November 1, 2014

Washington Budget Report: Sep. 28, 2010

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We Pledge to . . . Avoid Specifics?

House Republicans have outlined their fiscal priorities and ideas about reform in their “Pledge To America.” But while it correctly warns about the hazards of rising government debt, the Pledge lacks a plan to bring deficits down to a sustainable level.

“As with most such campaign manifestos, it is long on base-pleasing rhetoric and short on troublesome details,” Concord Coalition Executive Director Robert Bixby says in a new blog post analyzing the Pledge. Democrats in Congress have fallen short as well, he notes, by failing to pass a budget resolution.

Bixby says that the Republicans’ Pledge -- with its large tax cuts, spending increases on defense and repeal of cost-saving provisions in this year’s health care legislation -- could lead to deficits that are even higher than those in the president’s budget. Bixby is particularly concerned that the Pledge fails to offer recommendations to deal with projected increases in the big entitlement programs.

“The Pledge To America makes it clear that House Republicans favor low taxes and limited government,” he writes. “That is a consistent and perfectly sound policy. What the Pledge lacks, however, is any indication that House Republicans are prepared to do what is necessary to achieve this goal.”

Read more with A Dubious Pledge

Borrowing To Pay For Permanent Tax Cuts Could Harm Economy

A rational debate about tax policy should include whether to let the 2001 and 2003 tax cuts expire, says Concord Coalition Executive Director Robert Bixby. That would bring federal revenues up to about 20 percent of GDP by 2020 -- the same as in 2001, the last time there was a budget surplus.

In an op-ed Monday in The Tampa Tribune, Bixby points out that allowing the tax cuts to expire -- along with enacting appropriate defense cuts and restraints on all other programs -- would bring the deficit down to a sustainable level while entitlement-spending reductions could be phased in.

If Congress insists on extending the tax cuts now, Bixby said, it should do so only on a temporary basis as the economy recovers. A permanent deficit-financed extension, he argues, would actually harm the economy while increasing the debt burden on future generations.

In California, 'Fiscal Solutions Tour' Focuses Public Attention on Options for a Better Future

Reforming entitlement programs, improving health care, revamping the tax system and reducing defense spending were all up for discussion and debate last week as hundreds of people attended two Fiscal Solutions Tour programs in California.

The tour, conducted by The Concord Coalition and supported by The Peter G. Peterson Foundation, is scheduled to bring experts with different perspectives to six cities around the country this fall.

A program Thursday night at the Commonwealth Club in San Francisco included an extensive discussion of Social Security, considerable agreement on the need for additional health care reforms, and some differing views on the wisdom of raising additional tax revenue. More than 200 people attended the program, which is scheduled to be broadcast by radio stations around the country in a week-long period starting Friday, Oct. 1.

Michael Boskin, a senior fellow at the Hoover Institution, argued that tax increases would harm the economy and cited Europe’s high taxes and economic difficulties as evidence. But David Walker, president and CEO of the Peterson Foundation, replied that the fiscal gaps in the United States were so large that some tax increases would be needed along with substantial spending restraints.

Isabel Sawhill, a senior fellow at Brookings, said the nation could not afford to permanently extend the Bush tax cuts, and she called for additional energy taxes. Several panel members expressed interest in a value added tax (VAT) although Boskin worried that it might be used simply to finance new spending.

Asked about the president’s bi-partisan fiscal commission, Concord Executive Director Robert Bixby emphasized the importance of budget reforms in Congress and the critical need to address entitlement spending that rises each year even without congressional action. “Two-thirds of the budget is on auto-pilot,” he noted.

The following day Bixby, Walker and Sawhill were joined by Douglas Holtz-Eakin, president of The American Action Forum, at a lunch program attended by about 120 people at the McEnery Convention Center in San Jose. Among other topics, he detailed problems in the nation’s health care system, which he said was fragmented and offered no incentives for high-value, high-quality care. He said this year’s health care legislation did not do enough to control costs.

The next stop for the Fiscal Solutions Tour will be this Thursday, Sept. 30, in Des Moines. For additional information on that program click here.

Washington’s Fiscal Crisis Could Leave State and Local Governments Struggling

State and local governments face severe financial challenges that include slower economic growth, lagging tax revenues and rising health care costs and retirement benefits. But relying on more assistance from the federal government is not a viable option, according to Sara Imhof, Midwest regional director for The Concord Coalition, and Mark O’Connell, executive director of the Wisconsin Counties Association.

In an op-ed Sunday in the Milwaukee Journal Sentinel, Imhof and O’Connell point out that the federal government’s budget problems will require tough choices on taxes, Social Security, national defense and health care. The looming fiscal crisis, they warn, could dramatically affect state and local governments. Those governments could face increased public demands in road construction, law enforcement or health care programs, for example, if federal funding in those areas is cut.

Part of the answer, according to Imhof and O’Connell: “Communication and cooperation among the federal, state and local officials and citizens increasingly will be important as policy decisions become tougher and budgets become tighter.”

If We Don’t Take Action, Who Will?

What are the essential ingredients for Americans to meet the difficult fiscal challenges facing the country? Sara Imhof, Midwest regional director for The Concord Coalition, points toward civic engagement and a sense of stewardship.

She sees good examples in Iowa, where people have met to examine possible answers on topics like Social Security, Medicare, national defense and improvements in health care. They have also communicated their thinking to elected officials. But in an op-ed in the Des Moines Register on Sunday, she says that more such efforts are needed.

“The challenges of unsustainable budget policies, spiraling debt, insufficient savings, dangerous reliance on foreign lenders, and the growing needs of an aging population are not going away,” Imhof writes. “Getting involved is the right thing to do. If we don’t take action, who will?”