Concord Coalition Says That New CBO Numbers Call For More Realistic Proposals From Both Parties

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January 26, 2011

January 26, 2011

With the budget process for the next fiscal year about to get underway, The Concord Coalition said today’s annual Budget and Economic Outlook by the Congressional Budget Office (CBO) shows how inadequate most current policy proposals are to move the country onto a sustainable path. Elected officials in both parties should drop the pretense that cuts in domestic discretionary spending or a more robust economic recovery can do all the hard work of deficit reduction in the coming decade.

“Democrats and Republicans have set out competing visions for the role and size of government, but they have been united in avoiding a realistic assessment of how the numbers add up,” said Concord Coalition Executive Director Robert L. Bixby. “The new CBO report dispels the notion that there are politically easy options for dealing with our fiscal challenges.”

According to CBO, under current law the deficits over the next 10 years would add $7 trillion to the debt. That assumes, however, that the tax cuts extended in December will expire as scheduled in 2012, along with relief from the Alternative Minimum Tax (AMT). It also assumes a sharp reduction in Medicare physician payments — a reduction that has been routinely canceled in the past. As the CBO warns, its projections “understate the budget deficits that would arise if many policies currently in place were extended, rather than allowed to expire as scheduled under current law.”

A more realistic assessment of the federal government’s fiscal path, The Concord Plausible Baseline, shows cumulative deficits totaling $13.6 trillion over 10 years with the deficit never falling below $1 trillion (5.9 percent of GDP) and debt held by the public rising from 74 percent of the economy to 104 percent. (For more about our plausible baseline, click here:

“No plausible scenario results in a sustainable fiscal policy absent some fundamental changes in spending and tax policy. And yet, the proposals we’ve seen so far from the President and congressional Republicans amount to little more than tinkering around the edges,” Bixby said.

The President has proposed $478 billion in discretionary spending cuts and the Republican Study Committee has proposed $2.5 trillion in savings, but neither proposal would come close to even paying the interest on the debt ($5.4 trillion over ten years). Such a strategy wouldn’t pay off a credit card or a mortgage — and is certainly no solution for addressing the government’s $14 trillion debt.

Unfortunately, most proposals have focused on domestic discretionary programs and, to a lesser extent, on defense. Entitlement and tax reform are mentioned just in passing. This set of priorities stands our fiscal problem on its head. All parts of the budget should be scrutinized for savings, but in terms of what must be done to rein in deficits over the next decade and beyond, entitlement and tax reform should come first, followed by defense and then domestic discretionary spending.

Some statistics that highlight the severe challenges ahead:

  • Under the Concord plausible baseline, interest costs in 2021 will exceed $1 trillion, a larger amount of money than we are projected to spend that year on Medicare, defense or non-defense discretionary programs.
  • Even assuming Congress sticks to the Medicare cuts written into the health care reform law, Medicare spending is projected to be $480 billion higher in 2021 than in 2012.
  • CBO projects overall mandatory spending will average increases of 5.6 percent annually from 2013 to 2021. One of the main drivers of this increase is population aging, which is no longer just having a budgetary effect on the long-term budget outlook. As a comparison, total discretionary spending is projected to increase by only 1.9 percent.
  • CBO projects that this year’s deficit will be 9.8 percent of GDP, nearly 1 percentage point higher than last year’s deficit and close to the 2009 deficit, which was 10 percent of GDP and the highest in nearly 65 years.
  • Even if the Republicans were successful cutting $2.5 trillion over 10 years, that would be just enough to pay for extension of the 2001 and 2003 tax cuts — leaving the deficit in no better shape.

The failure of policymakers to move beyond a dispute over how much to cut discretionary spending is all the more disappointing in view of the far more comprehensive, and bipartisan, recommendations issued last month by the President’s National Commission on Fiscal Responsibility and Reform and the Bipartisan Policy Center’s Debt Reduction Task Force.

“Having a debate over which pieces of the small discretionary spending pie are wasteful is politically safe territory for both parties,” Bixby said. “It allows them to appear fiscally responsible while avoiding the larger issues that might anger their most fervent supporters. In this way, Republicans divert attention from the need for more revenues and Democrats divert attention from the need to reduce projected spending on health care and retirement entitlement programs. Until this dynamic is broken through good faith bipartisan negotiations and vigorous public engagement, our nation’s fiscal future will remain at risk.“



Steve Winn


[email protected]



The Concord Coalition is a national, grassroots organization dedicated to fiscal responsibility. Former U.S. Senators Warren B. Rudman (R-NH) and Bob Kerrey (D-NE) serve as its co-chairs and former U.S. Secretary of Commerce Peter G. Peterson serves as president. For more information, visit www.concordcoalition. org .

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