Concord Coalition Says New Projections Show Need For Health Care Cost Control and Deficit Reduction Plan

Press Release
Tuesday, August 25, 2009

With today’s release of new budget projections from the Obama administration showing deficits totaling more than $9 trillion over the next 10 years, The Concord Coalition said that cost control must be the primary focus of health care reform and called for a bipartisan deficit reduction plan. Furthermore, the administration’s numbers are optimistic when compared to what would occur if we simply extended current policy. The Concord Coalition Plausible Baseline, created using the Congressional Budget Office’s (CBO) updated projections, shows that current policy would lead to $14.4 trillion in deficits over the next 10 years.

“You would have to be in a coma for these numbers not to be an effective wake-up call. The most disturbing thing is not the astronomical deficit this year or next, but the unacceptably high deficits that persist after the economy has presumably recovered in 2011 and beyond. It’s time to come out of the partisan trenches and begin work on real solutions. Clearly, we have a serious structural problem that requires legislative action,” said Concord Coalition Executive Director Robert L. Bixby.

The President’s Office of Management and Budget (OMB) projects this year’s budget deficit of $1.6 trillion will be followed by a deficit of $1.5 trillion in 2010 and then deficits will average $840 billion, or 4.5 percent of GDP, through 2019.

Concord’s plausible baseline uses CBO’s more pessimistic economic assumptions and assumes that the 2001 and 2003 tax cuts are extended with continued relief from the alternative minimum tax, that the temporary tax cuts enacted as part of the 2009 stimulus bill are also extended, that discretionary spending grows at the same rate as economic growth (GDP), and that spending on the wars in Iraq and Afghanistan slows gradually. It shows much larger deficits averaging $1.4 trillion from 2011-2019, or 8 percent of GDP.

Concord warned that sustained budget deficits of this size would be unprecedented in the United States and would increase our reliance on foreign lenders. By 2019, debt held by the public will reach 100 percent of GDP and added debt service would push the federal government’s interest costs to a trillion dollars per year. At 5 percent of GDP, debt service will exceed projected spending on national defense or all other discretionary spending.

“These numbers have clear implications for the health care reform debate because they demonstrate why cost control is essential. Even reforms that are paid for over the coming 10 years would leave us on an unsustainable track if they don’t begin to actually reduce projected costs. Transformational steps are needed to bend the health care cost curve. Congress needs to be bold in legislating those steps, including a shift to reward quality of care over quantity and the creation of an entity such as the administration’s proposed Independent Medicare Advisory Council (IMAC), to monitor costs and make recommendations for future savings,” Bixby said.

The Concord Coalition is encouraged that in its mid-session review, the administration not only affirmed its commitment to health care cost control, but also recognized the importance of addressing the shortfall in the Social Security system and tackling the other factors contributing to the long-run fiscal challenge.

“Today’s numbers illustrate that we have a revenue crisis in the federal budget as much as a health care crisis. The federal revenue system is clearly failing to keep up with our nation’s spending needs. Since last September, the 10-year revenue forecast has shrunk by over $3 trillion solely due to deteriorating economic conditions. What’s troubling is that even without any more tax cuts and even after the economy is expected to recover, today’s reports show revenues will continue to fall short. It is time to rethink tax policy, from the deficit-financed extensions of the 2001 and 2003 tax cuts proposed by the administration, to an even broader look at how to increase the revenue base,” said Concord Coalition Chief Economist Diane Lim Rogers.

Under the plausible baseline, revenues would average 16.4 percent of GDP over the next decade -- the lowest 10-year average since 1942-1951. Even under the administration’s optimistic projections, revenues average only 18.4 percent through 2019. While this is in line with the 40-year historical average, it comes during a time of unusually high spending (23.5 percent) -- as stimulus gives way to increased entitlement spending, caused by an aging population and health care cost inflation, and growing interest rates and continued deficits lead to increasing debt service.

The Concord Coalition also said that today’s dire fiscal outlook bolsters the case for a fiscal policy commission to recommend solutions that would be guaranteed consideration by Congress. Proposals such as those introduced by Representatives Jim Cooper (D-TN) and Frank Wolf (R-VA) in the House and Senators Joe Lieberman (I-CT) and George Voinovich (R-OH) in the Senate can serve as a model.

“The routine budget process has produced an unsustainable outlook. It is unrealistic to think that this will change without some mechanism to compel consideration of the hard choices that have been ducked in the past. Regardless of the outcome of this year’s health care reform debate, there will be a need to address other contributors to the structural deficit such as Social Security growth and inadequate revenues,” Bixby said.

For more on the Concord Coalition plausible baseline, visit:


The Concord Coalition is a nonpartisan, grassroots organization dedicated to balanced federal budgets and generationally responsible fiscal policy. Former U.S. Senators Warren Rudman (R-NH) and Bob Kerrey (D-NE) serve as Concord's co-chairs and former Secretary of Commerce Peter Peterson serves as president.

CONTACT:Joshua Gordon(703) 894-6222[email protected]