April 24, 2014

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Wednesday, December 4, 2013 - 8:28 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 - 9:38 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 - 1:10 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 - 9:48 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 - 12:55 PM

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 - 10:08 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...

Tuesday, July 9, 2013 - 5:39 PM

The Obama Administration released its Mid-Session Review (MSR) of the budget on Monday. It would be nice to say that this update arrived just in time to clinch the deal on a fiscal sustainability plan, or even a plan to get through the rest of the year, but sadly that is not the case.

There are no apparent negotiations going on between the House and Senate to work out their differences over next year's spending levels, let alone any broader deal involving the President. Certain mechanical functions are grinding forward, such as the release of the MSR and approval of a few appropriations bills, but these are disjointed efforts with no attempt at coordination.

We no longer have "regular order" so much as we have regular chaos. A tacit decision seems to have been made to take no action on the budget until a crisis is at hand, which is not likely to occur until the end of the fiscal year on Sept. 30.  And even then, the "fix" might be to simply push things forward just enough to reach the next crisis point – raising the debt ceiling - later in the fall.

Within that context, the MSR means little. Still, it is useful to have the administration reiterate its most recent proposals with updated numbers.

...
Monday, June 10, 2013 - 2:37 PM

Judging by recent media reports, there is a growing belief in Washington that the best way to deal with the deficit is to “declare victory.” 

It won’t work.

The deficit problem is far from being solved and its lengthy shadow will hang over every other issue, including the economy, until a fiscal sustainability plan is in place.

To be sure, the deficit is coming down and that is good news. However, most of the improvement comes from a recovering economy, allowing expiring tax cuts to expire and assuming that improbable cuts in discretionary spending and Medicare provider payments will actually occur.

And even if all these things turn out as planned, the budget is still on an unsustainable track. We’ll need a lot more than a short-term declining deficit to declare victory. We’ll need a plan that doesn’t just bring the deficit down but keeps it down on a sustainable basis.

The core problem is not a cyclical deficit driven by the ups and downs of the economy but an underlying structural deficit caused by a mismatch between future spending promises and current tax law.

The Congressional Budget Office (CBO) estimates that under current law the deficit will bottom out at $378 billion in 2015 before turning higher again, reaching $895 billion by 2023. Meanwhile, as a share of the...

Monday, April 29, 2013 - 9:32 AM

Although Congress has plenty of serious budget work to do, lawmakers in both parties can’t seem to resist frittering away time and confusing the public with various proposals that serve no useful purpose. Last week offered a couple good examples.

House Republicans distracted themselves with a bill that would set priorities for payments on federal obligations if the debt limit were reached. There’s understandable confusion and disagreement over what exactly the bill would do, but the general idea seems to be that the federal government could somehow limit the damage of a default by presenting itself to the world as only a partial deadbeat.

As approved by a party-line vote Wednesday in the House Ways and Means Committee, the legislation would tell the Treasury to continue making payments on principal and interest on U.S. debt obligations – and keep Social Security checks going out, of course.

Becoming a partial deadbeat apparently requires some special accounting rules, and so those were tacked onto the legislation. Alas, the nation’s creditors and global financial markets are under no obligation to embrace lawmakers’ unconventional notions about what might constitute a government default.

In any case, there is really...

Tuesday, April 23, 2013 - 2:49 PM

The new budget plan released recently by Alan Simpson and Erskine Bowles once again demonstrates that it is possible to bring the deficit under control using a mix of spending cuts and revenue increases without harming the near-term economy.

It is not a plan for partisan purists, and that is why it could play a vital role in the coming months as Democrats and Republicans struggle to find a way forward on a budget compromise.

Unlike the original Simpson-Bowles plan, which was presented when the two men co-chaired the bipartisan National Commission on Fiscal Responsibility and Reform, this plan picks up where negotiations broke off last December between President Obama and House Speaker John Boehner.

“The plan we have put forward here is not our ideal plan, it is not the perfect plan, and it is certainly not the only plan,” they wrote. “It is an effort to show both sides that a deal is possible; a deal where neither side compromises their principles but instead relies on principled compromise. Such a deal would invigorate our economy and demonstrate to the public that Washington can solve problems, and leave a better future for our grandchildren.”

Simpson and Bowles acknowledge that some...