July 29, 2014

Concord Coalition Urges Budget Compromise Based on Realistic Assumptions

WASHINGTON -- While supporting the goal of returning balance to the nation’s finances, The Concord Coalition said today that the ambitious 10-year budget plan released by House Budget Committee Chairman Paul Ryan relies on dubious assumptions to achieve that goal.

“Any plan to put the federal budget on a more responsible and sustainable track must be based on sound assumptions for both spending and revenue” said Concord Coalition Executive Director Robert L. Bixby. “The Ryan plan falls short on both counts. It assumes a level of restraint on domestic discretionary spending and means-tested programs that does not seem likely to hold up over time. Moreover, the plan’s tax reform and revenue assumptions are too vague to be adequately assessed.”

On the positive side, Ryan has left the door open for further discussion and possible compromise, acknowledging that some elements of his plan are unlikely to be accepted by Democrats. Without those items, most notably repeal of the Affordable Care Act (Obamacare) and substantial Medicaid cuts, the House Republican and Senate Democratic deficit paths are likely to be only around $900 billion apart (see note below). Elected officials should be able to bridge this difference through bipartisan cooperation and compromise -- essential elements on the road to comprehensive fiscal reform. 

“The Ryan plan is best viewed as a statement of Republican positions, with the understanding that the Democrats will soon be presenting their own plan. These plans should all be debated through the regular budget process this year, with the goal of adopting a compromise that at a minimum stops the debt from growing faster than the economy,” Bixby said. Senate Democrats are scheduled to release their proposed budget tomorrow.

The Ryan plan envisions deficits swiftly falling from $845 billion this year to $54 billion in 2018, and disappearing entirely by 2023. In addition to more steep cuts in domestic spending, the plan achieves $1.8 trillion in savings by repealing Obamacare -- an implausible assumption after the President’s re-election.

“Including repeal of Obamacare in the House Republican budget may make for an interesting theoretical exercise but it does not advance the debate over a fiscal sustainability plan,” Bixby said. “Moreover, assuming that existing tax increases in Obamacare will be replaced with unspecified savings from loophole closings is a dodge.”

The Concord Coalition also urges Senate Democrats to engage in an honest discussion about the trade-offs that would be required by their proposal. They should avoid the practice of providing specific details about popular items while including little or no detail on the budget policies that, although less politically appealing, are required to make the budget numbers work. 

Discretionary spending has already taken the brunt of Washington’s deficit-reduction efforts and is projected to hit historic lows relative to the size of the economy -- even without the additional cuts Ryan is proposing.

That’s why The Concord Coalition continues to encourage lawmakers in both parties to stop procrastinating on the other reforms that are needed elsewhere in the budget -- notably in Social Security, Medicare and in the more than $1 trillion a year in spending through the tax code that will drive federal deficits in the years ahead.

The aging of the population is already putting pressure on the federal budget and such pressure will be the driving force behind the growth of Social Security and Medicare for decades to come. So a basic test of any proposed budget plan should be whether it deals in a credible way with this problem.

The House Republican plan for Medicare savings includes increased cost-sharing for higher earning seniors -- a credible way to adjust benefit promises in light of the retirement of the baby boom generation adding 18 million Medicare recipients over the next decade. Premium support also has the potential to control the federal government’s commitment to health care spending. However, the Ryan plan is too vague on how the “backup” limit on spending would operate to judge whether or not the mechanism would be effective.

“The proposal relies solely on competition among insurance entities to bring costs in line with very austere health care spending targets,” said Josh Gordon, Concord’s policy director. “The best evidence suggests that we also need to work on controlling costs on the provider side, while researching best practices, in order to meet those targets.”

In addition to substantial changes in Medicare and Medicaid, elected officials in both parties need to be discussing reforms to put Social Security on a sustainable path. Here the Ryan budget also falls short, merely calling for the President and Congress to each come up with a plan to “shore up the Social Security Trust Fund.”

Ryan’s task in putting together his budget plan was made easier by government projections that assume a strengthening economy, a continuing slowdown in the growth of health care costs, and follow-through on prior legislative actions to cut spending and increase revenues.

It is important for elected officials in both parties to keep in mind, however, that some of these assumptions could change. The economic recovery still faces significant challenges, for example, and it remains unclear whether health care spending growth will continue to be as restrained as it has been in the last few years.

Contact: Steve Winn   swinn@concordcoalition.org   703-254-7828

Update 3/17: This press release orginally said the difference between the two plans was "around $200 billion" based on preliminary information released by the Senate Budget Committee. After reviewing the actual budget numbers it appears that the House and Senate budgets are closer to $920 billion apart when taking ACA repeal and steep Medicaid cuts out of the Republican plan. The difference is greater than in our original estimate because the "current policy baselines" used by the two budget committees are $1 trillion in deficits apart -- an unusually large difference we did not anticipate.