Text 2. Reforms of 1990: the Budget Enforcement Act

Date: 2015-10-07; view: 352.

This law drew distinctions in spending that drastically altered the significance of the new deficit targets. It defined discretionary spendingas authorized expenditures from annual appropriations (such as the personnel budget for the military) and mandatory spendingas expenditures required by previous commitments. Spending is mandatory for entitlementprograms (such as social security and veterans' benefits) that provide benefits to individuals legally entitled to them. The law also establishes pay-as-you-gorestrictions on mandatory spending and taxes. Under "PAYGO," any proposal to expand coverage of an entitlement program must be offset by other savings or a tax increase. Similarly, any tax cut must be offset by another tax increase or other savings. The law also set limits, or "caps," on discretionary spending through 1993 in three categories—defense, domestic, and international programs—and it fixed total discretionary spending for 1994 and 1995.

By this new law, the president and Congress agreed in advance on overall expenditures across the major categories of discretionary spending. Because borrowing from one category to increase spending in another was not allowed, there was no conflict between the Republican president and the Democratic Congress over how much to spend on defense versus domestic programs in 1991. However, some Democrats chaffed at the cap on domestic spending, and it remains to be seen whether the pact struck in the Budget Enforcement Act will survive after the 1992 elections.

Significantly, the law removed most of the pressure to reduce the deficit to meet the Gramm-Rudman targets by linking them to the numbers agreed to in the caps on discretionary spending plus pay-as-you-go restrictions on mandatory spending and tax cuts. Under prior rules, any economic downturn that caused the government to spend more or to raise less revenue than expected might increase the deficit beyond the Gramm-Rudman target and trigger across-the-board cuts. But now these unexpected external events (including war and the increased costs of the S&L bailout) are—like acts of God—regarded as "outside" the budgetary agreement, which requires only that everyone keep their part of the bargain on spending caps and pay-as-you-go restrictions.

If Congress fails to limit discretionary spending in any category to its cap in any year or violates pay-as-you-go restrictions, it will trigger a sequestration—an across-the-board spending cut in the overspent category or in nonexempt entitlement programs. These sequesters (cuts) would occur automatically fifteen days after Congress adjourns. Whether these new changes in the budget process will make it any more workable in the future remains to be seen. What does seem likely is that the new process will increase the power of the appropriations committees at the expense of the authorizing committees, who will have less latitude in spending, and the budget committees, who will find caps already set on overall spending in major categories.

(from “The Challenge of Democracy”)

Tasks:

do the phonetic reading and written literary translation of the first passage;

put 6 questions to the text;

give the summary of the text;

comment upon the advantages and disadvantages of the Budget Enforcement Act.