November 26, 2014

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Friday, January 17, 2014 - 12:52 PM

Many state and local governments have done little to address growing structural problems in their budgets that have been aggravated by federal deficit-reduction efforts, according to the State Budget Crisis Task Force.

The bipartisan organization released its final report last week, reiterating a stark warning from its previous reports: “The existing trajectory of state spending, and administrative practices cannot be sustained.”

Former Federal Reserve Chair and Concord Coalition board member Paul Volcker co-authored the report along with Richard Ravitch, a former lieutenant governor of New York. They urged state and local governments to deal with their budget problems and suggested that federal policymakers should focus more attention on how their own deficit-reduction efforts will impact other levels of government.

The task force’s work has concluded with this report, but Volcker plans to start a new organization, the Volcker Alliance, that will follow up on the recommendations and issues raised by the task force.

The task force recommends that Congress create an office to monitor and analyze how federal actions will affect state and local budgets, possibly as part of the Congressional Budget Office.

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Friday, December 13, 2013 - 3:43 PM

Unlike the past few years, the recent budget agreement has smoothed the way for Congress to recess for its winter break well before Christmas. That has left some traditional end-of-year legislation out in the cold.

That is bad news for the unemployed, as emergency unemployment benefits are scheduled to expire. Yet there is also hopeful news for those who wish to bring some sanity to the tax code because the oft-extended package of miscellaneous tax breaks, collectively called the “tax extenders,” is also scheduled to expire.

The tax extenders are temporary provisions. Like other tax expenditures, they are disguised federal subsidies that encourage certain behaviors. Every year Congress has extended them for at least another year, allowing certain individuals and businesses to lower their tax bills. Extenders represent the ad hoc approach that has made the tax code a complex, inefficient mess of tax expenditures.

Senate Finance Committee Chair Max Baucus (D-Mont.) and House Ways and Means Committee Chair Dave Camp (R-Mich.) came out last week against approving the extenders for another year. Instead, they want a comprehensive overhaul of the tax code that would eliminate wasteful subsidies.

Denying a vote on the...

Thursday, December 12, 2013 - 9:12 AM

President Obama hailed the two-year budget deal reached by House Budget Committee Chair Paul Ryan (R-Wis.) and Senate Budget Committee Chair Patty Murray (D-Wash.) as a “good first step.”

If he meant a good first step toward broader reforms needed to put the nation’s finances on sounder footing for the long-term, let’s hope he is right.

It is not clear, however, that Capitol Hill leaders, or the President for that matter, have any plans to follow up this very modest achievement with anything more.

Under the terms of the agreement, spending caps for appropriations would be adjusted upward for 2014 and 2015, resulting in an outlay increase of $62 billion over 10 years, according to the Congressional Budget Office (CBO)

That increase, however, is calculated from the “sequestration” level that neither party ever intended to go into effect. The new caps would still be lower than the original caps put in place by the Budget Control Act of 2011 and lower than the levels under the Simpson-Bowles plan or the original Ryan budget.

The spending increase would be more than offset by an array of future cuts in mandatory (non-appropriations) spending and higher user fees together totaling $78...

Friday, December 6, 2013 - 2:19 PM

Extending emergency unemployment compensation for another year would add 200,000 jobs but carries a price tag of $25 billion, according to an analysis released recently by the Congressional Budget Office (CBO). Such an extension now appears to be a central focus of negotiators trying to reach a budget deal before Congress adjourns for the year.

Emergency unemployment compensation (EUC) provides more “bang for the buck” than many other policies aimed at improving the economy. It provides an immediate surge in economic activity due to recipients quickly spending their benefits on consumer goods and services, which boosts aggregate demand and induces businesses to increase production and hire more workers.

CBO noted that part of this positive effect is offset as some workers reduce the intensity of their job searches in response to the extension of benefits.

Emergency unemployment compensation was approved in 2008 as the unemployment rate was rapidly rising due to the recession. It provides at least 14 additional weeks of benefits to individuals who have exhausted...

Wednesday, December 4, 2013 - 7:28 AM

If the recent past is any indication of how elected officials will deal with the country’s short- and long-term fiscal challenges, Americans – and especially younger ones – are in trouble.

Washington will have to step up its game.  And ordinary Americans can help by encouraging their elected representatives to forgo political  theatrics in favor of timely budgets and more responsible policies.

That was the consensus of budget experts as well as former lawmakers who spoke at a conference Tuesday on Capitol Hill. The conference was organized by the University of New Hampshire’s Warren B. Rudman Center for Justice, Leadership and Public Policy in cooperation with The Concord Coalition and several other organizations.

With congressional negotiations on an overdue budget for Fiscal 2014 still sputtering, speakers at Tuesday’s conference considered what it would take to avoid a federal debt crisis.

They generally agreed that lawmakers in both parties as well as the President should put a greater focus on developing realistic solutions and exercising bipartisan cooperation.

“We have got to get our colleagues to lift themselves out of this political quagmire -- and forget, just for...

Monday, October 28, 2013 - 8:38 AM

Who says that Democrats and Republicans can't reach a grand bargain?

Harry Reid and Paul Ryan seem to have it figured out. If Democrats and Republicans don’t demand compromises from each other, everyone can get along. It’s the perfect political grand bargain: Do nothing.

Unfortunately, that could easily become a self-fulfilling prophecy.

The prospects for a real grand bargain – one that actually makes some headway on solving our fiscal imbalance – are not looking good right now. It is particularly disappointing, however, that already two key members of Congress are simply accepting the gridlocked status quo rather using their leading positions to figure out a better result.

In an interview with the Associated Press (AP), Ryan summed up his view this way: “If we focus on some big, grand bargain then we’re going to focus on our differences and both sides are going to require that the other side compromises some core principle and then we’ll get nothing done.”

That’s a bit like saying elected officials can’t do a grand bargain because it would require a grand...

Sunday, October 13, 2013 - 12:10 PM

We will soon see whether there is any remaining capacity in the U.S. political system to reach compromise across partisan lines for the common good.

Republican congressional leaders say that if President Obama wants the government to reopen and the debt limit to be increased he will have to make concessions on spending and agree to negotiate a long-term deficit reduction deal. Obama says he will not negotiate anything until the debt limit is raised and the government reopened. After that, he’ll talk.

If neither side blinks, the government will remain shut and nation could begin defaulting on a portion of its obligations within a matter of days..

That disastrous outcome must be avoided. But how?

Backing down now would be politically perilous for either side. Failing to back down, however, would be perilous for the economy, the nation’s creditworthiness and the trust that citizens place in elected leaders to carry out the most basic functions of government.

Surely, both sides know that ultimately two things have to happen.

1.) The debt limit must be increased. There is no realistic alternative and any set of fiscal options, even Paul Ryan’s austere House Budget Committee plan, would require additional borrowing.

2.) There must be a meaningful negotiation over fiscal policy in...

Monday, September 9, 2013 - 8:48 AM

Syria is not the only challenge Congress faces as it returns to Washington from its August recess. Monday was the first of only nine legislative days that both the Senate and House of Representatives will be in session before the fiscal year ends on Sept. 30. Congress will need to approve a spending plan before then and take action on the debt limit not long after that.

Unfortunately, little progress has been made towards passing a budget this year. The budget resolutions adopted by Senate Democrats and House Republicans are $91 billion apart in overall spending levels, and no appropriations bills have been signed into law.

House Republicans have only been able to muster support for their deep proposed spending reductions in five of twelve appropriation bills, while the only appropriations bill brought to the Senate floor was defeated by a filibuster.

With so little time left on the legislative calendar, Congress is extremely unlikely to finish its appropriations bills on time. That would leave lawmakers with an important choice: adopt a continuing resolution to temporarily fund the government or allow it to shut down.

If that wasn’t bad enough, the government could default within weeks unless Congress raises the debt ceiling. The Treasury warns that it will run out of "...

Friday, August 30, 2013 - 11:55 AM

This year will mark the end of a four-year string of trillion-dollar-plus federal deficits that have troubled the American public and caused turmoil on Capitol Hill.

Fiscal Year 2013 is drawing to a close with a projected deficit of a little over $640 billion, down from $1.1 trillion last year. That’s good news, but it should hardly be considered an “all clear” signal on the nation’s fiscal and economic challenges.

Here are eight reasons why:

1. While the deficit is going down, the federal debt is still going up.

The government is still borrowing a substantial amount of money this year, and that is all being added to the accumulated debt, which is approaching  $17 trillion. That’s why elected officials -- despite their usual lamentations and finger-pointing -- have no choice but to raise the debt limit at some point in the next few months. The real question is what they will do to prevent the debt from growing in the future to unsustainable levels.

2. This year’s lower deficit can be largely attributed to short-term economic factors rather than systemic reforms in the federal budget

During difficult economic times with high unemployment, federal deficits rise as...

Tuesday, August 6, 2013 - 9:08 AM

Developments on the budget front last week demonstrated both the difficulty of achieving a grand bargain and why it may not be totally out of reach.  

First, the difficulty.

It became apparent last week that the House and Senate have made no progress on resolving their differences over Fiscal Year 2014 appropriations.  At issue is whether to assume that the sequestration cuts that took effect in March will continue. They are about $90 billion apart and unable to budge.

Then, in a speech last Tuesday, President Obama floated a new kind of  “grand bargain”: one aimed at short-term job creation rather than long-term fiscal sustainability.  The speech broke no new ground and did little to break the budgetary logjam.

While conceding that a fiscal sustainability plan must eventually be adopted, including a way to replace the sequestration cuts, Obama argued that his plan would at least address the current slow pace of job creation.

Essentially, he proposed to pay for a package of jobs programs (such as he proposed in his budget) with “transition revenue” from base-broadening corporate tax reform ideas that he proposed last year. The only new...