Trojan Horse: The Global Spending Cap and Why It Is Dangerous

Jos G. Linn, RESULTS Domestic Outreach Organizer
April 29, 2011

In The Odyssey, the Greek hero Odysseus devised a plan to end the decade-long Trojan War. He built a giant wooden horse disguised as a gift to the gods with Greek soldiers hiding inside. The Trojans took the bait and moved the horse inside the impregnable walls of Troy. Once inside the city, the Greeks emerged from the horse and opened the gates to the city for the Greek army to flood in. The Trojans were finally defeated. Just as the citizens of Troy mistook a dangerous weapon for a gift, we are faced with a similar threat to domestic and international aid programs through what's called a "global spending cap."

As you know, the House FY 2012 budget proposes block granting Medicaid and SNAP, privatizing Medicare, and substantially cutting the domestic discretionary budget, which includes Head Start, Early Head Start, and child care programs, as well as foreign aid. These proposals are very unpopular with Americans. However, they could still very well happen as a result of a global spending cap, which is going to get more attention over the next few weeks.

Essentially, a global spending cap is a limit on the amount of money the government spends each year. This can be a cap on all or parts of federal spending. The proposal getting the most traction right now is the Commitment to American Prosperity Act or “CAP Act” introduced by Sens. Claire McCaskill (D-MO) and Bob Corker (R-TN). The CAP Act would cap all government spending at 20.6 percent of the nation's gross domestic product (GDP), phased in from 2013 to 2023. Under the Act, as long as government spending is below that amount, there is no problem. However, once the cap is exceeded, automatic procedures would kick in and force immediate across the board budget cuts.

There are several serious problems with this and other spending cap proposals. First, the 20.6 percent of GDP cap is arbitrary and unrealistic. The last time U.S. government spending was 20.6 percent of GDP was when Ronald Reagan was president. Our country is much different than it was then. We now have more retirees relying on Social Security and Medicare, with many more retiring in the coming years. We also have skyrocketing health care costs that increase more rapidly than inflation and driving up the cost of Medicare, Medicare, Medicaid, the Children’s Health Insurance Program (CHIP). We also are coming out of a financial crisis that drove up spending in Medicaid, SNAP, and unemployment insurance because millions of Americans who had lost their jobs, health coverage, and incomes turned to these and other programs for help.

Yet under the CAP Act, between 2013 and 2021 Social Security would be cut by $1.3 trillion, Medicare by $860 billion, and Medicaid by $550 billion. To make matters worse, the CAP Act only mandates spending cuts as a remedy for exceeding the cap. Tax increases to offset spending would not be required and in some proposals, tax increases would be forbidden to offset spending.

This may sound complicated, but the results are easy to imagine. By capping government spending at arbitrary and unrealistic levels, block-granting Medicaid, privatizing Medicare, cutting Social Security, and forcing other disastrous cuts would become unavoidable. In other words, the CAP Act and other proposals like it are a Trojan Horse — back-door attempts to enact the House 2012 budget plan. Unfortunately, the CAP Act proposal is gaining support. Republican leaders are even demanding a spending cap as a condition for voting to increase the nation’s debt ceiling.

There is no question that our long-term debt is a problem that needs to be addressed. But this is the wrong way to do it. We need a balanced approach to our fiscal issues, not proposals that abandon the middle class and working families. A global spending cap is not an answer to our fiscal woes. It does nothing to solve the problems of rising health care costs, unemployment, or income inequality. It is merely a Trojan Horse designed to distract attention from its true intent - radically changing the role of government in American society.

Members of Congress need to stand up and take responsibility for their actions. It is their job to make the tough decisions about our spending priorities and face the consequences for such decisions. Using budget gimmicks to sneak in a radical agenda is shirking that responsibility. Learn more by reviewing the Budget Debate presentation online (or download the PowerPoint) designed by RESULTS as part of the “To Catch a Dollar” Budget Debate webinar on April 27.