November 21, 2014

Loveland Budget Exercise Looks at Federal Debt

In a guest column for the Loveland Reporter-Herald in Colorado, Sara Imhof, Midwest regional director of The Concord Coalition, and Loren Adler, research director for Fix The Debt, warn of the consequences of rising federal budget deficits and urge citizens to become involved in developing a consensus on how to put our country on a sustainable fiscal path. The column can also be found here

This morning Concord and Fix The Debt Campaign co-hosted a budget exercise in Loveland with Rep. Jared Polis (D-Colo.). In addition to hearing the congressman's remarks, dozens of participants worked in small groups to develop 10-year budget plans that would reduce future deficits. 

With the federal budget deficit down sharply compared to recent years, is it time to declare victory in the long struggle for a more responsible U. S. government fiscal policy?

Unfortunately, no. We've still got a long ways to go.

The nonpartisan Congressional Budget Office (CBO) released new projections a few days ago that highlight the challenges that we have yet to meet.

The CBO expects the deficit this year will drop to $492 billion, well below the four-year string of trillion-dollar-plus shortfalls that began in 2009. This year's projected deficit is even a third less than last year's shortfall.

Yet small deficits still add to the government's accumulated debt, increasing its interest costs as well. And at 72 percent of the country's Gross Domestic Product, the debt is already quite high by historical standards.

More significantly, annual deficits are expected to start rising again after next year — even if the economy continues to improve and America's military commitments abroad are scaled back.

Without some very hard choices on budget policy, these deficits and the accumulating debt will continue to rise on a path that is ultimately unsustainable.

To meet the country's fiscal challenges, it is important to understand the fundamental problems. All too often, people simply say Washington spends too much, or wastes too much of what it spends. But vague calls for more fiscal restraint won't get the job done.

The key drivers of the projected federal deficits in the years ahead are not waste and abuse; they are rising health care costs and the aging of the population.

Every day thousands of people — the leading edge of the baby boom — sign up to start receiving Social Security and Medicare benefits. This means that the federal government will have to spend more and more each year just to provide the same level of support and services that it gives retired Americans today.

In addition, health care costs usually rise with medical advances, expensive new technology and longer life expectancies. While the growth in health care spending has moderated recently, it is unclear whether that trend will continue — and in any case, the costs are still going up.

A third factor — snowballing interest payments on the federal debt — is expected to become more and more of a problem in the coming decade.

Loveland-area residents will have an opportunity this week to confront these challenges and help identify specific ways to rein in federal deficits in the years ahead.

U.S. Rep. Jared Polis and two nonpartisan organizations — The Concord Coalition and Fix the Debt — are presenting a federal budget exercise called "Principles and Priorities" on Wednesday morning in Loveland. (See additional information below.)

Why should citizens in Colorado and across the country be concerned about high and rising federal debt?

There are a number of reasons. They include the risk of another financial crisis, rising interest costs for taxpayers, higher investment costs for businesses, reduced productivity and lower wages.

High federal debt could also restrict the nation's flexibility to respond to unforeseen crises in the future.

Finally, there is a simple moral issue: We should not burden our children and grandchildren with debts for government services and benefits that we refuse to pay for ourselves. They deserve better.

Fortunately, many options are available to close the gaps between government revenue and spending. A number of bipartisan panels have offered suggestions that include entitlement reform, sweeping changes in the tax system, health care improvements, and some other reductions in both domestic and defense programs.

But while solutions are available, they will require some public sacrifices, courage on the part of elected officials, and more compromise and cooperation than Washington has shown lately.

Perhaps participants in Wednesday's exercise in Loveland can help show the way.