On the latest Facing the Future, I was joined by Concord Coalition Executive Director, Bob Bixby, and Policy Director, Tori Gorman. We discussed the fiscal and economic challenges facing the President and Congress over the next four years as well as action-forcing events on fiscal policy.
This program was recorded on election day, in advance of any election results. So, although the show aired during election week, it makes no reference to who won the White House or other elected offices. The program, however, did cover key issues that whoever occupies the Oval Office during the next four years will very likely face.
[Note: Portions of this week's Facing the Future can be seen in the video clip posted below.]
Bixby started with the fiscal and economic picture right now and then looked to the future.
“The budget deficit for the fiscal year that ended at the end of September 2020, was $3.1 trillion; very large as a percentage of the economy … like WWII level large,” Bixby said. “That is significantly worse than was projected at the beginning of the year, which was already pretty bad, but the immediate cause of that was the money spent and economic slowdown caused by the pandemic.”
Bixby added that, in January, the President is going to be facing a sea of red ink, with two inherent problems: 1) a need to control the pandemic so the economy and budget can recover, and 2) preexisting conditions that have formed trillion-dollar, structural budget deficit projections.
“That’s going to be job one for the President in the first budget,” he said. “A) What are you going to do about the pandemic, and B) what does your underlying budget look like?”
The next president, or a second term for President Trump, will not only have to deal with the immediate crisis, but also any other challenges that arise over the next four years.
“Our fiscal problems don’t go away just because we get the virus under control, which we haven’t done yet,” Bixby said.
And there’s a real possibility that the budget deficit for next year is even larger than currently projected, depending upon how the economy responds and how large any additional Congressional-relief packages might be.
Gorman provided insight on where large and important programs like Social Security and Medicare were headed in the near term, along with some longer-term implications.
“The trajectory of the economy, the estimates of payroll tax revenues that support some of those programs, the retirement decisions that certain people make in a crisis when jobs disappear, you throw all those together, and we’ve definitely seen some changes in the financial health of some of our major entitlement programs,” Gorman said. “The most recent long-term budget outlook produced by the Congressional Budget Office estimated that the Medicare Part A trust fund is expected to be exhausted by Fiscal 2024 and the anticipated exhaustion date of the disability program within Social Security has been bumped up to 2026.”
Both would be within the 10-year budget window that the next administration would be dealing with, she added. And the longer we wait to address such challenges, the harder and more painful the policy decisions will be and the harder it will be to protect the most vulnerable populations from those decisions.
From Gorman’s view, action forcing events facing elected leaders focus primarily on legislation that must be passed, such as appropriations bills and timely reauthorization of key programs.
Bixby took a broader view, and quipped, “I really wish taking the oath of office on inauguration day was an action forcing event.”
He added that the challenge with fiscal policy is there are rarely defined tipping points for issues like budget deficits and the national debt. It is simply a question of sustainability.
“You have to be thinking about the long-term health of the economy, and the reason CBO and others say that the debt is on an unsustainable track is that it can’t grow faster than the economy forever,” Bixby said.
However, Gorman highlighted some fast-approaching action forcing events for fiscal policy related issues, like funding the government beyond December, possibly extending relief provisions from the CARES Act that have expired, deciding whether to forgive a recent payroll tax deferral, continuing suspension of certain excise taxes or again renewing what are called “tax extenders.”
And many of those measures, if considered “must-pass” legislation, could become part of larger “kitchen sink” legislation or end up with costly riders, she said.
When you take a look at the 2021 calendar, there are additional items with deadlines that will need to be addressed as well, Gorman said.
Looking ahead, she advised policymakers that the only lasting legislation and policy solutions are those that are bipartisan.
“I know the trend has been to use things like reconciliation -- special procedures that allow one party to jam the other party with their own policy agenda -- but because of the restrictions associated with these procedures, you end up with poorly drafted legislation that’s never permanent,” Gorman said. “It’s my hope that both parties would learn from their experiments and actually try to work together in a bipartisan fashion.”
Bixby agreed and then provided a list of five recommendations on how elected leaders should approach fiscal policy moving forward.
Hear more on Facing the Future. I host the program each week on WKXL, NHTalkRadio.com (N.H.), and it is also available via podcast. Join me and my guests as we discuss issues relating to national fiscal policy with budget experts, industry leaders and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Play Music or with an RSS feed. Follow Facing the Future on Facebook and watch videos from past episodes on The Concord Coalition YouTube channel.