July 24, 2014

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Monday, June 7, 2010 - 4:45 PM

How large is the federal debt? That's something of a trick question in economic circles, and some analysts believe it may have already tripped up the President's fiscal commission.

Some commission members think the panel, charged with recommending solutions to the nation’s fiscal problems, should focus on the total federal debt. That figure, which just hit $13 trillion, is most familiar to the general public because it is widely cited by the news media and politicians.

Many budget experts and economists, however, say the real number to watch is “publicly held debt,” meaning what the government owes to investors. This figure, now approaching $8.6 trillion, does not include money that the government owes to various trust funds, notably for Social Security.

Beyond this issue is the question of how much more debt the government can safely take on. Fiscal commission members tussled over that at their second full meeting late last month on Capitol Hill, with some arguing that the economy was still too weak for the government to start focusing on deficit reduction.

“It’s very important that we don’t in our zeal focus on deficit reduction right now,” said Rep. Jan Schakowsky, an Illinois Democrat.

Regardless of which figure the commission focuses on, federal debt is...

Monday, June 7, 2010 - 4:34 PM

Public concern about the nation’s rising debt burden is beginning to have an impact on the legislative agenda.  

That much was evident as the House passed a scaled back “extenders” bill (H.R. 4213) on May 28 by a slim margin. Originally estimated to have a gross cost of $192 billion and a net deficit increase of $134 billion, the final bill carried a gross cost of $114 billion and a net deficit increase of $54 billion.

While this cost reduction was a victory for House Democrats -- mainly Blue Dogs -- who objected to the deficit impact of the original bill, much of it was accomplished by timing shifts rather than a change in policy. For example, shortening the extension period of certain unemployment benefits “saved” about $8 billion and sunsetting an increase in the Medicare physician reimbursement rate (the “doc fix”) after 19 months “saved” almost $40 billion. 

It remains to be seen whether concerns about the immediate deficit, which is largely driven by economic conditions, will be translated into hard choices on the long-term structural deficit. 

In that regard, it is worth noting that the policies extended in the extenders bill carry large long-term costs whether they become visible now or in the...

Thursday, June 3, 2010 - 4:35 PM

Below are a few budget items we have been following, since the last edition of the Washington Budget Report (sign up here) was published.

  • Last week, the House Appropriations Committee postponed its mark-up of the FY 2010 war supplemental.  The committee's chairman, David Obey, released a proposal including $84 billion in supplemental funding.  In addition to funding the President's request for war funding, the proposal would...
Wednesday, May 26, 2010 - 4:56 PM

While we publish a weekly Washington Budget Report (sign up here), we wanted to direct your attention to some other budget items we are watching this week.

  • The Senate is considering a McCaskill/ Sessions (amendment text here) that would institute statutory discretionary spending caps for three years.
Monday, May 24, 2010 - 5:27 PM

Today the Senate began considering the $59 billion supplemental spending bill (HR 4899) that the Senate Appropriations Committee approved last week. The bill includes emergency funding for priorities such as military operations in Iraq/Afghanistan, disaster assistance and veterans disability payments.  (For more details on the legislation, please see last week’s Washington Budget Report).

During the course of the week, amendments will likely be proposed to add extraneous items to the bill.  The Concord Coalition urges policymakers to resist adding non-emergency spending that will add to deficits that are already fiscally unsustainable. If these items are added, they should be paid for without emergency designations that exempt them from budget allocations.

Another potential addition to the bill is a procedural device called a “deeming resolution.”  Deeming resolutions are procedural shortcuts that Congress resorts to when its members have not lived up to their responsibility to pass a budget resolution.  Deeming resolutions have...

Monday, May 24, 2010 - 5:25 PM

The extenders bill that the House will consider this week is a timely reminder of why it is important for Congress to complete action on a budget resolution.  A budget resolution continues to elude Congress, but there has been considerably less trouble reaching agreement on a bill that the Congressional Budget Office estimates will add a staggering $167 billion to the deficit over 2010-2014 and a net increase of $134 billion over 2010-2020. 


Last Thursday, leaders of the Senate...

Monday, May 10, 2010 - 3:08 PM

 

recent story on CNN-Money by Steve Hargreaves asks “What will BP really pay?” I think a more fundamental question to ask at this point is “What should BP pay? And should no one else?” As the story explains (emphasis added):

NEW YORK (CNNMoney.com) — The Gulf oil spill is going to cost billions to clean up, a tab BP has publicly pledged to pay in full.

But thanks to the unpredictable nature of the oil slick and the legal maze surrounding maritime law, what BP will pay and to whom is very much an open question…

Start with the costs. Estimates to clean the spill and compensate other parties for the economic damage run from $2 billion to $14 billion. One politician even said it could run into the hundreds of billions

…which is a lot of money, too much for even BP to cover (whose profits were, coincidentally,...

Sunday, April 25, 2010 - 9:53 PM

President Obama’s bipartisan fiscal commission will hold its first meeting on April 27. It has two very ambitious assignments -- find a way to balance the budget excluding interest on the debt by 2015 and “meaningfully improve” the long-term fiscal outlook. All of this is supposed to be done by December 1, 2010.

That’s quite a task. It may even be too much to ask. So here is a simple suggestion for the commission: Leave the short-term goal to the regular budget process and focus on the more important long-term goal.

Finding long-term solutions to the nation’s unsustainable fiscal outlook is what originally motivated members of Congress to propose a statutory commission. Only when that effort failed did the President step in by establishing an executive commission with the added goal of filling a gap in his budget.

The short-term budget goal could easily distract the commission from its long-term mission. Senate Budget Committee Chairman Kent Conrad, a commission member, had it right when he told POLITICO last week, “I don’t think a commission should be absorbed with the short-term budget. We need them to focus on long-term structural problems.”

Simply determining which baseline to use in assessing the required deficit reduction in 2015 would get the commission bogged down. They can’t know what it...

Sunday, April 11, 2010 - 9:45 PM

I have never been a fan of the Bush tax cuts. I’ve always felt they were too costly, too skewed to the rich, and did too little to make the tax system more efficient. Concord also warned about the 2001 and 2003 tax cuts before they were enacted and has since continuously said they should not be extended without a plan to address the nation's unsustainable fiscal outlook.

The expiration of the cuts, at the end of this year, is fast approaching and policymakers in Washington are struggling to decide what to do with them. President Obama has promised to continue most of the same tax cuts that he himself has criticized for being fiscally irresponsible. Not only has he promised to extend the tax cuts for all households with incomes below $250,000 (at a budgetary cost of $2.2 trillion over ten years), but he also promised to never raise any taxes on households below that income.

However, President Obama has also promised to get the deficit down to a "sustainable" level of around 3 percent of GDP in five years. But the President's own budget, which includes the deficit-financed extension of those "middle-class" Bush tax cuts (that $2.2 trillion worth), isn't consistent with such a low deficit. CBO says that under the...

Wednesday, March 31, 2010 - 11:00 AM

According to a March 29 Roll Call article (subscription required), Senate Republicans have gone home for the two-week congressional recess with a strategy memorandum advising them to call for repeal of “Medicare cuts, tax hikes, mandates and sweetheart deals” in the new health care reform legislation.

Leaving aside the sweetheart deals, repeal of the other three items would amount to a fiscal catastrophe. One can legitimately argue that the law will end up costing more than anticipated or that some of the proposed savings will fail to materialize. Claims of big deficit reduction do indeed rest on some shaky assumptions, and the law certainly leaves a lot of work to be done on fiscal sustainability. However, the surest way to guarantee exploding deficits would be to leave in place all of the popular insurance reforms and repeal the politically difficult choices that have been made to pay for them.

Expanding health insurance coverage costs money. Unlike the 2003 Medicare prescription drug bill, this plan at least attempts to pay for its new spending by cutting future Medicare costs and raising new revenues. Constituents may not like these things but they are essential parts of the law. They are also protected by...