Statement of Robert Greenstein, Executive Director of The Center on Budget and Policy Priorities, on the "Cut, Cap, and Balance Act" That the House Will Consider on July 19

WASHINGTON, July 15, 2011 /PRNewswire-USNewswire/ -- The "Cut, Cap, and Balance Act" that the House of Representatives will vote on next week stands out as one of the most ideologically extreme pieces of major budget legislation to come before Congress in years, if not decades.  It would go a long way toward enshrining Grover Norquist's version of America into law.  It is so extreme that even the budget plan of House Budget Committee Chairman Paul Ryan would not fully satisfy its requirements — the Ryan plan's budget cuts wouldn't be severe enough.

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The bill also would threaten the U.S. government with default and would likely cause the loss of roughly 700,000 jobs in the year ahead.  In addition, the bill would target programs for the poor for cuts, while protecting tax breaks for the wealthy and powerful.

The version of the "Cut, Cap, and Balance Act" that House Republican leaders are now circulating would require total federal spending to be shrunk to less than 20 percent of the Gross Domestic Product (GDP) by 2018 and years thereafter.  The Congressional Budget Office (CBO) has estimated that under the Ryan budget plan — which cuts non-security discretionary programs by 33 percent by 2021, cuts Medicaid by $1.4 trillion over the coming decade (and slices it in half by 2030), and shifts thousands of dollars a year in costs to Medicare beneficiaries — federal spending would exceed 20 percent of GDP in most coming years.  CBO estimates, for example, that federal spending under the Ryan plan would equal 20 1/4 percent of GDP in 2022 and 20 3/4 percent in 2030.

The budget cuts under "Cap, Cut, and Balance" would start with $111 billion in cuts in the fiscal year that starts October 1, 2011, about 75 days from now.  This would cause the loss of roughly 700,000 jobs in the current weak economy, relative to what the number of jobs would otherwise be.

Furthermore, the legislation bars any increase in the debt limit until both houses of Congress approve a constitutional amendment requiring that no measure that raises any taxes may pass Congress unless two-thirds of both the House and the Senate approve it.  This would render it virtually impossible ever to raise any revenue, even by closing egregious special-interest tax loopholes.

The legislation would thereby hold the needed increase in the debt limit hostage to congressional approval of a constitutional tax limitation.

Adding to the extreme nature of the measure, the legislation reverses a feature of every law of the past quarter-century that has contained a fiscal target or standard enforced by across-the-board cuts.  Since the Gramm-Rudman-Hollings law of 1985, all such laws have exempted the core basic assistance programs for the poorest Americans from such across-the-board cuts.  "Cut, Cap, and Balance," by contrast, subjects all such programs to across-the-board cuts if its spending caps would be exceeded.  

It does so even as it seeks to erect a constitutional firewall to safeguard tax cuts and tax breaks for the most well-off Americans.  Thus, an impoverished elderly widow living on Supplemental Security Income — which provides benefits that lift people to just 75 percent of the poverty line — could have her assistance cut back under the measure's across-the-board budget cuts even as millionaire hedge-fund managers retained their lucrative carried-interest tax breaks.

Claim That Social Security and Medicare Would Not Be Touched Is Highly Disingenuous

Some proponents of the legislation portray the measure as protecting Social Security and Medicare.  This claim is false.  The legislation would inexorably subject Social Security and Medicare to large reductions.

The measure does not cut Social Security or Medicare in 2012.  And it does not subject them to automatic cuts if its global spending caps are missed.  But it is inconceivable that policymakers would meet all of the bill’s severe annual spending caps — which would require trillions of dollars of budget cuts of unprecedented magnitude — through automatic across-the-board cuts year after year or else key government functions would be crippled.

Policymakers would have little alternative but to institute deep cuts in specific programs.  And as the largest programs in the federal budget, Social Security, Medicare, and Medicaid could not escape cuts of large size.  After all, by 2021, combined expenditures for these three programs will be nearly 45 percent greater than expenditures for all other programs (except interest payments).  Big cuts in these programs would be inevitable.

The Center on Budget and Policy Priorities is a nonprofit, nonpartisan research organization and policy institute that conducts research and analysis on a range of government policies and programs.  It is supported primarily by foundation grants.

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SOURCE Center on Budget and Policy Priorities