October 22, 2014

Concord Coalition Says the President's Proposed Budget Falls Short on Entitlement and Tax Reform

WASHINGTON -- The Concord Coalition said it was disappointed today that President Obama’s proposed Fiscal Year 2012 budget failed to follow up more aggressively on some of the key recommendations from his own fiscal commission.

A bipartisan majority of the commission issued sweeping recommendations in December to not only rein in domestic and defense spending but to reform the tax code and major entitlement programs as well. The President has not rejected these proposals, thus leaving them on the table for future consideration, but his budget does not move the ball forward on many of them.

“While there are positive aspects to this budget, dealing with the nation’s unsustainable structural deficit is not one of them. Once again, the entitlement and tax reform agenda is left for another day. This is particularly disappointing given that the President’s commission presented him with a credible, bipartisan framework for initiating real solutions this year. Without a stronger push from the administration, the commission’s hard work may be squandered,” said Robert L. Bixby, Concord’s executive director.

A few numbers illustrate the magnitude of the fiscal challenges even if the budget achieved its promised savings:

  • The budget locks in a debt-to-GDP ratio that is roughly twice the historic average over the past 50 years.
  • By 2021, spending on interest would be almost double non-security discretionary spending ($844 billion vs. $453 billion).
  • Between 2012 and 2021 interest costs would rise from 9.5 percent of federal revenue to 17.1 percent of revenue.
  • As soon as 2018, interest costs would begin to exceed Medicare costs.
  • While it claims deficit reduction of $1.1 trillion over 10 years, the budget hides over $3 trillion worth of tax cuts in its baseline. This means that for all of the "hard choices" made primarily in programmatic discretionary spending cuts and some tax increases, the overall effect of budgetary choices for the next 10 years would be to increase deficits by almost $2 trillion from where current revenue laws would take us.


On the positive side, the budget recommends some tough choices on domestic and defense appropriations. Moreover, offsets have been targeted to pay for new initiatives and for the extension of certain existing policies, such as temporary relief from the Alternative Minimum Tax (AMT) and pending cuts in Medicare physician reimbursements.

However, as Concord has long pointed out, simply focusing on non-security discretionary spending is insufficient for the task at hand. That category of spending only accounts for about an eighth of the federal budget; the rest consists largely of entitlement programs, defense spending and interest payments on the debt.

"It is good to offset additional spending and tax cuts," Bixby said. "But we are at a point where we simply have to do more. Further delay will only make the job more difficult and painful."

In Concord's view, neither party is being realistic about what can be accomplished with savings from a relatively small slice of the budget.

The White House is missing an opportunity to use the fiscal commission’s report as a framework for fiscal sustainability.

“Several Republicans in Congress signed onto the commission’s recommendations, so its work can hardly be dismissed as a partisan agenda,” Bixby said. “It’s true that many Republicans don’t seem to be in a receptive mode right now. However, without a stronger push for entitlement and tax reform in the budget, momentum from the positive results of the commission may soon dissipate.”

Last year the administration put forth a budget that fell short of the goal of long-term fiscal sustainability. But at least the rationale a year ago was clear: the President would get things moving in the right direction while the commission worked on a more comprehensive plan that would deal with the long-term structural problems in the federal budget.

The commission did its work. But the White House seems to be taking a step backward, even as it warns that "the fiscal realities we face require hard choices."

“It is fine to be honest about how dire the outlook is,” Bixby said, “but it would be better to get started on the solutions.”

 

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The Concord Coalition is a national, grassroots organization dedicated to fiscal responsibility. Former U.S. Senators Warren B. Rudman (R-NH) and Bob Kerrey (D-NE) serve as its co-chairsand former U.S. Secretary of Commerce Peter G. Peterson serves as president. For more information, visit www.concordcoalition. org .