April 24, 2014

Washington Budget Report: May 24, 2010

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House Considers "Extenders" Bill That Would Add $167 Billion to the Deficit Over Five Years

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

Some emergency spending may be necessary to provide assistance to the unemployed while the economy remains fragile, but the cost of this bill goes far beyond what is necessary and affordable -- despite $56 billion in revenue offsets.

In addition to extensions of unemployment and COBRA benefits, the bill includes funding for such things as infrastructure, aid to the states, summer jobs, agriculture disaster assistance, and the settlement of two lawsuits.  While many of these items may be worthwhile, Congress must begin making some difficult choices.

These decisions should be made within the context of the broader framework that a budget resolution can provide.  As lawmakers begin reviewing the extenders bill and considering amendments, The Concord Coalition urges them to pass a budget resolution before adding to the deficit. In addition, they should either add more offsets or scale back the provisions in the bill.

Considering Supplemental Spending Bill, Senate Should Avoid Extraneous Additions and a "Deeming Resolution"

Today the Senate began considering the $59 billion supplemental spending bill (HR 4899) that its Appropriations Committee approved last week. The bill includes emergency funding for priorities such as military operations in Iraq and Afghanistan, disaster assistance and veterans disability payments.

The Concord Coalition urges policymakers to resist adding any extraneous, non-emergency spending that should instead be considered through the regular appropriations process.

Another potential addition to the bill is a “deeming resolution.”  Such measures are procedural shortcuts that Congress resorts to when its members have not lived up to their responsibility to pass a budget resolution. Some may argue that a deeming resolution is an effective substitute for a budget resolution.  It is not.

In recent years, deeming resolutions have been used to provide allocations to the Appropriations Committees or to adjust budget enforcement mechanisms. Because such resolutions typically do not include multi-year targets for deficits, spending and revenue, however, they do not establish an effective framework to guide Congress as it considers legislation.  A deeming resolution also cannot be used for reconciliation instructions that may be used for deficit reduction or compliance with the new PAYGO law.

For elected officials who lack the political will to make difficult choices, a deeming resolution is a tempting shortcut to move appropriations bills forward.  Unfortunately for Congress, you can’t deem the deficits away.

Social Security Reform Should Ensure Sustainability, Increase Savings and Improve Generational Equity

At first glance, circumstances may seem even less favorable for Social Security reform than under the last two presidential administrations. But that may not really be the case. This year, for the first time since 1983, it is expected that Social Security will pay out more than it takes in – focusing attention on the need for long-term sustainability. Fixing the system would likely be easier than Medicare or tax reform, and it would send reassuring signals to the financial markets and the public. The options for repairing Social Security are well known.

So Concord Coalition Executive Director Bob Bixby says that when looking for ways to address the structural deficit, Social Security has gone from being the “third rail of American politics” to the “low hanging fruit.”

The Senate Special Committee on Aging released a report last week titled “Social Security Modernization: Options to Address Solvency and Benefit Adequacy.” While the report is quite informative in some respects, its focus on 75-year trust fund solvency minimizes the fiscal challenge.

Trust-fund accounting assumes that surpluses accumulated in prior years can be drawn down to defray deficits incurred in future years. However, the trust funds are bookkeeping devices, not a mechanism for savings. Their existence does not, alone, ease the burden of paying future benefits. When assessing reforms, the question is not what the program looks like over a 75-year average (actuarial balance) but whether it is on a sustainable path at the end of the 75th year -- or headed over a cliff.

The Concord Coalition believes that Social Security reform plans should meet three fundamental objectives: Ensure the system’s long-term fiscal sustainability, raise national savings, and improve the system's generational equity.

Bipartisan Fiscal Commission to Meet Wednesday

The President’s Bipartisan National Commission on Fiscal Responsibility and Reform is scheduled to hold its second full meeting this Wednesday morning. At the request of panel members, the Congressional Budget Office is providing the commission with budget projections and other information to help them weigh policy options.

The commission is charged with making recommendations on the nation’s short-term and long-term fiscal challenges by Dec. 1. Concord has urged the group to focus on the more significant long-term issues.

FAQ: Why does the United States have “an aging population” and what does it mean for the federal budget?

The average age of Americans is increasing. With the end of World War II in 1945, the United States experienced a population surge known as “the baby boom.” Initially, this resulted in a younger population. As the baby boomers had fewer children than their parents, however, the population began growing “older.” Today Americans age 65 and older make up about 13 percent of the population. By 2035, that figure will grow to nearly 20 percent.

In the context of federal budgeting, an aging population is a policy dilemma because Social Security, Medicare, and Medicaid spending levels rise automatically with such population changes. Today there are three workers for every Social Security beneficiary. But as more baby boomers retire in the coming decade, there will be fewer workers to finance the growing pool of beneficiaries. The Social Security Administration estimates that in 2030 there will be only two workers to finance each beneficiary.

According to the Congressional Budget Office, aging will account for about 64 percent of spending growth in the major entitlement programs over the next 25 years. The aging population, combined with escalating health care costs, will produce unsustainable government spending levels unless lawmakers take steps to bring long-term costs and revenues in line with each other.