Social Security’s contribution to the overall fiscal gap over the coming decades is smaller than Medicare’s, as the program’s trustees have again made clear in their annual report. If Social Security contributes so much less to the fiscal gap than Medicare, some people ask, why do we have to talk about reforming Social Security?
It would be a mistake, however, to ignore the pressure that Social Security will put on the federal budget in the future -- and how that problem, if it is not addressed, will steadily grow. The difference between Social Security’s annual income (without interest) and its annual costs would stay close to 1 percent of GDP for decades but grows closer to 1.5 percent later in the 75-year window under the trustees’ “intermediate” assumptions. The longer we wait, the more difficult fixing the problem will become.
Closing the gap on Social Security certainly won’t be fun and will involve sacrifice. We would not want implement immediate changes that would weaken the economic recovery, nor would we want to place undue burdens on current...
If President Obama was looking for Congress to rubber-stamp his request for additional “emergency” funding for military operations in Iraq and Afghanistan this year, he was sorely disappointed. He asked for the money last February but a wary Congress didn’t approve the funding until just last week, and only after considerable debate over the war effort and U.S. spending priorities.
Rep. Jay Inslee, a Democrat from Washington state, offered a striking example of the trade-offs that are involved in heavy spending abroad at a time when communities around the country are struggling financially: A police department in his district could lose as many as 23 jobs.
“We can’t pay for them – our first line of security in our neighborhood – but today we would be voting for something on the order of several years of about $4 billion to train police officers in Kabul,” Inslee said. Another notable dissent came from House Appropriations Chairman David Obey of Wisconsin, who expressed concern about the high cost of the war and doubts about the Afghan government.
The legislation provides for $59 billion in additional spending this year, with $33.5 billion going to the Department of Defense and the rest...
FY 2011 APPROPRIATIONS: Prior to departing for the August recess, the House passed the first two FY 2011 appropriations bills. The Military Construction-Veterans Affairs bill passed by a vote of 411-6 and the Transportation-HUD bill passed by a vote of 251-167. House subcommittees reported the...
Prime Minister David Cameron’s visit last week to the United States underscored the important relationship between the U.S. and Britain, both politically and economically.
Britain’s new coalition government faces tremendous challenges, many of which are similar to the United States’ problems. Britain’s public debt was 68 percent of GDP at the end of 2009; the comparable figure for the U.S. was 53 percent.
Cameron’s coalition aims to slash government spending over the next five years. The eventual goal is to cut Britain’s annual budget deficits in half over five years, which will mean some ministries will face funding reductions of up to 40 percent. Even the popular National Health Service (NHS) will be ordered to make personnel cuts, although overall it will face much lighter cuts than other ministries. About 75 percent of deficit reduction will be achieved with budget cuts while the other quarter presumably will come from raising revenues.
The proposed cuts in Britain stand in stark contrast to the three-year freeze on domestic discretionary spending President Obama has proposed. Although broad generalizations cannot—and, indeed, should not—be drawn from these figures, it is clear that both the U.S...
COMMITTEES REPORT ADDITIONAL FY 2011 APPROPRIATIONS BILLS: Last week the House Appropriations Committee continued to make progress on the FY 2011 bills. The full committee reported the Military Construction-Veterans Affairs bill as well as the Transportation- Housing and Urban Development bill. Both bills are expected...
Last week President Obama nominated Jacob “Jack” Lew to be the new head of the Office of Management and Budget (OMB), replacing Peter Orszag, who is stepping down at the end of July. OMB is primarily responsible for developing the President’s budget.
If confirmed by the Senate, as expected, Lew will become OMB director for the second time. He served as President Clinton’s director from 1998 through the end of the Clinton administration in 2001.
While Lew is familiar with the job, the budget picture has changed considerably. Lew was OMB director during the only four years of budget surpluses since the late 1960’s. He was also a key negotiator on the bipartisan balanced budget agreement in 1997. Now the budget environment is even more partisan and the country is experiencing the largest deficits since the end of World War II.
The change in OMB leadership provides an opportunity to review the changes that have taken place since Lew’s last stint as budget director and also gives us another chance to review the major decisions looming for the federal budget.
The final budget presented by Lew for the Clinton administration in February of 2000 (FY 2001)...
2011 APPROPRIATIONS PROCESS MOVES FORWARD AS TIME STANDS STILL FOR THE 2010 SUPPLEMENTAL: Last week the House Appropriations Committee continued to make progress on the FY 2011 bills. House subcommittees reported the Military Construction and Veterans Affairs; Energy and Water; and...
Imagine if Congress held a vote in the next few months on a bill that cut nearly $3.7 trillion in income taxes, added $350 billion worth of loopholes and deductions to the tax code, and increased Medicare spending by $236 billion.
There might be quite an uproar. After all, we are experiencing the largest deficits in history with increasing awareness of our clearly unsustainable long-term outlook.
Yet, this bill is effectively being passed by Congress, sometimes in decisions made on a month-to-month basis and sometimes annually, through multiple bills that contain Medicare doctor payment "fixes," extenders, Alternative Minimum Tax (AMT) patches, and through the big upcoming push to extend some or all of the Bush tax cuts. Members from both parties have voted time and again over the last 10 years for this bill.
Today's release of the Congessional Budget Office (CBO) long-term outlook highlights the deleterious effect of these decisions on the budget outlook both over the short term and the long term. In it, CBO constructs a baseline of where current law would take us and a baseline of...