PAUL RYAN'S DYNAMIC DUO: COMBINED TAX AND BUDGET REFORM

By
ERNEST S. CHRISTIAN

At the joint CSTR/Heritage Seminar on July 18th, Congressman Paul Ryan (R-WI), a leading member of the Ways and Means Committee, emphasized the importance of his Legislative Line-Item Veto Bill (H.R. 4890), which passed the House in mid-June. Furthermore, in his view, budget and spending reform ought to be paired with tax reform aimed at enhancing economic growth.

The Legislative Line-Item Veto Bill would permit the president to place a temporary hold on wasteful spending projects or "tax pork" in bills he signs into law. The president would have a limited amount of time to request rescission on these items. Within 14 legislative days of receiving the president's request, Congress would then be required to have an up-or-down vote without amendment on whether to rescind the appropriated funding. Thus, an extra layer of accountability, fiscal discipline and transparency would be added to the spending process.

Insofar as concerns tax reform, Congressman Ryan said that Congress should begin addressing this issue as soon as possible, beginning in 2007, instead of waiting until the end of the decade when the Bush tax cuts and other pro-growth tax policies expire. He is right: overtaxing and overspending are two sides of the same coin; both come at great cost to the private economy ($2 to $3 dollars or more for each $1 of federal taxing and spending); and before either the budget process or the tax code can be reformed the voters must decide how much government they really want and how high a price they are willing to pay for it.

Congressman Ryan's call for a realistic "in-public-view" restraint on federal spending in combination with growth-oriented tax reform is a good example of the kind of new out-of-the-box thinking which is greatly needed and for which he is becoming well-known.

"Line-item pork parer," By Paul Ryan, appeared in The Washington Times on June 22, 2006

SOS: SENATOR JUDD GREGG'S CALL FOR FEDERAL BUDGET REFORM

By
MAYA MACGUINEAS

Senator Gregg, Chairman of the Budget Committee, recently introduced a far-reaching budget reform bill, the purpose of which is to force action on many of the important fiscal issues Congress would rather sidestep. The "Stop Over-Spending Act of 2006" or the SOS Act, creates mechanisms to control government spending, reduce the deficit, and reduce the unfunded promises in the country's largest entitlement programs.

The bill includes deficit targets, discretionary spending caps and limits on emergency spending, a Medicare trigger that would require that any new mandatory spending be offset once Medicare becomes too large a drain on the rest of the budget, biennial budgeting, line-item rescission, reforms to the budget resolution and reconciliation processes, and two new commissions-one to address entitlements and one to review government spending.

The line-item veto would shift some power from Congress to the President; commissions shift power away from elected officials to outside experts; and triggers rely on defaults to replace the proactive type of decision-making one would hope to see demonstrated by Congress. But the fact is that Congress has not been willing to make hard choices.

Given where we are in the business cycle and the forthcoming baby boom retirement-which starts in less than two years-a good case can be made for deficit reduction goals more aggressive than those in Senator Gregg's bill.

(The current goals would allow Congress to increase the deficit in each of the next three years before requiring deficit reduction in 2010 compared to the CBO current baseline.) The ongoing abuses to emergency spending must be addressed and the limits on emergency spending in the SOS Act would ratchet down the amount of emergency spending permitted to historical levels. The Medicare trigger would importantly focus attention on the growing costs of Medicare and halt all new direct spending until the program's growing claim on budgetary resources had been addressed. (Ultimately, controlling the costs of Medicare and Medicaid will require more comprehensive reform.)

All of these components serve important purposes and help focus political and national attention on getting control of fiscal imbalances. Senator Gregg should be commended for developing bold enforcement measures that help force action and serve as a check against fiscally irresponsible actions.

Maya MacGuineas is the President of the Committee for a Responsible Federal Budget. She received her Master in Public Policy from the John F. Kennedy School of Government at Harvard University.

"Stop Federal Overspending" by Senator Judd Gregg appeared in The Washington Times on June 21, 2006.

DISTINGUISHED ECONOMISTS LEAD DISCUSSION AT CSTR/HERITAGE SEMINAR

Dr. Edward Lazear and Dr. Douglas Holtz-Eakin spoke at the CSTR/Heritage Seminar on July 18th. Dr. Lazear, who is Chairman of the President's Council of Economic Advisors and was a member of the President's Advisory Panel on Federal Tax Reform, explained the contribution made by the Bush tax cuts to the sustained level of high economic growth presently being experienced. Dr. Holtz-Eakin, former Director of the Congressional Budget Office and the newly-appointed Director of the Maurice R. Greenberg Center for Geoeconomic Studies and Paul A. Volker Chair in International Economics at the Council on Foreign Relations, led a discussion about tax and spending policies. Both speakers received high praise from the more than fifty tax and economic policy experts who attended the seminar.