Returning to Washington this week, Congress and President Trump face a pile of leftover budget work that they should try to complete with a greater sense of fiscal responsibility than they have shown in the recent past.
Even if the outgoing Congress can resist the temptation of a lame-duck borrowing spree, however, the new Congress elected last week will inherit massive fiscal problems that procrastination will only make more difficult to solve.
Just the day after the election, the Congressional Budget Office (CBO) issued a wrap-up of the last fiscal year that serves as a timely reminder of the rapid deterioration of federal finances.
“In Fiscal Year 2018, which ended on September 30, the federal budget deficit totaled $779 billion — $113 billion more than the shortfall recorded in 2017,” the CBO report said. “The deficit increased to 3.8 percent of the nation’s gross domestic product (GDP) in 2018, up from 3.5 percent in 2017 and 3.2 percent in 2016.”
The budget office said the 2018 deficit would have been even worse — $823 billion, or 4.1 percent of GDP — were it not for timing shifts in certain federal payments.
Of particular concern: Total government revenue rose by less than 1 percent in the last fiscal year, despite a booming economy that would normally have provided a much bigger revenue boost. Not surprisingly, the tax cuts enacted last year are not paying for themselves.
On the spending front, elected officials have done nothing to put the big entitlement programs on sustainable paths, a job that becomes more and more urgent as the result of the aging population and rising health care costs.
More government borrowing, combined with rising interest rates, have made interest payments the fastest-growing segment of the federal budget.
Under current law, the CBO has projected that the deficit will approach $1 trillion in this fiscal year and surpass that figure in the next four years.
Such high deficits could hurt average Americans in a variety of ways in the future, ranging from higher taxes down the road to possible job losses and lower standards of living. And the longer-term fiscal picture, CBO says, is even worse.
Unfortunately, the outgoing Congress has not even completed its work on Fiscal 2019 spending legislation that should have been done months ago. Only five of the twelve required appropriations bills have been approved.
Consequently, lawmakers are relying on a “continuing resolution” to keep parts of the government open through December 7. If agreements cannot be reached on the remaining appropriations legislation or another continuing resolution by then, parts of the government would shut down.
One hazard in this direction is Trump’s demand for more generous funding for his proposed border wall than even many Republican lawmakers have balked at. This issue was sufficiently controversial for the GOP to delay it until after last week’s elections.
The outgoing Congress faces a number of other budget-related deadlines. They will need to vote, for example, on reauthorizing the national flood insurance program and on recommendations from a joint committee that has been studying the critical problem of financial shortfalls in multi-employer pension plans.
Members of Congress are also likely to vote in the near future on the extension of a number of temporary tax breaks. In addition, lawmakers could consider other measures ranging from disaster relief to changes in Medicare’s prescription drug benefit.
With the election season just ended and the holiday season getting underway, the unfinished appropriations work and other budget decisions will likely take place in a rushed and chaotic atmosphere.
Under these circumstances, lawmakers in both parties should do their best to focus on fiscal responsibility and at least not add to the deficits that are projected for the current year and beyond. Following the “pay as you go” principle, they should find credible ways to finance any additional spending and tax-break extensions.
In addition, decisions that could significantly increase the federal government’s long-term liabilities in areas like pension reform require close scrutiny and would probably be best left to the next Congress.
Unfortunately, this year’s congressional campaigns largely avoided serious discussions of the nation’s fiscal challenges. The next Congress should at least commit itself to improving on the dismal fiscal record of its predecessor.