A Washington Post editorial today sums up a bunch of different strands of thinking about the federal budget that Concord has been writing about and talking about a lot recently. One is that the country can "walk and chew gum" at the same time when it comes to short-term actions to help the economy that may involve increased deficits and long-term planning to confront the nation's real fiscal challenges. Another is that the current debate in Congress over the cost of tax-extenders is failing to focus on their merits while the overall fiscal challenge continues to go unexamined. A third is that we generally do know what actions need to be taken to reform federal programs over the long run -- but that members of Congress lack the political courage to act, and hopefully the President's fiscal commission can begin to...
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How large is the federal debt? That's something of a trick question in economic circles, and some analysts believe it may have already tripped up the President's fiscal commission.
Some commission members think the panel, charged with recommending solutions to the nation’s fiscal problems, should focus on the total federal debt. That figure, which just hit $13 trillion, is most familiar to the general public because it is widely cited by the news media and politicians.
Many budget experts and economists, however, say the real number to watch is “publicly held debt,” meaning what the government owes to investors. This figure, now approaching $8.6 trillion, does not include money that the government owes to various trust funds, notably for Social Security.
Beyond this issue is the question of how much more debt the government can safely take on. Fiscal commission members tussled over that at their second full meeting late last month on Capitol Hill, with some arguing that the economy was still too weak for the government to start focusing on deficit reduction.
“It’s very important that we don’t in our zeal focus on deficit reduction right now,” said Rep. Jan Schakowsky, an Illinois Democrat.
Regardless of which figure the commission focuses on, federal debt is...
The extenders bill that the House will consider this week is a timely reminder of why it is important for Congress to complete action on a budget resolution. A budget resolution continues to elude Congress, but there has been considerably less trouble reaching agreement on a bill that the Congressional Budget Office estimates will add a staggering $167 billion to the deficit over 2010-2014 and a net increase of $134 billion over 2010-2020.
Last Thursday, leaders of the Senate...
It’s a little amusing to see how badly the idea of a bipartisan fiscal commission has frightened some partisans at both ends of the political spectrum. That alone indicates the idea may have merit.
Some skeptics, of course, doubt that a special bipartisan panel would have any hope of success in steering the government onto a more responsible fiscal course. And there’s no question that this would be a very tough assignment.
But the strident opposition to a bipartisan commission from some critics on both the right and the left is rooted in fears that such a panel might actually succeed. They describe commission proposals in conspiratorial terms, as though serious bipartisan planning for the nation’s future would be merely a cover for shady plots to sneak reprehensible policies past Congress and the American public. Oh, the deceit of it all...
The Wall Street Journal, for example, recently ran an editorial conceding that “current federal commitments are unsustainable, starting with $37 trillion in unfunded Medicare liabilities.”
Yet the editorial ruled out a bipartisan commission that could tackle this...
While the President's press conference Wednesday night got a lot of attention and focused substantially on health care, he also did an interview with Washington Post editorial page editor Fred Hiatt earlier in the day. The wide-ranging interview touched on health care reform, but also on a lot of the other subjects Concord Coalition members are interested in -- like deficits, debt, Social Security reform and a BRAC-like fiscal commission. It is worth a read.
It has almost become axiomatic that growing health care costs, rather than population aging, is the overwhelming cause of a projected spike in federal spending. That notion was dispelled in CBO’s Long-Term Budget Outlook published last week. As explained in the report:
“Federal spending on Medicare, Medicaid, and Social Security will grow relative to the economy both because health care spending per beneficiary is projected to increase and because the population is aging. Spending on Medicare and Medicaid will be driven by both factors, while Social Security spending will rise because of the population’s aging. Between now and 2035, aging is projected to make the larger contribution to the growth of spending for those three programs as a share of GDP. After 2035, continued increases in health care spending per beneficiary are projected to dominate the growth in spending for the three programs.”
Later in the report, CBO quantifies the relative effects of aging and health care growth on projected...
It has been the beginning of a busy week for those closely following developments in the federal budget. On Monday, President Obama released the final installment for his FY 2010 budget. Then yesterday, the annual Social Security and Medicare Trustees' Reports were released.
This year, the Trustees' Reports received additional attention because analysts were curious how the current economic downturn would affect the finances for these programs. Early estimates were that it would have a significant impact. A few weeks ago, the Congressional Budget Office provided updated data showing that income for Social Security was expected to decline by $1.2 trillion over a 10-year period. Most of the lost revenue was a result of revisions in their economic forecast.
The Trustees' Reports reaffirmed the worsening financial position of these two programs. In last year's report, the Trustees noted that Social Security would begin to run cash deficits in 2017 and exhaust the trust fund in 2041. However, yesterday's report accelerated those dates...
Today’s Washington Post contains a very welcome front-page headline, “Obama Pledges Entitlement Reform.” The article explains that President-elect Obama plans to convene a fiscal responsibility summit in February. According to the Post story:
President-elect Barack Obama pledged yesterday to shape a new Social Security and Medicare "bargain" with the American people, saying that the nation's long-term economic recovery cannot be attained unless the government finally gets control over its most costly entitlement programs.
That discussion will begin next month, Obama said, when he convenes a "fiscal responsibility summit" before delivering his first budget to Congress. He said his administration will begin confronting the issues of entitlement reform and long-term budget deficits soon after it jump-starts job growth and the stock market.
"What we have done is kicked this can down the road. We are now at the end of the road and are not in a position to kick it any further," he said. "We have to signal seriousness in this by making sure...
Today, the Concord Coalition released our second issue brief during the general election. In this one, called “Fiscal Policy Beyond Election Day: Nine Challenges for ’09," we discuss how the reality of the nation’s current economic and fiscal transformation will affect the plans the presidential candidates have developed. Additionally, we propose that recent events, and the unrealsitic nature of the plans even before the financial crisis required massive government intervention, will require whoever becomes president to re-prioritize to fit current circumstances and to improve the well-being of future generations.
Our first issue brief looked more closely at the specifics of the candidate's taxing and spending plans and how by accepting currently policy trends as the baseline by which their plans should be judged, they were setting lower expectations for themselves than they should, and certainly lower expectations than the American public should...