July 28, 2014

Washington Budget Report: Feb. 1, 2011

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Troubling New CBO Projections

The Congressional Budget Office has released its annual Budget and Economic Outlook, filled with statistics that underscore the need for both Democrats and Republicans to offer more realistic proposals to put the country on a responsible fiscal path.

The official projections are bad enough; they show, to take just one eye-popping statistic, that Medicare spending would be $480 billion higher in 2021 than in 2012. But the official projections are based on current law, including measures for future savings that have often been postponed in the past.

The Concord Coalition’s plausible baseline offers an even gloomier picture, based on a number of realistic assumptions about future policy decisions. This baseline shows cumulative deficits totaling $13.6 trillion over 10 years, with the annual deficit never falling below $1 trillion. Federal debt held by the public would rise from 74 percent of the economy to 104 percent.

Elected officials have issued proposals that over-focus on domestic discretionary spending while downplaying or simply dismissing the need for entitlement reform, a revamped tax system and substantial defense cuts.

The CBO report -- like the recent reports from the President’s bipartisan fiscal commission and the Bipartisan Policy Center’s Debt Reduction Task -- shows that elected officials must put far more than cuts in domestic discretionary spending on the table.

State of Union Lacked Plan of Attack on Deficits

President Obama’s State of the Union address raised questions about his willingness to take the lead in focusing public attention on the heavy sacrifices that will be required to rein in future deficits.

While he talked about the importance of fiscal responsibility in general terms, much of the speech last week promised additional spending and tax cuts to bolster the economic recovery.

Trillion-dollar deficits, however, are projected even after the economy fully recovers, a problem that his bipartisan fiscal commission tried to address with its recent recommendations.

It was disappointing that the President did not use more of his speech to discuss these recommendations and the tough policy choices they will require. He proposed $478 billion in discretionary spending cuts but the savings would not even cover anticipated interest on the federal debt ($5.4 trillion) over 10 years.

“We do big things,” Obama reminded the country. Unfortunately, one of the biggest things we’ve done in the last decade is build up a $14 trillion federal debt. The President must lead the effort to change course; otherwise it simply won't get done.

The Republican response, from House Budget Chairman Paul Ryan of Wisconsin, called for spending restraint while acknowledging that his party shared some of the responsibility for that debt.

Legal Confusion Continues Over Health Care Law

A federal court judge in Florida on Monday rejected last year's health care legislation, finding that its mandate for individuals to purchase health insurance was unconstitutional. The ruling by U.S. District Judge Roger Vinson said other parts of the law were so “inextricably bound” to the mandate that they, too, had to be invalidated.

This was a more sweeping rejection of the law than the ruling last year by a federal judge in Virginia that also found the mandate unconstitutional. Two other federal judges have upheld the law, and its constitutionality is likely to eventually be decided by the Supreme Court.

Vinson did not issue an immediate injunction against the law but the language in his ruling left confusion and disagreement over how elected officials should proceed as the case is appealed.

If higher courts invalidate the law, Congress will need to quickly pass new health care cost-control measures that are at least as strong as those approved last year. Elected officials would have to resist the temptation to keep the most popular elements of the legislation without ensuring that they will be financed in a responsible way.

Biennial Budgeting: A Step in the Right Direction

Senators Jeanne Shaheen (D-NH) and Johnny Isakson (R-GA) have introduced legislation to convert the annual budget and appropriations process into a two-year cycle.  Under the Biennial Budget Appropriations Act (S. 211), the first year of the process would be dedicated to appropriations and the second year would be reserved for oversight.

Isakson said "We must rein in spending, reform our broken appropriations process and require that Congress conduct oversight of federal programs on a regular basis." Shaheen described their proposal as "a critical tool for improving legislative and agency review of government programs, so that we're not just spending blindly, but analyzing what works and what doesn't."

For several years, The Concord Coalition has called on Congress to seriously consider biennial budgeting.  As part of a comprehensive plan to reform the budget process, the tax code, and spending, biennial budgeting is a sensible proposal that could shift time and resources from repetitious debates toward increased oversight. It could also result in a more orderly process and fewer opportunities for fiscal irresponsibility. It won't make trillion-dollar deficits disappear, but it would be a step in the right direction.

Debits & Credits

Good Call on a Fair Umpire: House Budget Chairman Paul Ryan and Senate Budget Committee Chairman Kent Conrad deserve praise for successfully pushing the reappointment of Douglas Elmendorf as director of the nonpartisan Congressional Budget Office. There had been some unjustified criticism of the CBO’s analysis of health care legislation, but Ryan (R-WI) and Conrad (D-ND) formed a united front at the recent Fiscy Awards dinner when they heaped praise on Elmendorf. Conrad calls him “an unbiased and fair umpire.”

Error of Commission: President Obama not only failed to give the work of his bipartisan fiscal commission the attention it deserved in the State of the Union, he distanced himself from the panel by noting vaguely that “I don’t agree with all their proposals.” He didn’t bother to explain which ones or how they might be improved.