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With all of the talk lately surrounding the war on terrorism and the economic downturn and the impact on President’s budget, few seemed to have noticed that federal budget caps expired last year.

In 1990, Congress passed the Budget Enforcement Act (BEA) in an effort to control deficit spending. BEA controls spending through two separate, but related, mechanisms: limits on discretionary spending (caps), and the pay-as-you-go (PAYGO) process to require offsets for any legislation that would increase the deficit. Both PAYGO and the spending caps expired last year.

With huge surpluses as far into the future as the eye could see, PAYGO and the caps were not major players over the last few years. Now, with the economic downturn and tax cut package enacted last year, the country is once again set to return to deficit spending. Many fear the lack of caps combined with the war on terrorism and the need for domestic spending will turn into a potent concoction that will lead to out-of-control spending on Capitol Hill. The next few months should prove extremely interesting as Congress tries to walk the fine line between fiscal restraint and expensive requests both domestically and internationally.

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