• Large Future Deficits
• Demographics
• Future Costs
• Macroeconomic Problems
• Slow Economic Growth
• Generational Accounting
• Increased Interest on Debt
• Capital Flight
• Economic Solutions
• Social Security
• Medicare
• Discretionary Spending
• Taxes
• Political Limitations
• Ideological Difference
• Partisan Politics
• Public Awareness
• Deficit Politics
• Entitlement Spending
• Policy Recommendations
• Complete Recommendation


• Full Printable Document

Discretionary Spending

Discretionary spending represents only a small percentage of the problem, however it can and should be controlled because it may be more controllable than other aspects.  In particular, Congress could enact rules to control discretionary spending. 

1. Enhanced Rescission Authority - Enhanced Rescission Authority could be an effective way to control discretionary spending.  Rescission is the President’s ability to question funds appropriated to a program.  The President can hold out on ‘signing the check’ and ask Congress to reconsider the amount given.  Under the current system, Congress must approve the rescission within 45 days, and if the rescission is ignored and Congress does nothing,  the President is forced to release the funds.  Reform of this process would force Congress to vote on the rescission, therefore making them reconsider the numbers and reevaluate the need for the amount requested.
2. Discretionary Spending Caps –  Under the President’s current budget proposal discretionary spending would grow by 1.7% which is slightly less than the rate of inflation.  This plan would bring the discretionary spending as a share of GDP down to 5.5% in 2015 from the 7.7% it was in 2004.[i]  However, since 1962, the lowest that discretionary spending has been is 6.3% of GDP [ii] which makes projections of 5.5% seem unrealistic.  A more likely realistic proposal would be to cap discretionary spending at 1% a year above the rate of inflation, meaning the real (inflation adjusted) discretionary spending would grow by 1% which is still lower than the usually real growth rate of GDP, therefore the discretionary spending to GDP ratio will decrease.  

  As Alice Rivlin, former Vice-chair of the Federal Reserve and founding director of CBO pointed out, “the process is not the problem, the problem is the problem.”[iii]  The reforms recommended above are only as good as the enactors. In the first case it would be the President, therefore, if the President is given a new rescission power and never chooses to use it, its worth is questionable. However this would give the President another tool to review bills and question the need for the spending.   While the power of the President to veto the whole bill is still the most affective method at controlling discretionary spending, it appears to be ineffective due to President Bush’s refusal to use that power; this method might give the President greater flexibility at a smaller political price to reign in spending.

[i]Holtz-Eakin, Douglas.  Letter to Honarable Thad Cochran.  Mar. 2005.  Congressional Budget Office. 14 Mar. 2005. <http://www.cbo.gov/showdoc.cfm?index=6137&sequence=0>

     [ii] Congress. Congressional Budget Committee. The Budget and Economic Outlook: Fiscal              Years 2006 to 2015.  Washington: CBO, 2005.

     [iii] Klumpner, Jim. Interview with Macroeconomic Policy and Politics class. 11 March 2005