October 25, 2014

Posts on federal budget

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Friday, August 14, 2009 - 10:41 AM

Last Friday, Treasury Secretary Timothy Geithner sent a letter to Congress requesting an increase in the statutory debt limit.  In the letter, Geithner noted:

"It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations."

The current statutory debt limit is $12.104 trillion.  As it stands today, the national debt is $11.658 trillion -- providing less than $500 billion of buffer room.  The Treasury Department expects federal debt to exceed the limit sometime this fall

To help everyone understand the statutory debt limit, the drivers behind this proposed increase, and the options available to policymakers, The Concord Coalition published an "Understanding the Federal Debt Limit" issue brief. The brief sets out to make sense of these developments and encourage Congress to address the real issues at hand. 

 

P.S. On a...

Thursday, July 30, 2009 - 11:18 AM

The Congressional Budget Office once again validates some intuition many of us had about health care reform: when you have health costs rising much faster than the economy is growing, a package that expands coverage but is unwilling to tax health benefits to pay for it is not likely to add up to a deficit-neutral plan over the longer term. The basic problem is that the cost of coverage expansion will continue to increase at the same rate as health care costs, but the tax increase offsets will only grow (at best) at the rate of economic growth. Then you have an additional problem that many of the offsets might be one-time cuts or cuts whose value does not even keep up with economic growth or inflation. 

Quoting from pages 12-13 of the report (a letter to Congressman Dave Camp (R-MI) on the House tri-committee proposal), emphasis added:

Looking ahead to the decade beyond 2019, CBO tries to evaluate the rate at which the budgetary impact of...

Thursday, July 23, 2009 - 9:19 PM

While the President's press conference Wednesday night got a lot of attention and focused substantially on health care, he also did an interview with Washington Post editorial page editor Fred Hiatt earlier in the day. The wide-ranging interview touched on health care reform, but also on a lot of the other subjects Concord Coalition members are interested in -- like deficits, debt, Social Security reform and a BRAC-like fiscal commission. It is worth a read.

Wednesday, July 22, 2009 - 5:59 PM

In today’s Washington Post, Harold Meyerson complains that the centrist “Blue Dog” Democrats have a “can’t do” attitude when it comes to health care reform:

[O]ur government used to actually pave roads, build bridges and allow for secure retirements by levying taxes on those who could afford to pay them. To today’s centrist Democrats, this has become a distant memory, a history lesson they cannot grasp. The notion that actual individuals might have to pay to secure the national interest appalls them. In the House, the Blue Dogs doggedly oppose proposals to fund universal coverage by taxing the wealthiest 1 percent of the nation’s households…

Centrist Democrats’ opposition to health reform verges on the incoherent. A caucus (the Blue Dogs) formed ostensibly to promote balanced budgets now disapproves of the proposed taxes that would cover the expenses of the new programs. The congressional centrists say, commendably, that they want to squeeze more economies out of the system, but they oppose giving more power to an agency that would set the payment...

Tuesday, June 30, 2009 - 12:15 PM

It has almost become axiomatic that growing health care costs, rather than population aging, is the overwhelming cause of a projected spike in federal spending. That notion was dispelled in CBO’s Long-Term Budget Outlook published last week. As explained in the report:

“Federal spending on Medicare, Medicaid, and Social Security will grow relative to the economy both because health care spending per beneficiary is projected to increase and because the population is aging. Spending on Medicare and Medicaid will be driven by both factors, while Social Security spending will rise because of the population’s aging. Between now and 2035, aging is projected to make the larger contribution to the growth of spending for those three programs as a share of GDP. After 2035, continued increases in health care spending per beneficiary are projected to dominate the growth in spending for the three programs.”

 

Later in the report, CBO quantifies the relative effects of aging and health care growth on projected...

Thursday, June 25, 2009 - 9:30 AM

After reading this post, hopefully all of our loyal readers will finally understand the simplicity and beauty of the Pay-As-You-Go (PAYGO) concept. 

First, I should mention that today we published an issue brief on the new statutory PAYGO law proposed by President Obama and introduced in the House of Representatives to coincide with today's PAYGO hearing in the House Budget Committee, featuring OMB Director Orszag. This proposal puts in place a law that requires any new spending or tax cut legislation to be offset so that it does not increase the deficit. If it did, the law forces automatic spending cuts designed to balance out the difference.

The Concord Coalition supports enactment of statutory PAYGO. The basic message in our brief is that PAYGO can be, and has been in the past, an important budget enforcement tool that helps promote fiscal responsibility. However, PAYGO shouldn't be thought of as more than that, and certainly not as a silver bullet that can somehow solve the nation's long-term fiscal...

Tuesday, June 9, 2009 - 7:31 PM

Today, President Obama held a press conference with Congressional leaders to announce his support for enactment of a statutory pay-as-you-go (PAYGO) budgeting rule.

The Obama administration’s proposal looks to build off the PAYGO rules put in place during the 1990s. Similar to them in design, the Office of Management and Budget (OMB) would keep a running scorecard for the costs associated with enacted legislation for each year through 2014 and compare those costs to the established baseline. If the scorecard found the cumulative effect of enacted legislation to increase the deficit, OMB would be required to reduce spending in certain non-exempt mandatory programs to balance the difference -- a process called sequestration. Although sequestration under PAYGO was never actually ordered in the 1990's, the existence of this automatic trigger provides some incentive for members of Congress to be fiscally disciplined.

While PAYGO has recently been in place for a few years, it has only existed as a congressional rule which has often been waived or ignored for legislation requiring politically difficult trade-offs. The proposal that President Obama put forward, and that the...

Friday, June 5, 2009 - 1:30 PM

I looked at the Treasury Department’s “green book” on the Administration’s revenue proposals only a few days ago, curious to see how the Bush (soon-to-be Obama) tax cuts would be described, considering that they comprise the single most costly policy in President Obama’s proposed budget (about $2 trillion over ten years according to CBO). Seems like a pretty significant “revenue proposal” to describe, right? The Treasury green book is 131 pages long, with each tax proposal described fairly thoroughly, over the course of 1 to a few pages each, in terms of current-law treatment, reason for change, and the specifics on the President’s proposal. Yet the extension of the 2001 and 2003 tax cuts is described in exactly two places–first, as a footnote in the table of contents (note, through the emphasis added, how...

Thursday, June 4, 2009 - 12:30 PM

Both Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner have been vocal this week regarding the need to rein in our growing federal budget deficits as the economy begins to recover and work to confront the structural fiscal imbalances projected over the coming decades.

Yesterday, Chairman Bernanke testified before the House Budget Committee and spent a portion of his testimony focusing on fiscal policy. He emphasized that it is necessary for policymakers to confront these challenges now more than ever. A failure to act, Bernanke noted, will result in economic consequences which will impede growth:

Addressing the country’s fiscal problems will require a willingness to make difficult choices. In the end, the fundamental decision that the Congress, the Administration, and the American people must confront is how large a share of the nation’s economic resources to devote to federal government programs, including entitlement programs. Crucially, whatever size of government is chosen, tax rates must ultimately be set at a level sufficient to achieve an appropriate balance of spending and revenues in the long run. In particular, over the longer term, achieving fiscal...

Tuesday, May 26, 2009 - 3:29 PM

In Nobel-prize winning economist and New York Times columnist Paul Krugman's column Monday, he makes an interesting point about California's budget woes that supports much of what The Concord Coalition's message has been for the last three years traveling the country on the Fiscal Wake-Up Tour. The irony is that he often protests much of what we stand for.

In writing about the political barriers to sound fiscal policy and governance in California, he expresses concern that it "foreshadows the future of the nation as a whole." He continues:

"Last week Bill Gross of Pimco, the giant bond fund, warned that the U.S. government may lose its AAA debt rating in a few years, thanks to the trillions it’s spending to rescue the economy and the banks. Is that a real possibility?

Well, in a rational world Mr. Gross’s warning would make no sense. America’s projected deficits may sound large, yet it would take only a modest tax increase to cover the expected rise in interest payments — and right now American taxes are well below those in most other wealthy countries. The fiscal consequences of the...