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Problems with Global Spending Caps

[“Global Spending Cap” refers to a limit Congress places on the amount of money the government is allowed to spend each year.  It can be one cap affecting the overall amount, or it might refer to placing a cap on each part of federal spending (for instance, housing and defense).]

Deficit reduction is an imperative! The federal government is spending roughly 40 percent more each year than it receives in revenue. Both spending and revenue changes need to be made in order to meet current and future needs. Every entity that gains profit (individually or corporately) shares the responsibility to support what we are committed to in the Constitution, what we are called to by faith, and what America values – allowing all members of our communities to live in human dignity.

Many see global caps on spending as a simple way to reduce spending. However, proponents do not specify how the strands of the safety-net would be cut. A global cap freezes spending in every area, across the board, at a point in time. Current spending is at 24.7 percent of Gross Domestic Product (GDP). The global caps, as proposed in the Corker-McCaskill plan, would cap overall spending at 20.6 percent of GDP. In contrast, spending during the Reagan administration averaged 22% of GDP - at a time prior to facing these challenges:

  • Aging population – the percentage of Americans over the age of 65 will grow by more than half in the next 25 years
  • Two (or three) unpaid-for wars
  • Homeland Security
  • Ever-increasing interest on the debt
  • Ten years of reduced revenues due to the tax benefits provided in 2001 and 2003
  • Decreased revenue due to the recession and high unemployment
  • Veterans returning with far greater health care needs than ever in our history, and in higher numbers.

Proposals for global spending caps would, indeed, reduce spending.  However, the question of “at what cost” must be addressed

Impact of Capping Spending at 20% - 22% OF GDP

 To achieve the proposed levels (in the range of 20 to 22 percent of GDP), the safety-net would need to be shredded. Programs, which have already experienced cuts, would be far further slashed. Medicaid, Medicare and Social Security would become unrecognizable. 

  • In order to not exceed these caps, Medicaid would have to be made into a block grant program, with $547 billion being cut from the program in the first nine years. States would be given tremendous discretion in det