December 10, 2016

Posts on national debt

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Tuesday, December 6, 2016 - 9:17 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...

Tuesday, September 27, 2016 - 9:31 AM

The first segment of the first presidential debate between Democrat Hillary Clinton and Republican Donald Trump was dedicated to achieving prosperity.

That provided an opportunity for the moderator to ask about -- and the candidates to talk about -- their respective plans for putting the nation’s projected debt on a sustainable path. It’s hard to see how prosperity can be achieved, or long maintained, with a debt that is projected to reach unsustainable levels.

Unfortunately, the subject was not discussed.

Trump made a couple of passing references to the debt and Clinton noted that Trump’s plan might increase the debt, but neither of them made a connection to the debt as an economic issue, much less described what they would do about it.

That’s too bad because one of these two candidates will become president in 2017 and will immediately be confronted with having to submit a budget to Congress against the backdrop of rising deficits and debt.

Each has made some expensive proposals that would have to be paid for and the American people have a right to know how they plan to do this without making the debt problem worse.

Consider what awaits the next occupant of 1600 Pennsylvania Avenue:

  • For the first time since 2009, the budget deficit is projected to increase this year,...
Thursday, July 21, 2016 - 11:47 AM

The overall budget picture in Washington remains bleak as lawmakers have left town without making any meaningful progress on the appropriations process. They are now anticipating a September scramble to approve a Continuing Resolution (CR) to keep the government open after the new fiscal year begins Oct. 1. This means Congress, yet again, would be falling back on legislation that indiscriminately maintains the funding levels of the previous year, with little or no attention to the necessity of increased or decreased funding levels for important programs. 

The long-term outlook is even more dire. The Congressional Budget Office (CBO) issued yet another warning recently about the enormous pressures on the federal budget over the next 30 years. Just to maintain the current level of federal debt as a share of the economy, the nonpartisan budget office warns, would require large-scale spending cuts and/or tax increases every single year until 2046. 

It would stand to reason that the nation’s leaders would focus on such a significant problem at this critical time. Unfortunately, many of them -- along with other political candidates -- have done the exact opposite and are pandering to voters with unrealistic promises of giant tax cuts and major benefit increases, even for upper-...

Monday, April 4, 2016 - 10:25 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...

Tuesday, February 2, 2016 - 10:12 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...

Friday, November 6, 2015 - 10:44 AM

Rep. Scott Rigell (R-Va.) recently offered the America First Act, a bill to replace 75 percent of the sequester cuts scheduled under current law with a mix of reforms in mandatory spending and revenue increases from limiting tax expenditures.

In the aftermath of the bipartisan budget agreement, ideas like those in the Rigell plan could serve as models for long-term, bipartisan fiscal reform efforts in Congress.

The Rigell plan proposes a new framework that would achieve substantial deficit reduction while replacing the sequestration-level spending caps that are in place under current law. The plan comes at a time when a number of fiscal experts and lawmakers have concluded that the sequester caps are unrealistically tight.  

According to Congressional Budget Office (CBO) estimates, the Rigell bill would save $2.5 trillion over the 10-year budget window. It would do so by implementing a three-to-one mix of spending cuts to revenue increases, making major reforms to Social Security and Medicare to improve their long-term finances.

On the...

Monday, September 14, 2015 - 12:33 PM

The House Ways and Means Committee approved a measure last week that would allow the Treasury to continue issuing new debt to pay interest on the publicly held debt and Social Security benefits even if the statutory debt limit has been reached.

The measure, mislabeled the “Default Prevention Act,” would not actually prevent a default because failure to pay any government obligations is still a default and would be seen as such in global markets.

The legislation attempts to prioritize which payments the government would make if the debt ceiling is reached and Treasury can no longer pay all of its obligations. Under the act, all debts not related to debt held by the public or the Social Security trust funds would be left unpaid.

Treasury Secretary Jack Lew again urged Congress last week to raise the debt limit in a timely manner, reminding lawmakers that failure to do so in the...

Thursday, August 27, 2015 - 10:00 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...

Monday, June 29, 2015 - 11:54 AM

Federal officials could take some lessons from the success that many state leaders have had in putting together responsible budgets, according to former elected officials and others at a recent  panel discussion in Washington.

“There is something about being a governor that seems to force hard choices that don’t always happen in Congress,”  said Robert L. Bixby, executive director of The Concord Coalition. Concord presented the panel discussion Thursday in connection with giving its 2015 Economic Patriot Award to former Indiana governors Mitch Daniels and Evan Bayh III.

In addition to the award winners, other panel members were Michael Castle, a former Delaware governor; Tim Penny, a former Minnesota congressman with experience...

Thursday, March 5, 2015 - 12:25 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...