Harry Reid considers putting on a different ‘cap’

HARRY REID CONSIDERS PUTTING ON A DIFFERENT ‘CAP’…. The “CAP Act” would impose insane, statutory spending caps on Congress, with the goal of automatically slashing public investments in practically everything. The measure is generating growing support from Republicans and “centrist” Democrats, but it’s still one of the worst ideas in recent memory.

We haven’t heard too much from the White House on this — though the West Wing is reportedly pushing against the idea behind the scenes — but we also haven’t heard the Senate Democratic leadership weigh in. Yesterday, Harry Reid didn’t denounce the CAP Act, but he did offer an alternative.

Senate Majority Leader Harry Reid is backing a cap on deficits as part of a deal to raise the federal debt limit, he told reporters on a conference call Wednesday.

“We have to be able to prove that we’re willing to do something about the debt,” the Nevada Democrat said. Reid said that in his opinion, the nation needs a deficit cap, as opposed to the spending caps being proposed by Republicans and some Democrats.

“If we are able to cap deficits, it automatically brings down the debt, and that’s the key to all this,” he said. “You would have a law saying that we have to do it.”

It’s hard to evaluate this in any depth without more details, but on the surface, a “deficit cap,” as opposed to a “spending cap,” would be preferable — but only a little.

It’s reminiscent of the “debt failsafe” plan President Obama mentioned a few weeks ago in his debt-reduction speech: “If, by 2014, our debt is not projected to fall as a share of the economy — if we haven’t hit our targets, if Congress has failed to act — then my plan will require us to come together and make up the additional savings with more spending cuts and more spending reductions in the tax code. That should be an incentive for us to act boldly now, instead of kicking our problems further down the road.”

The difference between a spending cap and a deficit cap is important — under the former, once spending reaches an arbitrary level as a percentage of the economy, sweeping reductions become mandatory, including cuts to programs like Social Security and Medicare. Under the latter, once the deficit reaches a certain level, Congress would be required act to bring it below the arbitrary level, but this could be done through some combination of spending cuts and increased revenue.

The former is intended to force brutal cuts; the latter is intended to keep the deficit in check by whatever means policymakers see fit.

Republicans won’t go for the latter, but Democrats can’t go for the former.

Under saner circumstances, all of these “cap” ideas would be rejected as unnecessary gimmicks. Indeed, my suggestion would be for an unemployment cap: once the jobless rate tops 8%, policymakers would be forced to start investing in job creation until it comes down and stays down. [Update: I’m not the first to come up with this.]

But the circumstances we’re dealing with are anything but sane, and austerity fever has blinded the establishment to what should be important.