July 31, 2014

Washington Budget Report: Sep. 21, 2010

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As "Fiscal Solutions Tour" Emphasizes, Many Options Are Available -- And We're Going to Need Them

While this year’s high federal deficit is worrisome, far more troubling are the projections of large, unsustainable deficits even after the economy has fully recovered and U.S. military commitments abroad have been scaled back.

But in a guest column in The San Jose Mercury News on Sunday, Concord Coalition Executive Director Robert Bixby emphasized that a wide range of options are available for dealing with the country’s fiscal challenges. The article was printed in conjunction with “Fiscal Solutions Tour” programs in San Francisco on Thursday and San Jose on Friday. (For information on attending, see links below.)

The country’s fiscal options include cuts in defense as well as the domestic spending that Congress approves each year, entitlement programs, more responsible tax policies, and tougher, more effective budget rules in Congress.

“We will probably need options in all of these categories,” Bixby writes. “That's why everything should be on the table. Many steps that need to be taken will require public sacrifice. They will be easy to demagogue. So bipartisan cooperation will be essential. Without change, the fiscal problems will only become more difficult and painful to solve.”

By itself, the current $13.5 trillion federal debt would be manageable, especially with economic growth.

“What we can't afford to do is start running annual deficits of $1 trillion and more in perpetuity,” Bixby warns. “That's something that Congress should keep in mind as members consider irresponsible proposals to use deficit financing to permanently extend the Bush tax cuts.”

Budget? What Budget? Congress Remains Far Behind Schedule as New Fiscal Year Approaches

With the fiscal year nearly over, Congress unfortunately has not passed a budget resolution or enacted a single appropriations bill for the coming year. Attention has now turned to a continuing resolution to keep the government running after Sept. 30.

“Congress should have met its obligation to pass a budget resolution and complete the appropriations bills using the regular process,” Concord Coalition Chief Budget Counsel Cliff Isenberg writes in a new blog posting. “However, if a continuing resolution is necessary to prevent a government shutdown, it should be a clean measure that permits agencies to continue operating with budgets no higher than current funding levels.”

Last week two Senate committees – Budget, and Homeland Security and Government Affairs -- held hearings on President Obama's nomination of Jack Lew to head the Office of Management and Budget. Lew held the same job during the Clinton administration. The Homeland Security and Government Affairs Committee gave its approval of the nomination this morning.

Senate Finance Committee Chairman Max Baucus introduced a revised package of tax extenders that included $50 billion in tax cuts and spending, as well as offsets such as reductions in some tax breaks. As Isenberg notes, Concord has argued that lawmakers should ask whether each tax cut extension can be justified at a time when federal deficits are already well over a trillion dollars.

Pentagon Plans to Focus on Affordability for a Change

Defense Secretary Robert Gates, who hopes to save the Pentagon $100 billion over the next five years, has explained in more detail how he plans to do so.

Gates said contracting would be made more efficient and productive in a speech last week at the Pentagon, which has an annual budget of $700 billion. Managers will be guided by estimates for what programs should cost if managed efficiently, an improvement over just relying on the cost of similar programs in the past. Program managers will now have to establish “affordability targets” that can only be changed with approval from the undersecretary of defense for acquisition.

“This guidance will make programs more affordable without sacrificing capabilities,” Gates said, “and prevent us from embarking on programs that will need to be cancelled when they prove unaffordable.”

With the U.S. government facing extremely high deficits now and in the future, it must do everything possible to ensure greater efficiency and savings. This certainly holds true for the Pentagon, where spending has more than doubled over the last decade. Gates is moving in the right direction by implementing institutional change in how the Pentagon does business.