October 23, 2014

Washington Budget Report: Mar. 8, 2011

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Shutdown Avoided As Budget Talks Continue

Congress averted a government shutdown last week by passing a new continuing resolution (CR) that funds agencies through March 18. President Obama signed the resolution into law on Wednesday.

Concerns about a shutdown had increased when the House originally passed a CR with over $61 billion in cuts while Senate Democrats argued that a new CR should continue 2010 levels. The dispute was temporarily resolved with $4 billion in initial cuts drawn from earmarks and savings proposals in the President's budget. Most other programs will continue to be funded at 2010 levels.

To avoid a government shutdown later this month, however, Congress will need to reach another agreement before the new CR expires. During negotiations with Republicans last week, the White House offered an additional $6.5 billion in cuts and the Senate Appropriations Committee unveiled a proposed seven-month CR allocating the cuts. The Senate is expected to consider the various proposals this week.

GAO Identifies Billions in Government Waste

A new report from the Government Accountability Office (GAO) identifies billions of dollars in potential savings that could come from eliminating federal programs with duplicative goals.  GAO recommends that Congress consider 81 separate areas -- 34 where duplication exists and 47 where there are other opportunities for savings.

Restructuring the military health care system, for example, could save up to $460 million annually. Addressing duplication in policies to promote domestic ethanol production could save $5.7 billion per year. Tens of billions of dollars could be saved by reducing improper federal payments and addressing the gap between taxes owed and paid. GAO also recommends increased scrutiny of the nearly 200 tax breaks that reduced revenue by almost $1 trillion in 2009.

Earlier this year, bipartisan legislation was introduced in the House to create a commission to help eliminate duplicative, unnecessary or inefficient federal programs. Also, the President's budget included over 200 proposals for savings from federal programs. As the debt exceeds $14 trillion, this increased scrutiny of federal programs is a responsible first step, and Congress should seriously consider these proposals.

CBO Director Offers Budget 101

Congressional Budget Office Director Douglas Elmendorf laid out four simple observations about the federal budget in a recent presentation to the National Association for Business Economics.

First, on the government’s current path the gap between spending and revenues would persist even as economic growth returns to normal. Second, focusing on waste and inefficiency alone cannot stabilize the budget; meaningful changes to popular programs, revenue increases, or both will be necessary.

Third, given current economic conditions, lawmakers must carefully judge how quickly to enact the changes needed to restore sustainability. Finally, Elmendorf notes that a number of policymakers have already released plans that could address the enormous problems.

Although these plans differ in focus – some rely more heavily on spending cuts, others more on revenue – it is encouraging that the goal of fiscal sustainability is now so widely accepted.

Financial Planning: Not Washington's Strong Suit

Washington’s money problems make it all the more important for individual Americans to plan responsibly for their own financial futures. At the same time, elected officials have no time to lose in confronting the fiscal challenges imposed by an aging population and climbing health costs.

Those points were driven home last week as experts on The Concord Coalition’s “Fiscal Solutions Tour” spoke to financial planners, college students, journalists, civic leaders and many others in four programs in the Atlanta area.

“Financial planning is not a strong suit in Washington,” Robert L. Bixby, Concord’s executive director, told a regional conference of the Financial Planning Association of Georgia. He noted that “trillion-dollar-plus deficits are the new norm.”

Bixby and three other experts also spoke at Kennesaw State University, the Atlanta Press Club and the Kiwanis Club of Atlanta.

Alice Rivlin, a senior fellow at Brookings, said her work on two commissions that issued realistic packages of fiscal recommendations left her optimistic that elected officials would eventually take constructive action. But she stressed the need for bipartisanship.

David M. Walker, president and CEO of the Comeback American Initiative, said elected officials need to focus on the largest challenges ahead: “Right now Washington is arguing over the bar tab on a cruise ship headed for an iceberg.”

Joseph Antos of the American Enterprise Institute discussed the need to set priorities for federal spending, particularly with health care. “One way or another,” he said, “we have to come to grips with the fact that you can’t have everything at all times.”

Debits & Credits

A Promising Statement: In an interview last week, House Speaker John Boehner said House Republicans would offer a budget this year that would set goals for limiting the cost of entitlement programs. This would be a responsible move and should be accompanied by specific policy proposals.

"Cuts" That Aren't: Over the last month policymakers from both parties have been measuring spending "cuts" against the President's 2011 budget-- a plan that was never enacted. Since you can't cut funding that was never provided, a more accurate estimate would be measured against actual spending.