November 27, 2014

Washington Budget Report: Apr. 12, 2011

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White House Promises Long-Term Deficit Reduction Plan

President Obama on Wednesday will propose a broad plan to reduce significantly deficits in the coming years, according to the White House.

This is a promising indication that the President will become more focused on the most serious long-term fiscal challenges facing the country. Up until now, he seemed to be ignoring many of the solid recommendations that were developed last year by a bipartisan majority of his National Commission on Fiscal Responsibility and Reform.

On Monday Jay Carney, White House press secretary, said Obama would "very clearly lay out his vision for deficit reduction -- the need for it to be balanced; the need for it to be bipartisan; the need for it to address the long-term drivers of our debt and for everyone to share in the burden of bringing our fiscal house into order."

Carney also indicated that Obama’s new plan would contrast sharply with one recently released by House Budget Chairman Paul Ryan.

David Plouffe, a senior White House aide, said on Sunday the president would suggest not just domestic spending cuts but additional government revenue and significant cuts in the Pentagon budget, as his fiscal commission and other bipartisan groups have suggested.

Ryan's Budget Squeeze

Under Paul Ryan’s budget plan, the country’s three big entitlement programs – Social Security, Medicare and Medicaid – would make up a larger share of non-interest federal spending than they would under the budget President Obama proposed earlier this year.

It is not that Ryan’s budget raises spending more for the big entitlement programs, but that he would cut so much from everything else. That’s because he wants to hold federal taxes to no more than 19 percent of the economy -- slightly above the past 40-year average -- while eventually balancing the budget.

This inevitably produces a squeeze. Without higher government revenues than in the past, the federal programs driven by an aging population and rising health care costs will consume more and more of the budget -- even with the large cuts proposed by Ryan.

But it is hard to see how we can remain the dominant world power and make important economic investments if retirement income and health care programs claim two-thirds to three-quarters of all federal dollars.

Shutdown Over 2011 Spending Averted

With a potential government shutdown hours away on Friday, President Obama, Speaker of the House John Boehner and Senate Majority Leader Harry Reid reached a last-minute agreement to continue funding government agencies for the remainder of the fiscal year.

Under the agreement, Congress will consider a resolution this week to fund government agencies for the rest of Fiscal Year 2011 and cut nearly $40 billion from FY 2010 levels, including $12 billion in cuts that were included in prior continuing resolutions.  According to the House Appropriations Committee, total spending in the bill is $1.049 trillion.

To fund the government until the broader agreement is enacted, Congress passed a new short-term resolution that continues funding through Friday, April 15.

House Committee Approves 2012 Budget Resolution

With a partisan vote of 22-16, the House Budget Committee last week approved Rep. Paul Ryan's proposed 2012 budget resolution and sent it to the House floor. According to the committee, the resolution would reduce deficits for the next 10 years by an additional $1.6 trillion compared to CBO's baseline.

Democrats on the committee offered 20 amendments, most of which were rejected in partisan votes. The committee approved amendments adding non-binding language that expresses support for considering national security spending for deficit reduction and providing additional resources for priorities such as child support enforcement and veterans health care. The full House is scheduled to consider the budget resolution later this week.

Debits & Credits

No Free-Fire Zones: Sen. Al Franken (D-Minn.) correctly argues that in the future, Congress should be expected to figure out how to pay for wars – through spending cuts, tax increases or both -- rather than simply borrowing the money.

Wait, We Didn’t Mean Our Pork: While loudly proclaiming a new era of fiscal austerity, some members of Congress are quietly working to make sure the cuts they supported don’t apply to their own districts.