July 29, 2014

Washington Budget Report: Dec. 21, 2010

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Publication Note: This is the last scheduled issue of the Washington Budget Report for the year.

How Not To Do a Budget

This week Congress is expected to act on a continuing resolution (CR) that will fund most federal agencies at last year's levels through March 4. Action is necessary because neither the $1.09 trillion full-year CR passed by the House nor the $1.11 trillion omnibus bill proposed by Senate Democrats was able to pass the Senate.

Limiting the growth of discretionary spending is a reasonable goal, but a CR is not a responsible way to budget. By placing most agency budgets on autopilot for months, the CR will give extraordinary discretion to the executive branch and prevent Congress from developing a comprehensive budget that could shift resources from ineffective programs to more effective ones.

A CR that expires in March would set the stage for a contentious debate early in the 112th Congress.  At a time when Congress would normally turn its attention to the President's budget proposals for the next fiscal year, the administration and lawmakers will also need to complete this year's unfinished business.

Next year, policymakers should work to quickly finalize the fiscal 2011 budget and then avoid another breakdown of the budget process. Instead of the annual parade of CRs and an end-of-the-year omnibus, Congress should pass a real budget resolution and consider appropriations bills using the process required by the Budget Act.

Fiscal Reforms Should Follow Costly Tax Bill

Congress approved and President Obama signed legislation last week that will increase projected budget deficits by $858 billion. The additional borrowing would finance two-year extensions of the Bush tax cuts, a 13-month extension of unemployment benefits, and a one-year reduction in the Social Security payroll tax.

The administration negotiated the framework for the legislation with congressional Republicans, and some members of Obama's own party objected strenuously to certain parts of the deal – notably the renewal of tax cuts for high-income earners and a $5 million exclusion for the revived estate tax. But Obama said the bill as a whole would help the middle class and boost the economy.

Noting the high cost of the legislation, The Concord Coalition believes it should be followed as soon as possible by enactment of a substantial deficit-reduction plan –- including comprehensive tax reform and spending cuts -- that would take effect as the economy recovers.

Insurance Requirement Is Crucial to Health Care Reform

A federal judge put a cloud over this year's health care reform legislation by ruling last week that a key provision – the individual mandate to buy insurance – was unconstitutional. But the judge declared the mandate “severable” from the rest of the law, meaning that everything else could continue.

That could create disastrous results for the federal budget, warns Joshua Gordon, The Concord Coalition’s policy director. The individual mandate, he explains in a blog posting, “is a crucial leg in the stool of the expanded coverage provisions” of the law.

The law prohibits insurers from discriminating against sick people who want to buy health insurance. So without the individual mandate, many would have an incentive to game the system by refusing to buy insurance until they become ill. Insurance companies would be forced to raise premiums dramatically, Gordon says, and government spending on insurance subsidies “would skyrocket.”

If the ruling ultimately stands, Congress would need to take action -- ideally, including strong new health care cost-control measures.

Coal in Our Children’s Stockings

American adults have turned traditional holiday values on their heads by buying gifts for ourselves and putting it on the national credit card for our children to pay. That’s how Sara Imhof, The Concord Coalition’s Midwest regional director, views the federal debt that is now approaching $14 trillion.

“Unfortunately, gifts are not free and we are currently buying (federal) presents for ourselves and sending the bill (national debt) to our children . . . “ Imhof wrote in a guest column Sunday in the Cedar Rapids Gazette. “Future generations will be saddled with the bulk of this debt, even though they had no say in creating it.”

She praises the work of recent bipartisan commissions that have recommended policies that could help the country recover from the recession, curb future federal deficits and repair the big entitlement programs.

Debits & Credits

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