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Congress needs to thoroughly review the budgetary process in order to face exploding costs in entitlement programs states a new report from the Mercatus Center. The process is presently ruled by the Budget Act of 1974,  which can easily control discretionary spending by cutting it if it goes over a determined cap. But entitlements such as Medicare are part of mandatory spending, and according to Senior Fellow at the Ethics and Public Policy Center James A.Capretta, these spendings virtually know no limit. Such lack of restrain could create emergency situations.

“The fiscal leeway is very slim at the moment,” he said in an interview. “Suppose there were a major international crisis that required emergency Defense spending of $150 billion. Such a shock in spending would likely decrease investors’ confidence in the U.S. economy and increase both the cost of borrowing and taxes.”

Capretta believes that such a crisis would be one of the only ways Congress would have to come up with a serious solution to the present fiscal problems. “The Budget Act wasn’t created to face steep increase in entitlement programs. In fact, there is no incentive for Congress to act, which is exactly what it does: let the programs spend the projected amounts, no matter how rapidly they might be growing.”

And Capretta thinks that the recent “Medicare Fix” is a good example of this do-nothing attitude. “It’s going to increase spending for a program whose cost is already rising rapidly. It also opens the door for federal bureaucracy to micromanage the quality of care, which will make future problems even worse.”

The senior fellow proposes a few solutions to help solving the current budget problems. “First Congress needs to abolish the pay-as-you-go scheme. It’s a huge incentive to increase revenues in order to finance entitlement programs.”

“And second, instead of handling periodic shutdowns, Congress would need to move towards continuing resolutions”, he adds. “With CRs, the affected department would continue to operate but at a lower level than the originally appropriated amount. This would go one for 30 to 60 days, after which time there would be a new decrease. This would therefore put more pressure on Congress to act quickly.”

He does believe that politicians recognize the need to reform the Budget Act, but “there seems to be no will to act at the moment,” he concludes.

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