Administration officials defended the President’s budget at committee hearings last week that followed an all-too-familiar script: Democrats supported the budget, Republicans condemned it, and there appeared to be little room for bipartisan compromise in the near future.
At House and Senate Budget Committee hearings, Acting Office of Management and Budget (OMB) Director Jeff Zients said the budget would continue “policies that will shore up our economy and our fiscal situation.” He argued that the proposals, combined with legislation enacted last year, would cut deficits by $4 trillion in 10 years and put the country on a course to lower the deficit to only 3 percent of Gross Domestic Product (GDP) by 2018. Of the $4 trillion figure, over $1 trillion in savings is the result of discretionary-spending caps included in the Budget Control Act of 2011.
The President’s budget projects that spending will decrease from 24.3 percent of GDP in 2012 to 22.8 percent by 2022. Relative to GDP, revenues by that year will increase to 20.1 percent from 15.8 percent, deficits will decrease from 8.5 percent to 2.8 percent, and debt held by the public will increase to 76.5 percent from 74.2 percent.
In comparison, the Congressional Budget Office’s January baseline, which assumes the continuation of current law, projects that spending will be 22.4 percent of GDP, revenues will be 21 percent, deficits will decrease to 1.4 percent, and debt held by the public will reach 62 percent by 2022.
Senate Budget Committee Chairman Kent Conrad said the budget moves in the right direction by substantially reducing the deficit, but also agreed that additional steps are needed to address long-term fiscal challenges. House Budget Committee Ranking Member Chris Van Hollen praised the “tough choices the administration made to protect and build upon the economic recovery, while putting in place a plan to steadily reduce the deficit over the next decade.”
House Budget Committee Chairman Paul Ryan, however, said that the budget “dodges the most difficult challenges our country faces” and he accused the President of breaking a promise to cut the deficit in half by the end of his term.
Senate Budget Committee Ranking Member Jeff Sessions has called the President’s budget “one of the most spectacular fiscal cover-ups in American history.” He criticized the budget for relying on tax increases, savings from last year’s Budget Control Act, and gimmicks such as savings from the winding down of military operations in Afghanistan -- a policy decision that has already gone into effect.
The Concord Coalition has given the President’s budget mixed reviews. Executive Director Robert L. Bixby praises its recommendations to broaden the tax base and achieve some Medicare savings, but he criticizes the lack of a commitment to broader structural reforms.
At another Senate Budget Committee hearing last week, Treasury Secretary Timothy Geithner said another increase in the debt limit may be required before the end of the calendar year. The debt is currently $15.4 trillion, and Treasury does not have the legal authority to issue debt above the $16.4 trillion statutory limit. One factor that will affect the timing of an increase is the additional borrowing that will be required for the payroll tax cut Congress approved last week.