What Republicans Can Do about the Federal Budget Now

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When the new 2023 fiscal year began October 1, Washington had been running a series of trillion-dollar deficits. This year’s Christmastime budget showdown, and the adventures to come in 2023, underscore Congress’ inability to cut such spending. Policy makers need pressure put on them to both do that and to overhaul the regulatory state now escalating alongside spending. Like cutting spending, cutting regulations can also—indirectly—cut deficits.

As CEI’s founder Fred L. Smith Jr. sometimes remarks about our prosperous but unfortunately exploitable economy, “A bigger dog can have more ticks.” Cutting both spending and regulation can mean the dog doesn’t eventually perish, even if smaller ticks remain affixed.   

In chaos of preparing a fiscal year 2023 budget, some in the House are pressing for a “clean” continuing resolution extending current spending levels temporarily so the 118th Congress’ Republican majority calls the shots in early 2023. But on the Senate side, Republican negotiators have given support to the House Democrats’ full $1.7 trillion unread omnibus that would cover the fiscal year through September 30, 2023. Sen. Rand Paul (R-KY) excoriated the deal, calling Republicans “emasculated.” Sens. Rick Scott (R-FL) and Mike Lee (R-UT) called on Congress and to complete the final deal to 2023.

Paired with the debt ceiling, the budget represents one of the final institutions left capable of addressing Washington’s heft, marking the GOP’s best chance to not let crisis go to waste.

Either way, a temporary patch is sought before Christmas, or the dreaded “partial shutdown” happens. Yet there’s no need to belabor the obvious that a federal shutdown, of which there have been manydoes not shut down the federal government. Taxes will keep coming out of your paycheck.

Yet, there are arguably ample reasons to deliberately shut down parts of the federal government if necessary to prevent the spending time bombs set in the wake of COVID, many too new to have materialized.

It isn’t merely that omnibus bills are not read before being enacted; it is impossible to read and absorb them.

The solution on the busted budget, as with debt ceiling, is to not pass it and instead get busy slashing government.

Granted, the issue of spending cuts was ignored during the Trump years, and it’s a good chance it would be again under a new Republican president. So, it’s not clear what it would take for Republicans to enact serious spending restraints in future budgets.

Even while the current debate was raging, the National Defense Authorization Act, or NDAA, passed the House. That alone means, in one single year, another $858 billion for you and me, residents of a nation that isn’t being attacked (I observe this writing at a dining table in Iquitos, Peru, which has now declared a police state in the wake of the ousting of its president). Who among leadership is paying attention to the Department of Defense both spending the most of any agency and, indirectly, arguably regulating the most, too. I’ll just omit the question mark.

The upshot is, it’s not just entitlements on autopilot, but all discretionary and military spending, if we’re honest about it. Thanks to it all, deficits are projected hit $2 trillion within the decade.

The fiscal budget does not constrain, let alone reduce, anymore. As consolation, if we cannot significantly cut spending, one might hope we can hold Congress accountable for the regulatory costs agencies impose. Cutting spending, were it possible, would free private-sector resources for expanding enterprise. Cutting regulations can have the very same effect, boosting prosperity.

One option for the time being is to roll back federal red tape and over-regulation (including objecting to Biden administration initiatives) to spur growth. The Competitive Enterprise Institute has called for many such actions during the pandemic and just released Free to Prosper, our brand new pro-growth Agenda for Congress.

Regulatory budgets are needed as much as new spending restraints. These actions could reduce deficits as an unintended consequence. The time is right for groundwork intellectual ammunition to be prepared, giving separate treatment to economic, environmental, health and safety, social and paperwork regulation.  

The Office of Management and Budget (OMB) used to say regulations cost around $5 billion a year. But cost-benefit analysis on which to base such a claim doesn’t exist, despite the issuance of over 3,000 regulations annually (compared to a few dozen laws, generally). In fact, the mandatory Report to Congress on regulatory costs hasn’t appeared since fiscal year 2019.

Short of a comprehensive regulatory cost budget, Congress can start simple with a regulatory ceiling by making agencies remove a rule for every new one issued, or “one-in, one-out.” This approach has had some success in Great Britain and Canada, and even NPR praised Canada’s  version until Trump’s “one-in, two-out” version came along.

One-in, one-out cannot eliminate categories of regulation, such as over antitrust and the electromagnetic spectrum. Regulatory caps and freezes can combine with other reforms like a bipartisan regulatory reduction commission, sunsetting of laws and rules, major constraints on the use of and procedures for issuing guidance documents, and requiring congressional votes on major and controversial regulations. In some embodiment, an “Office of No” to counter the pro-regulation bias in every single other part of the federal government is necessary.

So we find ourselves mired in spending and regulation, but there are answers, and they might come from bottom-up. That’s the big task for Congress after this Christmas budget showdown.