October 26, 2014

After Debt Ceiling Action, Our Nation's Future Remains at Risk

In an op-ed for the Casper Star-Tribune, Paul Hansen, western states regional director for The Concord Coalition, says although Congress recently approved a debt ceiling increase and appropriations legislation, our nation's long-term fiscal challenges remain unaddressed. The guest column can also be found here on the newspaper's website.

Finally, Congress has completed its budget process without another government shutdown and raised the nation’s debt ceiling without seriously threatening default.

Unfortunately, though, once again elected officials in Washington have postponed action on the larger challenge of fiscal sustainability – a challenge rooted in an aging population, growing health care costs and a grossly inefficient tax system.

Our nation’s future remains at risk.

While the annual deficit is down, the total federal debt is very high by historical standards and is projected to continue climbing – pushing the government’s interest payments upwards as well. Congress has done little to address the major drivers of the large deficits projected within a few years: the rapidly growing costs of social programs and the subsidies embedded in an overly complex tax code.

A budget deal in December set the total amounts of “discretionary spending” -- which Congress approves on an annual basis -- for fiscal years 2014 and 2015. This spending is roughly split between defense and non-defense.

Most people do not realize, however, that such discretionary spending accounts for less than a third of the total budget. Most elected officials have deluded themselves with unrealistic plans that call for deep cuts in only this one part of the budget.

The imbalances in “mandatory programs” like Social Security and Medicare, and the tax subsidies of more than $1 trillion a year, remain largely untouched. Dealing with these challenges is essential to the nation’s economic growth and prosperity.

The recent passage of a new budget may not necessarily signal a permanent change in the pattern of budgeting by crisis and special-interest giveaways. In fact, lawmakers have already reversed one of the key reforms in that budget package – a modest change in the way cost-of-living pension benefits are calculated for working-age military veterans.

At this point, Congress has not renewed the so-called “tax extenders” – special interest subsidies and tax breaks that members of both political parties renew year after year. Continuing them all would increase the deficit by $913 billion over the next decade. If they are approved, lawmakers should at least offset the cost elsewhere in the budget, as required under the “pay as you go” standard.

The nonpartisan Congressional Budget Office just released its 10-year budget outlook. In a society saturated by media information on all kinds of issues, these three wonky sentences are among the most important you will read this year:

"The large budget deficits recorded in recent years have substantially increased federal debt, and the amount of debt relative to the size of the economy is now very high by historical standards. CBO estimates that federal debt held by the public will equal 74 percent of GDP at the end of this year and 79 percent in 2024 (the end of the current 10-year projection period). Such large and growing federal debt could have serious negative consequences, including restraining economic growth in the long term, giving policymakers less flexibility to respond to unexpected challenges, and eventually increasing the risk of a fiscal crisis (in which investors would demand high interest rates to buy the government’s debt)." 

The math of fiscal reform is politically difficult for elected officials in both parties. They will need to tell fervent partisans, on the right and the left, that they cannot have something for nothing. It is, however, just that kind of leadership that is needed if America is to thrive in the coming years.