July 29, 2014

CONCORD COALITION RELEASES REPORT ON FISCAL RESPONSIBILITY: “LACK OF ACTION ON DEFICIT SIGNALS UNDUE COMPLACENCY”

WASHINGTON -- The Concord Coalition today released a new Report on Fiscal Responsibility entitled “Lack of Action On Deficit Signals Undue Complacency.” (Requires Adobe Acrobat Reader) This report grades Congress and the Administration on the choices that they make – or fail to make – in promoting fiscal responsibility and paving a long-term sustainable path for entitlement spending.

“The budget deficit continues to ratchet upward and there is no consensus on what, if anything, to do about it. At best, Washington policymakers seem content to tread water in the rising tide of red ink. At worst, they are cynically professing concern about the deficit while pursuing tax and spending policies they know will only dig the fiscal hole deeper. One thing is clear: specific plans to actually reduce the deficit are not on the agenda. Such complacency is not warranted,” said The Concord Coalition.

“Earlier this year, the Congressional Budget Office (CBO) projected a fiscal year 2004 deficit of $477 billion. Since then, however, revenue growth has been stronger than expected and the actual deficit for 2004 will likely be closer to the $445 billion deficit that the Bush administration (OMB) now projects. Does that mean that current policies are bringing the deficit down? No. For one thing, the deficit is going up, not down. It is true that when CBO issues its next forecast, the projected deficit will be lower than it was–just as the OMB's projected deficit has declined since February. What matters, however, is the bottom line and there can be no denying that a deficit of $445 billion, or close to it, is considerably larger than last year's deficit of $375 billion.

“The President's budget claims to cut the deficit in half over five years but omits the likely cost of ongoing military operations in Iraq and Afghanistan, assumes a freeze on non-security appropriations and pretends that relief from the growing alternative minimum tax will be temporary. Moreover, its 5-year window ignores the 10-year revenue loss of making the President's tax cuts permanent. In Congress, deficit reduction talk has produced actions that only make it more difficult to close the gap.

“Washington has been consumed this year with reports of intelligence failures leading up to the September 11 attacks and the war in Iraq. Many have concluded that the official agencies entrusted with giving policymakers timely warnings about developing problems failed in that mission. No such charge can be leveled against those who are entrusted to provide warnings about our fiscal future. Here, the warnings have been timely, loud, and clear. Any ‘intelligence failure' rests squarely with policymakers who hear the warnings and choose to ignore them.

“The deficit cannot be dismissed as a self-correcting problem. Even assuming strong economic growth, plausible projections for the 10-year outlook show deficits of about $5 trillion. The longer-term outlook is worse. If policymakers want to get out of this hole, they're going to have to stop digging and start climbing. Deficits matter.”

The following is a summary of Concord's Report on Fiscal Responsibility:

CATEGORY

GRADE

COMMENTS

Overall: 

D

Fiscal policy this year has featured wishful thinking and creative accounting rather than actions to control the deficit.

Short-Term: Enacting measures that maintain fiscal responsibility over the next 1-2 years

C-

In the short-term, the most promising fiscal policy development may be that some politicians in both parties are beginning to recognize the danger of rising deficits and demanding offsets for the costs of new initiatives. It remains to be seen, however, whether this good intention will translate into actions that actually get the deficit under control.  Not a single piece of legislation has been enacted this year that makes any hard choices designed to cut the deficit.

Medium-Term: Enacting measures that are fiscally responsible over the next 10 years

D

The ten-year outlook remains as worrisome as ever.  Absent a change of course, deficits totaling $5 trillion are likely under plausible assumptions.  Most problematic in this bleak picture are expiration dates, or “sunsets,” embedded in the tax cuts passed over the last three years.  Circumstances have changed dramatically.  The tax cuts can no longer be justified as “refunding a surplus.”  The country now faces endless deficit spending that if left unchecked, will reduce national savings and private sector investment, potentially suppressing future economic growth.

Long-Term:  Enacting measures that deal with the entitlement financing gap and ensure fiscal sustainability

F

With the baby boom generation poised to retire in a few short years, Washington has rallied around the “Do Nothing Plan” for Social Security, added to the long-term liabilities of Medicare, and set off on a fiscal path that is likely to add trillions to our National Debt over the next ten years.  This is a “hat trick” of thoroughly irresponsible fiscal policy, and earns an F.

 

The full text of The Concord Coalition's Report on Fiscal Responsibility is available online:
/fedbudget/old-doc/040730fiscresponrpt.pdf

(Requires Adobe Acrobat Reader)

The Concord Coalition is a nonpartisan, grassroots organization dedicated to balanced federal budgets and generationally responsible fiscal policy.  Concord's co-chairs are former Senators Warren B. Rudman (R-N.H.) and Bob Kerrey (D- Ne.).  Former Commerce Secretary Peter G. Peterson serves as President of The Concord Coalition.

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