gives households and businesses more stable and predictable policies. It’s easier for policymakers to manage and gives them more ability to address other problems.
Sen. Braun and Reps. Emmer and Arrington deserve immense credit for reaching across the aisle with real solutions to America’s most pressing economic and national security challenge: controlling the federal government’s spiraling debt and dysfunction.
Josh Webb is state director of Americans for Prosperity-Indiana. Kurt Couchman is a senior fellow in fiscal policy at Americans for Prosperity. The opinions are the writers'.