December 17, 2014

Washington Budget Report: Jan. 18, 2011

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Fiscal Responsibility Remains Crucial in Health Care Debate

With health care reform back on the policy agenda this week, it is important for Congress to keep cost controls and the country’s enormous fiscal challenges at the forefront of the discussion.

The law that was passed last year had the fiscally responsible goals of controlling long-term health care costs and of seeking to pay for its new benefits, particularly expanded coverage. Those goals should not be abandoned in any attempt to repeal, replace or amend the legislation.

Simply repealing unpopular elements of the law while keeping the popular ones would likely leave fiscal policy in even worse shape. That’s because the unpopular elements like the individual mandate to buy insurance help make possible the popular features, such as requiring insurance companies to accept people with pre-existing conditions.

The most complete and up-to-date estimate for the costs and savings from the legislation will be released as part of CBO’s annual Budget and Economic Outlook toward the end of January. But the size and complexity of the legislation create substantial uncertainties about such projections.

Even if the law provides the promised amount of deficit reduction, it would hardly make a dent in total projected deficits over the coming decades. Much more work would remain to achieve a sustainable fiscal policy.

Senate Budget Chair Conrad Announces Retirement

Senate Budget Committee Chairman Kent Conrad (D-ND) today announced that he will retire from the Senate when his term expires in early 2013. Conrad said one of his top priorities for the remainder of his term would be "to get our country on a sound fiscal course."

"Kent Conrad has been a leading voice for fiscal responsibility in Washington," said Concord Coalition Executive Director Robert Bixby. "He has never sugar-coated the tough choices that need to be made, and he has insisted that real solutions require bipartisan cooperation." 

In November Concord presented Conrad with the Paul E. Tsongas Economic Patriot Award, calling him a “true deficit hawk." Conrad also recently received a Fiscy Award for his fiscal leadership.

PAYGO Loopholes Add Hundreds of Billions to Deficit

An OMB report concludes that exemptions in the PAYGO law have been used for legislation adding hundreds of billions of dollars to the deficit. PAYGO generally requires legislation affecting direct spending or revenues to be offset, though last year's law included costly exceptions for several revenue and spending priorities.

OMB's official scorecard shows that legislation subject to PAYGO and enacted since last February would save $55.2 billion over 2010-2015 and $63.7 billion over 2010-2020. However, when adjustments for loopholes such as emergency designations and exemptions are taken into account, the same laws would increase the deficit by $899.4 billion over 2010-2015 and by $820.1 billion over 2010-2020.

Both parties are guilty of weakening PAYGO with loopholes, whether it is the new House rule excluding revenues or the exemptions in the PAYGO law signed by President Obama. OMB's report is a timely reminder that these exemptions add to federal deficits that are already unsustainable. Congress should end the exemptions and return to a classic PAYGO rule that simply pays as you go.

 

Reminder: Fiscal Commission’s Plan Was a Package Deal

Proposals from President Obama’s fiscal commission and other bipartisan panels that issued reports last year are drawing renewed attention as the new Congress gets to work.

Rep. Kevin Brady (R-Texas), for example, has introduced a bill that would cut federal spending by $153 billion, in part by shrinking the federal workforce by 10 percent, freezing federal pay, cutting certain programs and reducing some military spending.

It is commendable that policymakers such as Rep. Brady are willing to put specific spending cuts on the table for discussion.  However, it is also important to remember that members of the president’s commission and other groups -- such as the Bipartisan Policy Center’s Debt Reduction Task Force -- emphasized that they had accepted some specific proposals only as part of a comprehensive, compromise plan.

If only some elements in such a plan are pursued while other parts are ignored, the bipartisan agreement could rapidly disappear.

Debits & Credits

Adult Education: John Boehner (R - OH), the new House speaker, recently noted that increasing the federal debt limit “is going to be probably the first really big adult moment” for his new Republican majority. “It’s going to be difficult, I’m certainly well aware of that. But we’ll have to find a way to help educate members and help people understand the serious problem that would exist if we didn’t do it.”

A Turkey of an Idea: Michele Bachmann (R – MN)  says refusing to raise the federal debt ceiling this will “force our elected officials to stop spending cold turkey.”  Actually, the spending has to stop first – otherwise the U.S. would default on its debt, triggering global economic chaos.