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For the week ahead of Tax Day 2011, Demos published daily writings, infographics, and illustrations that provided a fresh perspective on how we think about taxes.

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Main | Tenth Anniversary of the Bush-era Tax Cuts »

Why Spending Caps Are Poor Policy

By Rebecca Theis, Andrew Fieldhouse and Ethan Pollack

Congress is currently considering legislative proposals for both a federal spending cap and a balanced budget amendment (BBA). This paper examines possible implications of both the Commitment to American Prosperity (CAP) Act proposed by Sens. Bob Corker (R-Tenn.) and Claire McCaskill (D-Mo.), as well as the balanced budget amendment proposed by Sen. Orrin Hatch (R-Utah) in the Senate (and endorsed by Senate Republican leadership) and Rep. Bob Goodlatte (R-Va.) in the House.

Our analysis is based on the construction of a realistic current policy baseline, which is used to examine the full magnitude of the cuts required to meet the proposed limits.

Read the briefing paper (PDF)

Unbalanced Budgeting

The CAP Act (S. 245) would create hard caps on government spending, to be phased in over 10 years (2013–2022). In 2022 and subsequent years, the Act would cap spending at 20.6% of gross domestic product, based on the bill’s formula and assumptions.

This policy memorandum shows the possible impact of overall spending caps on the elderly through reductions in Social Security payments and on communities through decreases in federal outlays. It analyzes the impact nationally and within states and congressional districts. The memorandum also briefly reviews the even more dire cuts to Social Security under a proposed balanced budget amendment.

Read the policy memo

Supplemental table: Cut to Social Security outlays under CAP Act, by state and congressional district [PDF] [Excel]