June 25, 2017

The (Tab)ulation

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Wednesday, June 7, 2017 - 12:21 AM

The federal government’s financial problems are so large that all parts of the budget -- from entitlements to defense spending to tax breaks -- should be considered “on the table” for fiscal reform discussions.

Comprehensive, lasting reform will require substantial public sacrifice. As responsible elected officials in both parties have long recognized, this burden will need to be widely shared. Proposals that fail to spread the burden lack both mathematical and political credibility.

On that score President Trump’s proposed budget for the coming fiscal year falls short. Many of his fellow Republicans in Congress, to their credit, quickly recognized this and vowed to do better.

Trump gets some credit for specificity in terms of where he would like to reduce spending. But he has proposed extremely deep cuts in some parts of the budget while leaving other parts alone -- and is also calling for tax cuts that are unlikely to “pay for themselves.”

As Concord Coalition Executive Director Robert L. Bixby discussed in...

Tuesday, June 6, 2017 - 5:13 PM

President Trump’s nominee for chairman of the Council of Economic Advisers (CEA), Kevin Hassett, appeared before the Senate Banking, Housing and Urban Affairs Committee for his confirmation hearing on Tuesday. The nomination of Hassett, an American Enterprise Institute economist, received broad bipartisan support from dozens of respected economists, including all four CEA chairs who served in the Obama Administration.

The chairman of the CEA will be particularly important to the Trump administration given its stated desire to pursue tax reform and its recent budget proposal, which promised sustained economic growth of 3 percent per year within a few years.

Should these projections prove overly optimistic, as most independent analysts believe they will, the result would be large fiscal shortfalls that would increase the nation’s debt burden. It is thus critical that the administration make economic policy decisions based on realistic and informed premises.

Hassett articulated a desire to provide the president with exactly that, emphasizing in his testimony his commitment to “gather evidence and not...

Tuesday, June 6, 2017 - 11:23 AM

The Congressional Budget Office (CBO) is responsible for providing Congress and the American public with objective, detailed and non-partisan analysis of current fiscal trends and proposed legislation.

Given the difficulties of that assignment and the stakes that are often involved for elected officials, the CBO inevitably faces some political potshots and second-guessing. Over the years some of that has come from Democrats and some from Republicans.

But Mick Mulvaney, the White House budget chief, has recently taken criticism of the CBO to an entirely new and quite troubling level, particularly for a top executive branch official.

Mulvaney, unhappy with the CBO’s projections for House Republicans’ health care legislation, called that analysis “absurd” and speculated -- without offering any credible evidence -- that the CBO had been infected with partisan bias.

“At some point,” Mulvaney said in a recent interview with the Washington Examiner, “you’ve got to ask yourself, Has the day of the CBO come and gone?”

...

Tuesday, June 6, 2017 - 11:14 AM

After a recent “Budgets & Beers” presentation concerning federal budget problems -- notably a massive and growing debt -- I was asked: “What hope do we have for the future?”

That is a good question, one that comes up frequently when people begin to understand the depth of the country’s fiscal problems.

Fortunately, there is much hope  -- especially if younger Americans become more aware of our nation’s fiscal challenges and engaged in the search for solutions.   

In fact, with the support of some generous sponsors, I am working on a new initiative in New Hampshire with The Concord Coalition. Aimed at getting my fellow young adults more involved in fiscal reform efforts, this initiative is taking several forms, with “Pinot & Policy” and “Budgets & Beers” for the after-hours crowd and “Budgets & Bagels” for the early risers.

Each event begins with food, drinks and networking, then moves on to a brief presentation and lively discussion of how federal budget issues impact attendees and how changes in policy might shape the future.

This event series has already helped renew my hope for lasting change in the face of significant fiscal challenges confronting Americans today and that are likely to impact...

Wednesday, May 31, 2017 - 11:20 AM

Treasury Secretary Steve Mnuchin warned lawmakers recently that the deadline to raise or suspend the federal debt limit may be sooner than previously thought. The change is due to lower-than-expected tax receipts in April, which is typically the best month of the year for the government’s balance sheet due to tax-filing deadlines.

The debt limit had been suspended since November 2015 but went back into effect on March 16 of this year at the level of $19.808 trillion. This level covered the amount of outstanding debt at the time of the limit’s reinstatement. The Treasury Department can use so-called “extraordinary measures” to temporarily avoid default (as it has during past debt limit impasses) but eventually the limit will need to be raised or suspended again.

Estimates from both the Congressional Budget Office and the Bipartisan Policy Center previously projected that lawmakers could wait until October or November before raising or suspending the debt limit. Mnuchin now...

Wednesday, May 31, 2017 - 11:00 AM

The Trump administration’s budget plan rests heavily on the assumption that the American economy will grow much more rapidly in the next decade than the Congressional Budget Office (CBO) and many private-sector economists have projected.

The Concord Coalition, the Committee for a Responsible Federal Budget and many other analysts have expressed skepticism about this highly optimistic assumption about future economic growth.

Democrats have been critical as well. But in addition, Rep. Mark Sanford (R-S.C.) took the opportunity at a House Budget Committee hearing last week to present Mick Mulvaney, the White House budget director, with a forceful explanation of the risks and consequences of unrealistic growth projections.

The CBO is projecting average economic growth over the next decade at a little under 2 percent a year. The administration’s budget, however, calls for annual growth to climb from 1.6 percent last year to 2.4 percent next year and to 3 percent in 2021 and beyond.

This growth assumption is crucial to the administration’s claim that its tax and spending...

Tuesday, May 30, 2017 - 12:20 PM

In presenting President Trump’s first budget to the House Budget Committee last week, Office of Management and Budget Director Mick Mulvaney said that it “keeps the president’s promise to balance the budget within the next decade and reduce our debt without affecting beneficiaries of Social Security and Medicare retirement programs, and without raising taxes.”

Unfortunately, the budget relies on improbable assertions of higher economic growth and unrealistic assumptions about future spending cuts to achieve its goal. However, even taking the budget at face value, one little-noticed effect of the president’s budget is the extent to which his pledge to leave Social Security and Medicare largely alone, while imposing deep cuts elsewhere in the budget, results in those two programs consuming an escalating share of the budget.

To be sure, Social Security and Medicare would consume a growing share of the budget even without Trump’s policies. An aging population means that the number of beneficiaries for these programs will grow substantially in the coming years and they will be using more health care services, which tend to grow faster than the economy.

...

Thursday, May 25, 2017 - 8:14 AM

The Congressional Budget Office (CBO) has released its cost estimate for the American Health Care Act (AHCA) as passed in the House of Representatives on May 4. The estimate is that relative to current law the bill will decrease spending by $1,111.1 billion and decrease revenue by $992.4 billion, leading to a total deficit reduction of $118.7 billion over the 10-year budget window from 2017 to 2026. This is lower than the preliminary deficit reduction estimate of $336.5 billion from prior to last-minute amendments and the House vote.

The budget office also estimates that the legislation would increase the number of people who are uninsured by 23 million in 2026 relative to current law -- about a million less than the CBO estimate for the earlier version of the bill.

The small amount of deficit reduction in the legislation isn’t as important as the fiscal risks we have pointed out are inherent in the plan, from its lack of provisions to control health care cost growth, to the magnitude and rapidity of the Medicaid reductions, to the possibility...

Wednesday, May 24, 2017 - 3:49 PM

Leading policymakers in both parties, business leaders and prominent experts on the federal budget generally agreed at a Washington policy forum Tuesday that the United States faces difficult fiscal challenges and should act soon to deal with them.

 “Addressing our nation’s unprecedented and unsustainable debt is critical to securing a strong, growing economy of the future,” said Pete Peterson, founder and chairman of the Peter G. Peterson Foundation, which presented the day-long program entitled “2017 Fiscal Summit: Rising Debt in a Changing Economy.” It was the foundation’s eighth annual fiscal summit.

Like many others who spoke on Tuesday, Peterson expressed concern at Washington’s failure to put the country on a more sustainable path. A continued failure to act, he said, would have “an enormous negative effect on the future of this country.”

The summit focused on the rising federal debt, the changing economy, and related issues and policy prescriptions.

“As Congress and a new administration explore major changes in key areas -- health care, taxes, infrastructure, trade and more -- our fiscal condition is as important as ever,” said Michael A. Peterson, president and CEO of...

Wednesday, May 24, 2017 - 3:01 PM

Members and guests of the Charlotte Economics Club in North Carolina gathered for a luncheon on May 18 to hear a trio of fiscal policy experts discuss the massive budgetary challenges facing the nation.

Robert Bixby, executive director of The Concord Coalition, moderated the timely discussion with Diane Lim, principal economist for the Conference Board, and G. William Hoagland, senior vice president of the Bipartisan Policy Center.  Lim had experience working in the Clinton administration while Hoagland served on the staff of Senate Republicans.

Bixby began with an overview of the budget outlook showing why the debt is on an unsustainable path. His charts included the projected growth of federal spending and revenues as a percentage of the economy and highlighted the main sources of growth in federal spending.

Hoagland said he thought President Trump’s budget proposals would be unlikely to win congressional approval. He went on to say that earlier hopes for tax reform have been greatly impacted by the difficulties in Congress this year on health care legislation because “tax reform and health care reform are inextricably linked.”

Hoagland said the most worrisome...