WASHINGTON -- The Concord Coalition said today that new projections by the Congressional Budget Office (CBO) should spur candidates for federal office this year to provide voters with realistic proposals to deal with the country’s difficult fiscal challenges.
“CBO’s new Budget and Economic Outlook should be required reading on the campaign trail,” said Robert L. Bixby, Concord’s executive director. “Among the risks we face this year are unrealistic campaign promises that fail to take into account the harsh realities reflected in this report. And sooner rather than later, the heated rhetoric of the campaign will run into the cold reality of these numbers.”
Although conventional wisdom holds that progress on fiscal reform is doubtful this year, Concord believes that CBO’s report, released today, as well as Concord’s own Plausible Baseline projections underscore the importance of moving forward even before the November elections.
“The CBO forecasts steady growth in the federal debt over the next decade, even under some fairly optimistic assumptions -- including a full economic recovery,” Bixby said. “Under less optimistic assumptions, the picture gets far worse. There are a number of risks and uncertainties, ranging from the government debt crisis in Europe to persistent slow economic growth in the United States.
“Meanwhile, thousands of older Baby Boomers are signing up every day to receive Social Security and Medicare benefits, further increasing the demands on the federal budget. So we really can’t afford to wait for Washington to start moving towards a more sustainable path. We need a credible, long-term plan in place as soon as possible,” Bixby said.
According to the CBO, under current law the deficits over the next 10 years would total $3.1 trillion. Annual deficits would shrink to sustainable levels below 2 percent of GDP by 2015 and remain there through the budget window.
As the CBO warns, however, its projections understate the budget deficits that would occur if Congress, as it often has in the past, extends certain policies that are scheduled to expire under current law.
The Concord Plausible Baseline, which applies more realistic assumptions about future policy decisions to the CBO’s data, shows annual deficits remaining in the trillion dollar range throughout the next 10 years and totaling almost $12 trillion.
“The CBO’s report, along with The Concord Coalition’s own projections, show that we cannot get the federal budget under control by just economizing here and there, or by simply focusing on the politicians’ favorite target: waste, fraud and abuse,” Bixby said.
CBO's projections show that even significant cuts to discretionary appropriations are insufficient to place our nation on a fiscally sustainable path. As a result of spending caps included in the Budget Control Act, CBO projects that in 2022 discretionary spending as a share of GDP will decline to the lowest level in 50 years.
While this represents some progress, deficit reduction as a result of these savings will be overshadowed by the projected increases in mandatory spending and interest costs. CBO estimates that mandatory spending will increase from 13.3 percent of GDP in 2013 to 14.3 percent in 2022. Interest costs will increase by nearly 80 percent, growing from 1.4 percent of GDP this year to 2.5 percent in 2022. Over the next ten years, interest costs alone will total $4.2 trillion -- an amount double the total deficit reduction from the Budget Control Act.
“We need a comprehensive plan that spreads the burdens and sacrifices fairly, and includes all major areas of the budget: entitlement programs, domestic discretionary spending, defense and taxes. In addition, we need reforms in the congressional budget process to help ensure that solid deficit-reduction plans are not derailed, ” Bixby said
Congress has often responded to federal budget problems by making things worse. So as a starting point this year, Congress should quickly commit itself to staying within the revenue and spending totals in the CBO baseline.
Specifically, lawmakers should not undermine the automatic cuts that were triggered by the recent failure of the congressional super committee on deficit reduction. If they desire to avoid cuts in one area they should find equivalent cuts in another area of lower priority.
On the revenue side, Congress should find a way to meet the overall baseline projections even if the timing and method of raising this revenue are changed. If all expiring tax provisions are extended, revenues will hover just above 17 percent of GDP, which is below the past 40-year average.
The Concord Coalition is a nonpartisan, grassroots organization dedicated to fiscal responsibility. Former U.S. Senators Warren B. Rudman (R-NH) and Bob Kerrey (D-NE) serve as Concord's co-chairs.