April 18, 2014

The State of Fiscal Reform: Still Much to Do

  • The national debt has grown significantly in recent years due to rising annual deficits. A deficit occurs in any year the government spends more...

With a sharp drop in the federal deficit last year and voters disgusted with Washington’s budget showdowns, there is a broad consensus among elected officials in both parties to shift the political spotlight away from fiscal reform efforts for a while.

President Obama could show real leadership by challenging that comfortable consensus in his State of the Union address tonight. That’s because our nation’s largest fiscal problems remain -- and solving them is essential to future economic growth and prosperity.

These problems include mounting federal debt, rising interest and health care costs, an aging population and a tax code that lavishes hundreds of billions of dollars a year in subsidies on favored individuals and industries.

Elected officials have also deluded themselves with unrealistic plans for deep cuts in only one part of the budget -- “discretionary” spending that Congress approves on an annual basis. Much more is required to put us on a sustainable course.

A return to “regular order” in the budget process would help. But tardy approval of this year’s spending has already thrown work on next year’s budget behind schedule; the administration plans to release its proposed Fiscal 2015 budget on March 4, a month late.

Also coming up: The Congressional Budget Office plans to release its annual Budget and Economic Outlook next Tuesday, providing the statistical framework for budget discussions in the coming months.