President Obama’s request for an increase in the federal debt ceiling provides Congress with an opportunity to enact a bipartisan plan to reduce federal budget deficits and to increase economic growth. During periods of divided government, both congressional Democrats and Republicans have used increases in the federal debt ceiling to negotiate fiscal consolidation plans with presidents from the other party.* For example, the Omnibus Budget Reconciliation Act of 1990 came about through debt ceiling negotiations between congressional Democrats and President George H.W. Bush. Similarly, the Budget Control Act of 2011 came about through debt ceiling negotiations between House Republicans and President Barack Obama.

The Spending Control and Economic Growth Act, which is expected to be formally introduced this week, falls in this tradition of combining an increase in the federal debt ceiling with a fiscal consolidation plan of spending restraints and pro-growth reforms that will significantly reduce federal budget deficits. When scoring this legislation, the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) will rely upon models that assume the Spending Control and Economic Growth Act will not affect the overall size of the economy. While such analyses are standard in the legislative process, policymakers should examine how such pro-growth reforms will actually affect GDP, federal revenues, and federal budget deficits....

 

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