October 2, 2014

Washington Budget Report: Mar. 29, 2011

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Beyond Current Budget Battle, a Grim Long-Term Scenario

The battle over this year's budget, including the growing possibility of a government shutdown, has temporarily overshadowed the larger, long-term fiscal picture. But the Government Accountability Office (GAO) recently updated its January report on the long-term outlook with numbers that underscore the serious challenges facing the country.

If the country were to continue along its current path, for example, by 2018 net interest costs on the federal debt would exceed Medicare costs. By 2024 all government revenue would be claimed by interest costs, Medicare, Medicaid and Social Security. Nine years later, federal debt held by the public would be more than twice the size of the Gross Domestic Product.

This scenario couldn’t actually happen. No one would lend us the money and the economy would crash long before Washington reached some of the projected debt levels anyway. The key question is what steps will be taken, and when, to avoid such a crisis.

New Numbers Underscore GOP Dilemma

Budget-watchers in Washington are interested to see how Republican Paul Ryan, chairman of the House Budget Committee, will write a budget to achieve the sometimes conflicting aims of his conference.

Republicans say voter anger over deficits last fall helped them take control of the House. But as many deficit hawks have noted, it will be virtually impossible to show progress on short-term deficits if the only policy lever Republicans use is slicing domestic discretionary spending.

A recent Concord Coalition issue brief on the subject has been updated with new numbers from a Congressional Budget Office analysis of the President’s proposed 2012 budget. In a video accompanying the issue brief, Concord's Executive Director Robert L. Bixby and Policy Director Joshua Gordon discuss the Republicans' dilemma.

A comprehensive budget reform plan, like the one called for in the recent letter from 64 Senators to the President, would be the best way to reach manageable levels of federal debt. So far, however, the House has not shown an interest in that approach.

Time to Grow Up

The temper tantrums, blame-throwing and unrealistic thinking in Washington sometimes resemble an unruly elementary school classroom rather than a mature, deliberative national government.

That’s particularly true when the subject is the federal budget, where the political debate often degenerates into an irritating mix of dubious claims, silly accusations, angry taunts and the drawing of lines in the sand.

Such behavior led Diane Lim Rogers, The Concord Coalition’s chief economist, to suggest in a recent op-ed article in the Christian Science Monitor that members of Congress and the administration could benefit from thinking back to some of the lessons they learned – or should have learned – in kindergarten: Keep your temper, take responsibility for your actions, learn to compromise and so on.

International Group Calls for More Public Pension Reform

Since the early 1990s, public pension reforms in countries in the Organization for Economic Cooperation and Development have reduced future benefits by an average of 20 percent.

But a new O.E.C.D. report says further reforms will be necessary for these national pension programs, which under the organization's definition includes the U.S. Social Security system. These public programs are distinct from contractual, employment-based pensions.

The report bolsters the case for entitlement reform in the United States. It points out that while pension ages are rising in many countries, life expectancies are rising even faster.

In addition to further raising retirement ages, O.E.C.D. Secretary-General Angel Gurria says, countries must fight discrimination against older workers and provide more training opportunities for them. His organization also says more should be done to encourage people to invest in private pensions.

Debits & Credits

Former Advisers Offer Good Advice: A bipartisan group of 10 former leaders of the Council of Economic Advisers have urged that the report from the President’s fiscal commission be “the starting point’’ for serious negotiations and “an active legislative process” to deal with the country’s long-run budget problems. “Divided government,” they warn, “is no excuse for inaction."

Shocked, Shocked: The chairman of the House Appropriations Committee, where much congressional pork has been handed out over the years, said he and some colleagues just recently realized the extent of the nation’s fiscal difficulties. Rep. Harold Rogers (R-KY) explained: “The size of the problem, the depth of the hole we are in, was not obvious, frankly, until very recently.”