House Takes Early Steps on Deficit Reduction

The 112th Congress has moved quickly to signal a new focus on fiscal responsibility and attention to our ballooning national debt. As Congress convened this week the new leadership of the House of Representatives used some of its first actions to implement some of the changes they promised in the election in an attempt to convince voters that they are, quite literally, getting their fiscal house in order.

In their first move after new leaders were chosen Wednesday, the House adopted a number of changes to the rules which govern the body. Many of these new rules will directly impact the budget and appropriations process. We released a policy paper yesterday analyzing these changes. There are several positive steps, such as the long-term spending point of order, spending reduction accounts, and eliminating the Gephardt Rule. However, the focus solely on spending and not on deficit reduction is problematic.

Replacing the two‐ sided PAYGO rule with a one‐sided CUTGO rule will not only make it harder to offset legislation, but also exempt potentially budget‐busting tax cuts from any discipline...

We have a similar concern with the new budget reconciliation rules, which will no longer allow budget reconciliation to increase spending but will permit it to be used for tax cuts which increase the deficit. This is a step backward that would allow for a return to the process that was used to enact the tax cuts in 2001 and 2003 that continue to contribute to our fiscal problems...

Changes to statutory PAYGO (which differs from PAYGO rules both in substance and legal authority) also are disappointing. Although internal budget rules cannot change the PAYGO law directly, they are able to indirectly weaken the implementation of the law by allowing the Chairman of the Budget Committee to exclude the costs of certain policies from the cost estimates for statutory PAYGO.

Read the paper here for full analysis. Substantial reform of the budget process, along the lines recommended by the Peterson-Pew Commission on Budget Reform in the recent report, Getting Back in the Black, will be required.

Today, the second measure passed by the House took the first steps in reducing spending. Lawmakers voted overwhelmingly in a 410-13 vote to reduce House operating costs. The measure reduces the member's office allowance, staff salaries and expenses for leadership offices, and committee budgets each by 5 percent from 2010 levels. It reduces salaries and expenses for the House Appropriations Committeee by 9 percent. Republicans claim the changes will save an estimated $35 million this year.

While reducing the House’s operating costs will not make a significant dent in reducing the debt, it is a good symbolic step showing that legislators are willing to share in the sacrifies they will impose upon others as they embark upon substantial deficit reduction, such as plans to reduce the overall national budget back to 2008 levels.  

The next piece of legislation for the House will be repeal of the Patient Protection and Affordable Care Act - the health care reform law that President Obama signed into law in March 2010. Repealing the law is a priority for Republicans. In response to moves to repeal the law, CBO Director Douglas Elmendorf sent a letter to Speaker of the House John Boehner (R-OH), saying in part, "we expect that repealing that legislation would increase budget deficits." The preliminary analysis from CBO estimates that repeal will add about $230 billion to the deficit over a ten year period.

The first actions on Capitol Hill leave little doubt that fiscal policy will be center stage in 2011. We will continue to track developments and examine how they will impact the fiscal outlook.