Budget, Government Spending, and National Debt
In early February of each year, the President submits a budget proposal to Congress. This budget proposal deals only with discretionary spending and serves as an outline to how much money the federal government plans on spending. The House and Senate Budget Committees debate this proposal, come up with their own proposals, and draft a piece of legislation called a Budget Resolution by April 15.
The Budget Resolution establishes the overall framework and level of annual federal spending. Before going too deeply into this issue, it's first important to understand the different parts of the federal budget and how the spending process works. In Fiscal Year 2013, the Federal government spent $3.45 trillion and collected $2.78 trillion in tax revenues. Total federal spending is broken up two parts: mandatory and discretionary.
Mandatory spending, roughly 60% of all federal spending, is the spending that occurs each year automatically, not subject to debate, and not part of the overall appropriations process such as Social Security, Medicare, and Medicaid.
Discretionary spending is the money Congress authorizes and appropriates each year through the legislative process. Only discretionary spending, roughly 40% of all federal spending, is debated and authorized each year. Article 1, Section 9, Clause 7 of the U.S. Constitution says, “No money shall be drawn from the Treasury but in Consequence of Appropriations made by Law.” The appropriation bills are debated and enacted each year to provide for all non-mandatory spending programs. Security-related discretionary spending accounts for roughly 24% of the total spending; non-security discretionary spending accounts for roughly 12% of the total spending; and debt servicing, or interest payments on our debt, account for roughly 4% of the total spending.
Where I stand on budget, spending and debt issues
- We must work to balance the budget and begin paying down our debt: The national debt recently passed $17 trillion, and will hit $18 trillion within a year. That is unsustainable and does significant economic harm in both the short-term and long-term. In the short-term, it adds uncertainty about future interest rates and tax rates to the job market. That uncertainty causes investors and job creators to hold on to their capital, rather than investing it in job creation. In the longer-term, it could result in an interest rate spike that leads to massive loan defaults, home foreclosures, and corporate bankruptcies that put millions out of work. Because our debt growth is largely the result of annual budget deficits, we must put ourselves on a path to balancing the budget as quickly and reasonably as possible, and then must begin paying down our debt.
- We will only get our budget under control if we get serious about reforming our mandatory spending programs: If we eliminated all discretionary spending, including security and non-security discretionary spending, we still would be adding to our national debt. The fact is that because mandatory spending makes up nearly 2/3 of the entire budget, we must look for efficiencies in programs like Medicare and Social Security if we ever hope to shrink our debt. At the same time, it is the only way that we can keep those programs solvent. The good news is that if we act now, we can exempt anyone at or near retirement age from any changes in services and benefits. That's why I've only supported legislation to reform Medicare, for example, if it exempts people age 55 and older. The longer we wait, however, the fewer people we will be able to exempt. If we want to get our budget and debt under control, and if we want to preserve these programs for future generations, then we must begin looking at changing our mandatory spending programs now.
- We should add a Balanced Budget Amendment to the U.S. Constitution: Washington has shown it isn't willing to get serious about fiscal responsibility and put our budget into balance. That's why I support adding a Balance Budget Amendment to the Constitution so that future Congresses are required to spend no more than we have. 49 states, including Indiana, have some sort of Balanced Budget requirement, and individual Hoosiers would quickly go bankrupt if they spent like the federal government. Washington should operate on those same grounds.
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