April 25, 2017

Three Fiscal Suggestions for Congress and President-elect Trump

President-elect Donald Trump and the new Congress have many challenges to tackle. Hovering over all of them is our nation’s unsustainable fiscal policy.

New proposals, whether on the spending or tax side of the budget, will not be credible if they rely on an infusion of ever-mounting debt.

The Concord Coalition offers three suggestions to guide policies in the coming months:

  • Approve a Fiscal Year 2018 Congressional Budget Resolution with input from the administration that puts the debt on a downward path relative to the economy while fully and honestly accounting for new proposals.

  • Develop a bipartisan replacement plan for the Affordable Care Act (Obamacare) that can be enacted at the same time the current law is repealed.

  • Raise the debt limit in a timely manner to sufficiently accommodate the above policies so that the nation’s creditworthiness remains sound.

We begin with the Congressional Budget Resolution because Congress has the power of the purse. While the first Trump budget will be important for setting the agenda, particularly with House and Senate majorities of his own party, Congress must still pass judgment on any proposals the president-elect makes.

The vehicle for making such judgments and putting them together in an overall fiscal plan is the budget resolution. That is where Congress must make assumptions about the appropriate level of spending, revenues and debt for the coming years. It is also where critical trade-offs must be made to ensure that tax and spending proposals fit within a responsible framework. This can serve as a needed reality check on random campaign promises that were made primarily for their vote-getting appeal.

In recent years, budget resolutions have become more about political messaging and less about actual fiscal guidance. The delayed Fiscal Year 2017 Budget Resolution now under consideration is a good example. Its purpose is not to set in place a blueprint for the fiscal year, which is one-third over, but to establish a fast-track mechanism for repeal of the Affordable Care Act. The numbers are merely incidental and bear no relationship to Republican policy proposals.

That should change with the Fiscal Year 2018 budget as the House, Senate and executive branch are now all in the hands of one party. Under such circumstances, the budget resolution should be taken more seriously because Republicans can now turn messaging into legislation.

That leads to our second suggestion, which is that Republicans should have a replacement plan for Obamacare ready to go before they repeal current law. As a basic matter of sound fiscal policy, it makes no sense to reverse the many spending and tax policies of Obamacare without knowing what comes next.

Republicans leaders have insisted that even with repeal they do not want to instantly end the health care coverage of the roughly 20 million Americans who now get it through some form of Obamacare. Republicans also say they want to keep popular parts of Obamacare such as insurance reforms that prevent discrimination against those with pre-existing conditions.

All that will cost money. Policymakers should know how much money they will need before they push the repeal button.

Will premium subsidies continue? Will insurers be compensated for unexpected changes in the risk pool to prevent premium spikes? Will states still be reimbursed for most of their Medicaid expansion costs? Will tax increases and Medicare spending cuts used to finance all this be continued?

If the answers to these and many related questions is “yes,” for how long will these policies continue after they have supposedly been repealed? Will there be a new “fiscal cliff” tied to a delayed repeal that keeps getting pushed back year after year while Congress deliberates a replacement plan?

The only way to avoid great fiscal uncertainty, showdowns and risk with regard to Obamacare repeal is to know at the time of enactment what will take its place and to plan for this replacement in the budget resolution. And the only way to ensure that a replacement plan will endure is to include both parties in its development.

Our final suggestion is to recognize a simple matter of arithmetic. The statutory debt limit will need to be raised at some point in 2017. The logical time to do this is when the budget resolution is passed. It makes no sense, and indeed would be quite hypocritical, to vote for a budget resolution and then refuse to vote for a debt limit increase sufficient to carry it out.

All of these suggestions relate to immediate fiscal concerns. They do not provide solutions to the much more important long-term fiscal challenge. They would, however, get the Trump administration and Congress off to a good start and give the American people a greater sense of confidence that their newly elected leaders have a transparent, coherent fiscal plan.