October 22, 2014

Washington Budget Report: Nov. 16, 2010

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Co-chairs of President's Commission Provide a 'Sobering Fiscal Reality Check'

The co-chairs of President Obama’s fiscal commission released sweeping proposals last week that won praise from The Concord Coalition and many other analysts while drawing fire from some strident voices at both ends of the political spectrum.

The proposals from co-chairs Erskine Bowles and Alan Simpson delivered “a valuable and sobering fiscal reality check,” said Concord Executive Director Robert L. Bixby. “Their recommendations put aside partisan rhetoric and get at the essential trade-offs we need to confront among spending, taxes and debt.”

The bipartisan commission is scheduled to release a final report on Dec. 1. Approval from 14 of the panel's 18 members is needed to send official recommendations to Capitol Hill for congressional votes.

The Bowles-Simpson plan includes sharp cuts in domestic spending and defense, extensive repairs to the big entitlement programs, and reforms that would simplify the tax code while broadening the tax base, lowering rates and raising additional revenue. Concord challenged critics of the plan to “make their own tough choices and propose credible alternatives.”

A Second Bipartisan Panel to Offer Its Budget Plan on Wednesday

In addition to the President’s fiscal commission, another bipartisan group has been at work this year on federal budget recommendations. This panel, the Bipartisan Policy Center’s Debt Reduction Task Force, plans to release its final report on Wednesday.

The task force is chaired by Pete Domenici and Alice Rivlin and includes former administration officials, former elected officials from all levels of government, and others with diverse perspectives.

“As a member of the task force,” said Robert L. Bixby, executive director of The Concord Coalition, “I can say that our deliberations have been comprehensive and respectful of differing points of view. The resulting plan will show at least one way out of the fiscal swamp.”

After the plan’s release, more information on it will be available at www.bipartisanpolicy.org and www.concordcoalition.org.

Reconciling Rhetoric and Reality Won't Be Easy

With lawmakers returning to Washington this week, Republicans face an extremely difficult task: Living up to the campaign rhetoric that helped them gain dozens of congressional seats in the Nov. 2 elections.

Republicans campaigned on a pledge to move towards a balanced budget entirely through spending cuts. That would be hard enough. But the GOP also promised trillions of dollars in tax cuts. Their proposed repeal of certain parts of this year’s health care reform could boost deficits still higher. And many Republicans also want to increase defense spending.

“The problem with the Republicans’ pledge is that the numbers don’t add up,” says Robert L. Bixby, executive director of The Concord Coalition. In a recent blog post, he points out that beyond 2012, the combined cost of Social Security, Medicare and Medicaid will grow by more than the $100 billion per year that Republicans say they will cut from other programs.

“Thus, even if the Republicans are successful in making these difficult cuts, the total cost of government, and the total national debt, would continue to grow,” Bixby warns. This means interest payments on the debt would also rise rapidly, creating still more red ink.

In their budget plans, the President and Senate Democrats will also have trouble reconciling their campaign promises with unpleasant fiscal realities. “They too have promised to extend most of the tax cuts,” Bixby notes, “and their campaign rhetoric indicated even less desire to slow the growth of entitlement spending.”

Both parties, he argues, must adopt more realistic approaches to the country's demographic and fiscal challenges.

To Avoid Increasing the Debt Limit, Enact Responsible Policies

Congress has established the maximum amount of debt the government can issue. Unless it is raised, this statutory debt limit of $14.294 trillion will soon be exceeded. At the end of October, debt subject to this limit was just $677 billion short of that figure. To avoid a government default, Congress will need to increase the limit.

That is likely to be controversial on Capitol Hill. However, it is essentially a decision to pay the bills already incurred. Policymakers should rise above partisan gamesmanship and increase the debt limit to avoid a damaging financial crisis. If Congress finds this vote embarrassing, it should enact more responsible fiscal policies before the limit needs to be raised again.

‘Fiscal Solutions Tour’ Brings Timely Discussion of Reforms to Chicago

After visiting cities across the country this fall, The Concord Coalition’s Fiscal Solutions Tour wrapped up for the year on President Obama’s home turf in Chicago last week. The tour's policy experts outlined the country’s deteriorating fiscal situation, underscoring the importance of informed public debate on how best to reverse that trend.

It was a timely exercise Friday, as draft proposals by leaders of the President’s fiscal commission were under a barrage of misleading criticism -- much of it based on the assumption that the country can largely continue the status quo in fiscal policy.

We cannot do so, the speakers emphasized to business executives, civic leaders, college students, retirees and others in programs at the Union League Club of Chicago and the University of Chicago.

The policy experts said fundamental changes were needed in everything from Social Security funding to outdated defense programs, from bloated medical bills to lagging tax revenues. Among the many proposed solutions:

  • The financial incentives for health-care providers as well as consumers must be changed to curb inefficiency, unnecessary treatments and unreasonable pricing, said Joseph Antos of the American Enterprise Institute. Currently, he said, “the incentives are all there pushing us in the wrong direction.”
  • The government should make substantial spending cuts but also change the tax system -- by closing loopholes, for example  -- to provide sufficient funding for the government services and benefits that Americans expect. Said Joseph Minarik of the Committee for Economic Development: “There is no realistic way to solve the budget problem without some new revenues.”
  • Congress should revise its budget process to focus more on long-term challenges.
  • Individuals should save more money. David M. Walker, CEO of the Comeback America Initiative, noted that the United States has the lowest savings rate among industrialized nations: “Too many people are living for today without preparing for tomorrow.”
  • Americans should not assume that past levels of government spending and taxation will be sufficient to deal with future requirements, for example, to care for unprecedented numbers of elderly people. “What was past,” warned Concord Executive Director Robert L. Bixby, “is not necessarily prologue.”