WASHINGTON -- The Concord Coalition welcomes the House and Senate passage of a budget resolution that promises to balance the budget and substantially slow the growth of federal debt over the next 10 years. Concord warns, however, that these goals rest upon speculative savings from future policy actions that seem unlikely to occur.
“Approval by both the House and Senate of a single budget plan is a significant achievement, given the dysfunction of the congressional budget process in recent years,” says Robert L. Bixby, Concord’s executive director. “However, this is only the first -- and easiest -- step in the process. It did not require the President’s approval and it did not require agreement on how the $5 trillion worth of proposed deficit reduction will actually be achieved.”
Congress must now turn to the difficult task of filling in the policy blanks of the budget resolution. While balancing the budget over time is an admirable goal, the spending and revenue targets set out in the budget resolution rely on some politically implausible assumptions. Particularly dubious are the assumptions regarding domestic appropriations and projected revenues if the Affordable Care Act (ACA) were repealed.
Even though domestic appropriations are already projected to drop to a historic low as a share of the economy under the caps enacted in the 2011 Budget Control Act (BCA), the budget resolution cuts this spending by nearly another $500 billion.
Domestic agencies are already struggling to adjust to lower spending levels, so even deeper cuts might not be feasible. Moreover, the President has promised to veto any appropriation bills passed at the levels assumed in the budget, setting up the prospect of another funding crisis at the end of the fiscal year in September.
Another difficulty is that the budget resolution passes up the opportunity to use the reconciliation “fast track” process to enact reductions in mandatory spending, limiting it instead to repeal of the ACA -- which the President would veto in any event.
On the revenue side, the budget assumes that the government will receive all “baseline” revenues under current law. But it fails to acknowledge the potential impact of recently passed bills in the House that would make a number of costly tax breaks permanent and eliminate the estate tax. These actions, along with repeal of tax increases in the ACA, would increase projected deficits unless there were matching offsets to recoup the lost revenue. No such offsets have been identified.
Meanwhile, the resolution circumvents the existing BCA cap on defense spending by raising Overseas Contingency Operations (OCO) funding to $96 billion, which is $38 billion higher than President Obama requested. Funding from the OCO account is supposed to support only combat operations but has been used to shield the defense budget from lower spending limits.
Using OCO to fund activities that are not related to combat is a disingenuous practice that ignores the spending discipline that both parties agreed to four years ago. The resolution implies that lawmakers will continue this practice for years to come. No one seriously contends that this is anything more than a budget gimmick.
The new resolution also leaves out a Senate provision that would have required any funding increase for OCO above the President’s request to overcome a 60-vote point of order in the Senate.
“Given the political realities in Washington, it seems unlikely that substantial increases in defense spending and more tax cuts can be financed by even deeper cuts in domestic discretionary spending,” Bixby said.
The budget resolution will also enable future Congresses to be less fiscally responsible by eliminating the so-called “Conrad rule,” which prohibited using the fast-track reconciliation procedure for bills that increase the deficit. Now, instead of the fast track being used to facilitate hard choices to reduce the deficit, the budget process can be perversely used to make deficit increases even easier.
“While a balanced budget would be helpful,” Bixby said, “the key question is whether Congress can reach agreement on policies that would reduce the debt as a share of the economy -- and keep it on a responsible downward path. The fiscal challenges are large enough that all parts of the federal budget should be scrutinized, not just some of them.”
The congressional budget resolution and the President’s proposed budget look very different. As the process moves forward and the difficulties of fully enacting either plan become more apparent, Congress and the Obama administration should look for opportunities to reach compromises that will prevent a government shutdown and move the budget to a more responsible path -- without gimmicks, and with the debt stabilized or declining as a share of the economy. The alternative to such compromises is simply another round of disruptive crisis management.
Media Contact: Steve Winn, (703) 254-7828, [email protected]
The Concord Coalition is a nonpartisan, grassroots organization dedicated to fiscal responsibility. Since 1992, Concord has worked to educate the public about the causes and consequences of the federal deficit and debt, and to develop realistic solutions for sustainable budgets. For more fiscal news and analysis, visit concordcoalition.org and follow us on Twitter: @ConcordC