March 26, 2017

Posts on federal budget

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Tuesday, January 17, 2017 - 10:34 AM

An amazing thing happened in Washington recently. With the total national debt about to top $20 trillion and on an unsustainable long-term path, 376 members of the House of Representatives voted for one of two Fiscal Year 2017 budget resolutions that would add another $9.1 trillion to the debt over next 10 years.

One version was passed by the House with 227 Republican votes. Nine Republicans voted in opposition. The other version was a Democratic amendment that was defeated with 37 Democrats voting in opposition.

That means only 46 members of the House (9 Republicans and 37 Democrats) voted against adding $9.1 trillion to the debt.

Both budget resolutions contained roughly the same recommended levels of spending, revenues and debt. The main difference was that the Republican version contained a fast-track procedure (“reconciliation”) to begin the process of repealing the Affordable Care Act (“Obamacare”).

Earlier in the week, the Senate also approved a version of the budget resolution that would add $9.1 trillion to the debt with only one Republican, Rand Paul of Kentucky, voting in opposition.

It is not easy to vote against a budget resolution or amendment put forward by the party leadership, no matter how fiscally responsible that vote may be.

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Monday, December 19, 2016 - 1:07 PM

In selecting Rep. Mick Mulvaney (R-S.C.) as his budget director, President-elect Donald Trump has chosen a strong advocate of balanced budgets accomplished through deep spending cuts. It will be Mulvaney’s difficult task to craft a budget that adheres to this goal while accommodating Trump’s many campaign promises to increase spending and cut taxes.  

As a co-founder and leader of the House Freedom Caucus Mulvaney has advocated deeper spending cuts than House Republican leaders have agreed to, even if that meant shutting down the government. In his quest to reduce spending he has not spared the Pentagon budget from scrutiny, particularly the gimmick of using the Overseas Contingencies Operations fund (OCO) to avoid spending caps.

He has also opposed raising the nation’s statutory debt limit without spending cuts and has downplayed the likelihood of a government default.

Some of these hard-line positions might prove difficult to maintain as budget director where his job will require negotiations with his former colleagues in Congress to push through the administration’s fiscal agenda. This will include decisions on Fiscal Year 2018 spending caps, replacement costs of repealing the Affordable Care Act, and an inevitable need to raise the statutory debt limit.

Mulvaney may also find...

Friday, December 16, 2016 - 4:50 PM

Senate Majority Leader Mitch McConnell (R-Ky.) made headlines this week when he suggested that the GOP must pay for its campaign promises, stating his preference for “deficit-neutral” tax cuts and offsets for new spending.

“I think this level of national debt is dangerous and unacceptable,” McConnell told the press at a recent briefing. His comments come at an important time.

As a candidate, Donald Trump frequently made mention of the size of the debt, but some of his more popular proposals threaten to grow it even larger. Analyses of Trump’s proposed tax cuts put the cost between $3 trillion and $6 trillion. Incoming White House Senior Advisor Steve Bannon says he is “pushing a trillion dollar infrastructure plan” and many observers are waiting to see the size of Trump’s actual proposal.

The size of possible proposals is leading many Republicans, including McConnell and even the incoming White House chief of staff, Reince Priebus, to call for offsets. On “The Hugh Hewitt Show” on Wednesday,...

Tuesday, December 13, 2016 - 11:31 AM

Three former congressmen and a retired U.S. ambassador warned of the difficult fiscal policy challenges facing the incoming Trump administration and congressional leaders at a forum last week in Concord, N.H.

The bipartisan panel discussed issues such as the growing debt and deficit, tax reform, affordable health care, Social Security and infrastructure investment. It was hosted by The Concord Coalition and the Warren B. Rudman Center at the University of New Hampshire School of Law.
 
Panel members were retired ambassador George Bruno and former congressmen Charles Bass, Paul Hodes and William H. Zeliff. Bruno and Hodes are Democrats; Bass and Zeliff are Republicans. Robert L. Bixby, Concord’s executive director, moderated the conversation. A video is available here.
 
Bass said that both Republicans and Democrats are to blame for the nation’s debt and deficit issues, and that both parties must shoulder the responsibility of reform.
 
He called upon Congress -- which has struggled to complete appropriations legislation in recent years -- to consider systemic reforms that could...
Tuesday, December 6, 2016 - 10:17 AM

Budget experts urged the incoming Trump administration and congressional leaders to address the country’s long-term fiscal challenges at two events in Washington last week. 

The first event, hosted by the Bipartisan Policy Center (BPC), featured the authors of a new report titled Fixing Fiscal Myopia. The report presents five chapters, each by a different budget expert, covering topics such as the framing of long-term budget projections, other countries’ experiences with long-term budgeting, and goals for reforming the budget process.

“Given the documented long-term fiscal challenges facing the country, budgeting with our heads in the sand is no longer a viable strategy,” writes Bill Hoagland of BPC and Phil Joyce of the University of Maryland in the report’s final chapter. “If the budget process is to focus more effectively on the long term, a fiscal goal should be agreed to by the president and Congress.”

The second event, hosted by the Committee for a Responsible Federal Budget, centered around the publication of a memo to President-elect Trump about the fiscal challenges he will...

Friday, September 16, 2016 - 2:13 PM

The penny plan to reduce spending by one cent on every dollar (one percent a year) has been bouncing around Washington for years but is now getting a higher profile with versions supported by the Senate Budget Committee Chairman Mike Enzi and the Republican nominee for president, Donald Trump. 

While the plan sounds simple, it allows politicians to duck any responsibility for explaining to voters which federal programs should be cut and why. Furthermore, the size of cuts required are much larger and more unrealistic than one might think from the characterization built around the idea of “one percent."

That is because government spending on programs like on Social Security, Medicare and Medicaid (which alone make up nearly half the budget) grows to take into account population changes, aging and inflation. Thus the actual amount that the government would have to cut in spending is much larger than one percent relative to that built-in growth.

In the plan’s most basic iteration, where all government spending aside from interest payments would be subject to cuts, spending would have to be cut by almost 40 percent from where it would be otherwise in the tenth year of the budgeting period. That would mean dramatically large cuts to Social Security, Medicare, and everything else. Exempting a program from...

Monday, April 25, 2016 - 11:47 AM

A pair of Republicans on the House Rules Committee recently discussed proposals to alter the rules for the consideration of spending bills. The effort drew attention – and opposition – from Rules Committee Democrats and Appropriations Committee Republicans alike.

The controversy centered on a proposal that would have enabled the House to reduce expenditures on mandatory spending programs, the largest of which are Social Security, Medicare and Medicaid, during the appropriations process.

While it would be a good idea to provide more opportunities for review of mandatory spending programs, the already troubled appropriations process is not the right vehicle.

 As our chart shows, mandatory spending -- which is set by formula and does not require approval through the annual appropriations process -- has ballooned in the past several decades and is projected to continue growing faster than the economy. Many fiscal analysts...

Monday, April 4, 2016 - 11:25 PM

In an interview with Bob Woodward of the Washington Post, Republican presidential front-runner Donald Trump estimated last week that he could pay off the nation’s $19 trillion debt within eight years.

This claim demonstrates a basic misunderstanding of the debt and its impact on the economy. It is also inconsistent with the tax and spending proposals Trump has espoused on the campaign trail, which are far more likely to grow the debt rather than eliminate it.

What’s important about the debt is not its size in dollar terms but its size relative to the economy (GDP) and whether it is on a sustainable path. While the debt is indeed very high by historic standards and is projected to grow at an unsustainable rate over the coming decades, there is no need to eliminate it within eight years. Attempting to do so, however, would require spending cuts or tax increases that risk substantial harm to the economy.  

A better goal would be to stabilize the debt as a share of the economy and then begin to reduce it over time. That is what happened following World War II when the debt in 1946 was $242 billion or 106 percent of GDP. By 1974, the debt had grown in dollar terms to $344 billion but had shrunk to 23 percent of GDP -- the post World War II low.

Moreover, no plausible set of policy...

Monday, April 4, 2016 - 12:41 PM

As Congress slides into April without any serious progress on a budget resolution in the House, some pragmatic lawmakers are reportedly considering the use of a novel approach to break the gridlock: a “Queen of the Hill” legislative rule.

The rule operates on a simple, common-sense principle: Every lawmaker has an opportunity to put his or her preferred solution on the table, and if no preferred solution receives a majority of votes, a default option is “deemed,” or considered passed by the House. This approach should be taken seriously and the lawmakers proposing it should be praised for their efforts.

At issue in the impasse over the budget resolution is the $1.07 trillion total for Fiscal Year 2017 appropriations agreed to by lawmakers in the Fall. Some argue that the figure is too high; if the budget were accompanied by reforms to mandatory spending to put long-term deficits on a downward trajectory, they say, the agreement reached might be more acceptable. Laudable as this goal may seem, it has had the adverse effect of blockading the budget process.

It is against this backdrop that Rep. Charlie Dent (R-Penn.) has raised the possibility of a “Queen of the Hill” rule to inject some needed creativity into a broken process. Dent, according to a report in the National...

Tuesday, February 2, 2016 - 11:12 AM

On the campaign trail, voters are hearing promises of big tax cuts from the Republican presidential candidates and of big spending increases from the Democrats.

Meanwhile, back in Washington last week, the nonpartisan Congressional Budget Office (CBO) released a new set of projections for the next 10 years that casts serious doubt on how realistic (or responsible) those campaign promises are.

According to CBO's projections, here are some sobering fiscal facts that will confront the next president:

  • In 2018, the first fiscal year for which the new president will present a budget, the projected deficit will be $572 billion (2.8 percent of GDP).
  • By 2022, the end of the next president’s first term, the projected deficit will be  back above $1 trillion (4.4 percent of GDP).
  • Projections for a hypothetical second term show a steadily worsening situation, with the deficit above $1 trillion and rising in each year. By 2026, the last year of CBO’s 10-year outlook, the deficit will be $1.4 trillion (4.9 percent of GDP).
  • Debt held by the public is projected to grow from 76 percent of GDP this year to 86 percent in 2026, far above the 39 percent average for the past half-century.

This is not a scenario that calls for spending increases or tax cuts, even if offsetting...