May 27, 2017

Posts on national debt

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Tuesday, May 16, 2017 - 10:12 AM

Lawmakers recently received a timely warning about the nation’s fiscal health from a particularly credible and persuasive source: Gene L. Dodaro, comptroller general of the United States and the head of the Government Accountability Office (GAO).

The warning came as administration officials continued to work on President Trump’s tardy proposed 2018 budget, and as lawmakers have been considering substantial tax cuts and fundamental changes in the health care system.  

Fortunately, Dodaro’s testimony before the House Budget Committee included not just an explanation of our fiscal difficulties but an array of recommendations that could help deal with them. Congress and the president would do well both to heed Dodaro’s warning and carefully consider his agency’s recommendations.

“The Congress and administration face serious economic, security and social challenges that will require difficult policy choices in the short term about the level of federal spending and investments as well as ways to obtain needed resources,” Dodaro said. “At the same time, the federal government is highly leveraged in debt by historical norms and on an unsustainable long-term fiscal path caused by a structural imbalance between revenue and spending absent a...

Thursday, April 13, 2017 - 10:32 AM

Experts on the federal budget often warn that excessive federal debt could eventually lead to a fiscal crisis. But what would that actually involve, and how could Washington respond to such a crisis?

The Congressional Budget Office recently sought to answer those questions, among others, in a report following up on CBO Director Keith Hall’s testimony before a Senate Budget Committee hearing in February. CBO’s explanations underscore the importance of putting the federal budget on a more sustainable course.

The federal debt is already quite large by historical standards, equaling 77 percent of GDP, and the budget office has projected that under current law it will grow rapidly in the coming decade and beyond.

At some point, CBO warns in the new report, investors worried about the size and growth of the debt “might become less willing to finance federal borrowing unless they were compensated with high returns. If so, interest rates on federal debt would rise abruptly, dramatically increasing the cost of government borrowing.”

Unfortunately, interest payments...

Monday, February 27, 2017 - 10:47 AM

President Trump’s Saturday morning tweet on the national debt left many budget watchers scratching their heads about its dubious factoid and irrelevant comparison.

Here’s what Trump said:

“The media has not reported that the National Debt in my first month went down by $12 billion vs a $200 billion increase in Obama first mo.”

The facts are accurate but meaningless.

Trump correctly claims that the debt went down in his first month as president. There are, however, two problems with this claim. First, the time frame is totally arbitrary. The debt number can fluctuate widely on a day-to-day basis. For example, from January 10 to January 12 this year the debt fell by $22 billion. On the other hand, from January 13 to January 18 it rose by $21 billion.

As Keith Hennessey, former director of the National Economic Council under President George W. Bush, noted, if Trump had “ended his timeframe one day earlier this tweet would have been invalid and debt would have increased (by just $1 B) in ‘the first month.’ ”

Beyond that is the fact that Trump has not done anything yet that would have an effect on the debt. The numbers he cites are not indicative of any...

Tuesday, February 7, 2017 - 11:43 AM

With interest rates in recent years far below traditional levels, it has been easy for American taxpayers and their political leaders to overlook one of the chief drawbacks of the federal debt: the borrowing costs.

But as Congressional Budget Office (CBO) officials have made clear recently, there is good reason for elected officials and the public to start paying more attention to what the government pays in interest -- and how rapidly these payments will rise in the coming years unless big changes are made in the federal budget.

In testimony last week on Capitol Hill, CBO Director Keith Hall said that net interest payments this year would be the fastest-growing component of the projected increase in federal spending.

If interest payments rise as projected over the next decade, they will make it even more difficult to put the federal budget on a responsible and sustainable path.

Two factors are driving the current and projected growth in federal interest costs:

  • Interest rates are on their way up. As explained in a CBO blog post last week, the budget office expects rates to rise...

Monday, January 30, 2017 - 12:24 PM

In an interview on Fox News last week, President Trump said that he would like to have a balanced budget “eventually,” but not at the expense of higher spending for the military.

“So a balanced budget is fine,” Trump said. “But sometimes you have to fuel the well in order to really get the economy going. And we have to take care of our military. Our military is more important to me than a balanced budget because we’ll get there with a balanced budget.”

This brief window into the president’s thinking on budget policy is troubling because it indicates that he does not feel constrained by the need to make trade-offs in pursuit of his policy goals. It is an invitation to pit any worthy initiative against the goal of a balanced budget regardless of the cost.

That is a false choice and one that has potentially harmful consequences for budget discipline.

As new projections by the nonpartisan Congressional Budget office (CBO) show, current policy is already on track to add another $9.4 trillion of borrowing to the nation’s growing debt over the next 10 years.

With that sobering outlook in mind, Trump’s...

Monday, January 23, 2017 - 11:15 AM

Last week marked a sad anniversary at The Concord Coalition. On Jan. 18, 1997, former U.S. senator and Concord Coalition co-founder Paul E. Tsongas passed away.

Twenty years later, his example and vision continue to guide us.

Upon his death, The Concord Coalition issued a statement about him and his legacy that we republish below.

"The death of Paul Tsongas will be deeply felt by every member of The Concord Coalition family. His leadership inspired many of us first in his 1992 presidential campaign, and later as co-founder of The Concord Coalition. He represented the best qualities in leadership - integrity, courage, commitment, compassion, and the good grace to take himself less seriously than the policies he advocated.

"With his death, some will inevitably wonder whether the work of The Concord Coalition will go on. But no one who had the privilege of knowing Paul Tsongas could have any doubt as to the answer. Of course it will.

"Paul Tsongas often spoke of legacies. To him, the work of The Concord Coalition went well beyond the tactical goal of balancing the federal budget. He was much more...

Thursday, January 19, 2017 - 12:12 PM

With a new administration coming into office, a report on the nation’s fiscal health provides a timely and emphatic reminder of the need for the new president and Congress to pursue sweeping long-term changes in the federal budget.

Released this week by the Government Accountability Office (GAO), the report provides a good look at the nation’s unsustainable fiscal path and deserves close scrutiny by elected officials in both parties.

Although our nation’s leaders face an array of serious short-term challenges and difficult policy choices, the new report reminds them -- and the American public -- that the federal government is already “highly leveraged in debt by historical norms.”

So in addition to the near-term financing decisions that must be made, the GAO says, “a broader plan is needed to put the government on a more sustainable long-term path.”

The report draws on the work of the GAO itself as well as Congressional Budget Office (CBO) projections and the recently issued Fiscal Year 2016 Financial Report of the United States Government.

Their projections, the GAO says, “all show that, absent policy changes...

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.

...
Tuesday, January 10, 2017 - 11:24 AM

Any day now the total debt of the United States government will top $20 trillion.

That eye-catching number should prompt all of us to reflect on what the growing debt means for future generations (a lot) and whether our elected officials have a plan to deal with it (they don’t).

The most important thing to recognize about the $20 trillion debt is that its size in dollar terms is not as important as the fact that it is on an unsustainable track.

Two non-partisan agencies, the Congressional Budget Office (CBO) and the Government Accountability Office (GAO), have concluded that unless actions are taken to cut spending, raise taxes or both, the debt will continue to grow faster than the economy.

That’s bad for future generations because it will harm long-term economic growth, greatly increase interest payments on the debt, squeeze out other government spending and make it more difficult to respond to emerging, unmet or emergency needs.

We’re placing a growing burden on future workers and investing less in the economy that will be called upon to support that burden. This generationally irresponsible pattern will continue absent major changes that alter the long-term trend lines rather than simply postpone a crisis.

The $20 trillion figure actually...

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...