March 23, 2017

Posts on discretionary spending

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Wednesday, March 8, 2017 - 3:15 PM

Last week, the Congressional Budget Office published a blog exploring the role of fiscal policy in improving economic productivity. The subject is particularly interesting given how frequently politicians propose to pay for their agendas, be they tax cuts or spending increases, with dubious claims of improved economic growth. CBO identified four main fiscal tools that can actually result in increased growth through higher productivity:

  • Increasing funding for federal research and development (R&D)

  • Incentivize private investment in R&D through tax credits

  • Increase federal spending on education

  • Increasing loans or loan guarantees for businesses pursuing innovative technology

While federal lending programs can be difficult to quantify, the first three of these are easily measured and are worth putting in perspective relative to other areas of the federal budget.

In Fiscal Year 2017, the federal government is projected to directly spend just under $126 billion on four categories of R...

Tuesday, March 7, 2017 - 12:37 PM

When The Concord Coalition presents its federal deficit-reduction exercise around the country, many of the participants arrive with what they consider an easy solution in mind: Cut foreign aid.

They assume this would produce a gusher of extra money for other programs or deficit reduction. As they begin studying the spending and revenue numbers in the exercise, however, many participants quickly realize that annual foreign aid amounts to far less than they had realized -- a little over 1 percent of the federal budget.

That’s about $50 billion a year. By comparison, the government’s net spending last year on Medicare was $588 billion, while $910 billion was spent on Social Security and $584 billion on defense.

Misconceptions about the size of the foreign aid budget are widely shared. Over the years studies have repeatedly found that Americans grossly overestimate what the country spends on foreign aid. Many aren’t even in the ballpark, assuming that this assistance consumes a fourth of the entire federal budget or more.

But cutting foreign aid -- or even completely eliminating it -- would be no substitute for seriously addressing the big drivers of the federal deficits that are projected for the coming years:...

Thursday, August 27, 2015 - 11:00 AM

It has been easy for advocates of generationally responsible tax and spending policies to look at Capitol Hill with dismay for the past few years. A few consequences of inaction and lack of bipartisanship include:

  • A complete breakdown in the federal budget process.

  • Continued struggles to replace arbitrary, shortsighted caps on discretionary spending with smarter deficit reduction.

  • Total inaction on addressing the main drivers of deficits in the coming years, rising health costs and an aging population.

  • More than 30 short-term extensions of transportation funding and a failure to eliminate the growing shortfall plaguing the Highway Trust Fund.

  • Multiple debt-limit showdowns, each of which threatened the United States’ credit rating and roiled financial markets.

Yet in the past few months, I’ve been pleased to see at least a few positive signs.

In over two dozen staff and member meetings conducted over the first two months of my tenure at Concord, we’ve found that some lawmakers are coming back around to the fiscal realities facing them this fall and in the coming years. Part of the...

Thursday, March 5, 2015 - 1:25 PM

The New Democrat Coalition, a group of 46 House members who describe themselves as the "pro-growth, fiscally responsible wing of the Democratic Party," have announced a new platform designed to strengthen the role of moderates in Congress.

Among the many items on their “American Prosperity Agenda,” the New Dems pledge to "pursue a long-term, pro-growth fiscal reform that prioritizes investments in our future." If the New Dems really want to make good on this plank of their platform, here are five things they can do in this Congress.

1. Propose a Responsible Sequester Replacement

Lower discretionary spending caps will go back into effect on Oct. 1, enforced by an across-the-board sequester. But these lower caps were never supposed to actually take effect: they were designed to be so irrational that lawmakers would be induced to agree on a so-called "grand bargain" that addressed the real long-term drivers of our debt.

Because Congress could not agree to curb entitlement spending or raise more revenue, the discretionary budget -- the part of the budget that funds the "investments in our future" supported by...

Monday, July 7, 2014 - 11:31 AM

In a move that many saw as inevitable unless lawmakers acted, the Department of Transportation announced recently that the dwindling Highway Trust Fund would have to begin delaying payments to state governments in August.

In a press release, Transportation Secretary Anthony Foxx said “there is still time for Congress to act on a long-term solution,” adding that he hoped “Congress will avert this crisis before it is too late.”

Delayed payments would mean financial difficulties for the states, postponement of planned highway projects, and delays on the projects that are already underway. Yet Washington lawmakers continue to struggle over how to replenish the trust fund.

Foxx also said Tuesday there is “no good option when we're...

Tuesday, March 25, 2014 - 9:49 AM

Last Thursday, Congressman Reid Ribble invited The Concord Coalition to host a panel of experts on Capitol Hill to talk with congressional staffers gearing up for the annual budget process. Despite the ideological differences on the panel, there was a strong consensus that the process is broken and on ways in which it could be improved.

Gridlock has repeatedly brought our nation to the brink of crisis in the past few years. In October, Congress even temporarily shut down the government and brought the country within days of defaulting on at least some of its financial obligations. According to the GAO, a previous standoff over the debt ceiling cost the Treasury $1.3 billion in FY 2011 alone.

“The political process is the problem,” said Ed Lorenzen, a former aide to Democratic leader Rep. Steny Hoyer and now a senior advisor at the Committee for a Responsible Federal Budget. Lorenzen added that lawmakers “are not willing to make tough choices” that are necessary to resolve the country's long-term fiscal challenges.

Gordon Gray, director of fiscal policy at the American Action Forum and a former aide to Republican Sen. Rob Portman, agreed. He said that while some of the talk about the broken process is an attempt by politicians to absolve themselves of...

Monday, September 9, 2013 - 9:48 AM

Syria is not the only challenge Congress faces as it returns to Washington from its August recess. Monday was the first of only nine legislative days that both the Senate and House of Representatives will be in session before the fiscal year ends on Sept. 30. Congress will need to approve a spending plan before then and take action on the debt limit not long after that.

Unfortunately, little progress has been made towards passing a budget this year. The budget resolutions adopted by Senate Democrats and House Republicans are $91 billion apart in overall spending levels, and no appropriations bills have been signed into law.

House Republicans have only been able to muster support for their deep proposed spending reductions in five of twelve appropriation bills, while the only appropriations bill brought to the Senate floor was defeated by a filibuster.

With so little time left on the legislative calendar, Congress is extremely unlikely to finish its appropriations bills on time. That would leave lawmakers with an important choice: adopt a continuing resolution to temporarily fund the government or allow it to shut down.

If that wasn’t bad enough, the government could default within weeks unless Congress raises the debt ceiling. The Treasury warns that it will run out of "...

Friday, August 30, 2013 - 12:55 PM

This year will mark the end of a four-year string of trillion-dollar-plus federal deficits that have troubled the American public and caused turmoil on Capitol Hill.

Fiscal Year 2013 is drawing to a close with a projected deficit of a little over $640 billion, down from $1.1 trillion last year. That’s good news, but it should hardly be considered an “all clear” signal on the nation’s fiscal and economic challenges.

Here are eight reasons why:

1. While the deficit is going down, the federal debt is still going up.

The government is still borrowing a substantial amount of money this year, and that is all being added to the accumulated debt, which is approaching  $17 trillion. That’s why elected officials -- despite their usual lamentations and finger-pointing -- have no choice but to raise the debt limit at some point in the next few months. The real question is what they will do to prevent the debt from growing in the future to unsustainable levels.

2. This year’s lower deficit can be largely attributed to short-term economic factors rather than systemic reforms in the federal budget

During difficult economic times with high unemployment, federal deficits rise as...

Monday, April 29, 2013 - 9:32 AM

Although Congress has plenty of serious budget work to do, lawmakers in both parties can’t seem to resist frittering away time and confusing the public with various proposals that serve no useful purpose. Last week offered a couple good examples.

House Republicans distracted themselves with a bill that would set priorities for payments on federal obligations if the debt limit were reached. There’s understandable confusion and disagreement over what exactly the bill would do, but the general idea seems to be that the federal government could somehow limit the damage of a default by presenting itself to the world as only a partial deadbeat.

As approved by a party-line vote Wednesday in the House Ways and Means Committee, the legislation would tell the Treasury to continue making payments on principal and interest on U.S. debt obligations – and keep Social Security checks going out, of course.

Becoming a partial deadbeat apparently requires some special accounting rules, and so those were tacked onto the legislation. Alas, the nation’s creditors and global financial markets are under no obligation to embrace lawmakers’ unconventional notions about what might constitute a government default.

In any case, there is really...

Friday, March 1, 2013 - 11:19 AM

Back in August of 2011, with the nation’s debt bumping up against its statutory limit and an election year looming, President Obama and Congress made a deal.

They would empower a special committee (the “super committee”) to reach a long-term budget deal worth $1.2 trillion to $1.5 trillion in deficit reduction and give that deal a fast-track path to enactment. All options for cutting spending or raising revenues would be on the table.

To provide an incentive, other than simply doing the right thing, they agreed that if the super committee failed, or if Congress rejected its plan, a fallback mechanism known as “sequestration” would initiate spending cuts worth $1.2 trillion from non-exempt programs over 10 years. Half of the cuts would come from defense spending and the other half from domestic programs. The idea was not to craft rational policy but to install a back-up so arbitrary that no one would want it to go into effect.

The deal provided a grace period throughout 2013 during which a more comprehensive plan could be reached, if the super committee failed.

Here we are, 18 months later, still awaiting a “grand bargain.” The committee failed to produce a plan, nothing has been done to replace the 2011 deal, and the sequester...