A key obstacle to a bipartisan budget deal that raises taxes and cuts spending is the belief among conservatives that such deals lock in tax rates while promised cuts never materialize, but an independent budget analysis shows that isn’t the case.
Conservative lawmakers and aides point to the bargain struck in 1990 by President George H.W. Bush with a Democratic Congress to cut spending by $165 billion and raise revenue by $158 billion. It was the last bipartisan deal to both raise taxes and cut spending, but conservatives argue that spending cuts didn’t materialize because total spending over the next four years was $22 billion higher than a 1990 Congressional Budget Office projection.
However, this focus on the top-line numbers doesn’t take into account how budget rules work. A closer look at the spending restrictions put into place by the 1990 Budget Enforcement Act, found in this 1998 Office of Management and Budget report, demonstrates a different story: Discretionary spending was largely in line with budget caps, with the exception of emergency funds.
From 1991 to 1998, the period that the enforcement act was in effect, Congress exceeded the law’s spending caps by $111 billion. However, nearly all of that spending came from $60 billion spent on Operations Desert Storm and Desert Shield and $40 billion of emergency spending for purposes like disaster relief. Only $10.7 billion in new discretionary spending was added over the seven-year period, which is a cut in real terms.
Budget experts generally expect rules such as PAYGO, the primary tool of the BEA, not to restrain emergency spending, but rather to prevent structural deficits from becoming permanent. More than most such tools, PAYGO, which required tax increases or spending cuts to offset any policy changes that would increase the deficit, provided that discipline. By 1998, real spending was $1.5 billion below the statutory cap.
While the Republican opposition to tax cuts as a matter of economic policy will continue—along with the bad memories of the first President Bush breaking his infamous no new taxes pledge—the 1990 budget deal did prove itself effective in restraining congressional spending.
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