WASHINGTON – With a new Congressional Budget Office (CBO) analysis of the President’s proposed budget showing unsustainable deficits mounting over the coming decade, The Concord Coalition today called on President Obama and the House of Representatives to embrace a call from 64 senators of both parties to “engage in a broader discussion about a comprehensive deficit reduction package.”
“The senators hit the nail on the head, and CBO’s analysis of the President’s budget supports their point,” said Robert L. Bixby, Concord’s executive director.
“The President should take advantage of this bipartisan initiative to invite congressional leaders of both parties to a White House conference on deficit reduction. Prospects for success would greatly improve, however, if House members joined their Senate colleagues in committing themselves to a broad approach to deficit reduction,” Bixby said.
According to CBO’s analysis, deficits under the President’s budget would range from a high of $1.4 trillion this year (9.5 percent of GDP) to a low of $748 billion (4.1 percent of GDP) in 2015. By the end of the 10-year projection in 2021, the deficit would be $1.2 trillion (4.9 percent of GDP) and climbing. Deficits from 2012 through 2021 would total $9.5 trillion (4.8 percent of GDP).
On Friday, the same day that these grim projections were released, 64 senators -- 32 from each party -- sent a letter to President Obama stating, “we believe comprehensive deficit reduction measures are imperative” and asking him to “support a broad approach to solving the problem.”
The letter referenced the work of the President’s fiscal commission as “an important foundation to achieve meaningful progress on our debt” and, consistent with the commission’s recommendations, called for discussions on “discretionary spending cuts, entitlement changes and tax reform.”
Up until now, the fiscal debate in Washington has centered on the narrow question of finishing appropriations bills for 2011. This is a necessary process and has resulted in $10 billion of savings compared to last year’s level of spending. The focus, however, has been on a small slice of the budget and done virtually nothing to change the projected growth of federal debt. A broader discussion must soon begin with all parts of the budget on the table.
The scale of the problem, as underscored by CBO’s analysis of the President’s budget, requires a broad approach to solutions along the lines established in the commission’s framework.
Under that framework, which includes savings from all parts of the budget and raises revenues by scaling back or eliminating federal subsidies administered through the tax code, deficits would shrink to 1.2 percent of GDP in 2020 while lowering the debt-to-GDP ratio to 65.5 percent from 71 percent in 2012. The compounding effects of these lower deficits would result in substantial savings on interest costs over time.
By contrast, the President’s budget, which includes few of the commission’s major proposals, would boost debt held by the public to 85.7 percent of GDP in 2020 and increase interest costs to $866 billion in that year, according to CBO’s analysis.
“It is clear that the President’s budget is inadequate to the task at hand,” Bixby said. “Part of the reason may be that administration officials were not sure that if they adopted some of the more controversial aspects of the commission’s framework they would be praised or pilloried. But a super-majority of the Senate has now indicated a willingness to work across party lines to find solutions using the commission’s framework as a guide. This provides vital political cover for a more aggressive approach to deficit reduction by the administration. However, it is not yet clear that the House is willing to go along with this approach. House members, as well as the President, must therefore respond favorably to the senators’ letter before conditions will be fully ripe for broad-based negotiations to begin.”
The Concord Coalition is a nonpartisan, grassroots organization dedicated to fiscal responsibility. Former U.S. Senators Warren B. Rudman (R-NH) and Bob Kerrey (D-NE) serve as Concord's co-chairs and former Secretary of Commerce Peter G. Peterson serves