September 2, 2014

Washington Budget Report: Aug. 2, 2011

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Last-Minute Deal Falls Short of Comprehensive Reform

The Senate is scheduled to vote today on a debt-limit deal that would prevent a government default but falls far short of what the country needs to meet its long-term fiscal and demographic challenges.

“The main flaw in the agreement is that it reflects the continued refusal of our political leaders to confront fiscal reality,” Robert L. Bixby, executive director of The Concord Coalition, writes in a new blog posting. “Once again, they are leading with discretionary spending cuts while leaving the biggest problems -- entitlement and tax reform -- for another day.”

After many weeks of frustrating negotiations and bitter partisan debate, President Obama and congressional leaders said late Sunday that they had reached a deal to raise the debt limit while cutting back on projected spending over the next decade. The House approved the deal Monday night on a 269-161 vote.

The deal includes no tax increases, calls for the House and Senate to vote on a balanced budget amendment, starts with $917 billion in reduced discretionary spending over 10 years, and envisions further action based either on later recommendations from a special congressional committee or a back-up "trigger" mechanism with automatic spending cuts. The deal would also avoid a similar debt-limit battle during the 2012 election campaign.

The Congressional Budget Office said Monday that the plan would reduce projected deficits over the next 10 years by a total of at least $2.1 trillion – a far cry from the $4 trillion that the administration and congressional leaders were at one point contemplating.

Bixby said the proposed congressional committee “is the only aspect of the agreement that has the potential to be a game-changer.” Ideally, it could recommend a more comprehensive reform plan along the lines recommended by the president’s bipartisan fiscal commission and the Bipartisan Policy Center’s Debt Reduction Task Force.

Bixby also noted serious flaws in the back-up trigger mechanism that is supposed to ensure that certain levels of deficit reduction are actually achieved.

Scrutinizing the 2012 Candidates

Toxic levels of partisanship in Washington call for an engaged American public that understands the country’s huge long-term budget problems and will support political leaders who can actually get something done about them.

In advance of the 2012 elections, voters around the country should demand that incumbents in federal offices as well as others who seek those positions get specific in explaining how they intend to put the nation on a better financial course -- a job that should involve far more than the debt limit deal the House approved Monday. In a guest column in Sunday’s Des Moines Register, Concord Coalition Executive Director Robert L. Bixby and Concord’s Midwest Field Director Sara L. Imhof elaborated on what voters should look for from the candidates.

“What, specifically, would they cut? How would they put Social Security and Medicare on a sustainable path as millions of baby boomers leave the work force each year and medical costs continue to rise rapidly? What loopholes would they close? How do they define ‘rich’?”

Bixby and Imhof also said that it was critical for voters to ask politicians how they would deal with those with whom they disagree: “We have more than enough public officials in Washington who can throw blame, cater to selfish impulses and duck responsibility.This is not a one-party nation. No solution will be possible without compromise.”

Projections Show Need to Curb Health Care Costs

Federal  researchers report  that U.S. health care spending grew at 3.9 percent last year, a historic low they attributed in part to lingering effects of the recession. But they project that this spending will grow by an average of 5.8 percent per year through the decade ending in 2020, 1.1 percent faster than expected economic growth.

As a result, health care as a percentage of the gross domestic product (GDP) would rise to 19.8 percent by 2020, up from 17.6 percent in 2009. These estimates are presented in a new Health Affairs article by economists and others in the Office of the Chief Actuary of the Centers for Medicare and Medicaid Services (CMS).

Although elected officials often focus on smaller factors, the two key drivers of the projected federal deficits in the coming years are the aging of the population and rising health care costs. The new projections by the CMS staff underscore the critical importance of efforts in both government and the private sector to contain these costs.

The annual report from the Medicare trustees, released in May, also shows how medical costs put increasing pressure on the federal budget.

The Health Affairs article says of last year’s health care legislation: “The expanded Medicaid and private insurance coverage are expected to increase demand for health care significantly, particularly for prescription drugs and physician and clinical services. Robust growth in Medicare enrollment, expanded Medicaid coverage, and premium and cost-sharing subsidies for exchange plans are projected to increase the federal government share of health spending from 27 percent in 2009 to 31 percent by 2020.”

College Students Confer With President

Members of a national coalition of college student body presidents discussed the debt negotiations and possible solutions to the nation’s fiscal challenges in a conference call with President Obama and members of his staff last week.

The “Do We Have a Deal Yet?” coalition includes more than 120 student leaders representing 2 million students across the country. The group recently wrote a letter to Obama and congressional leaders urging them to support compromise proposals developed by the Senate’s “Gang of Six” and the President’s bipartisan fiscal commission.

More than 100 students participated in the call with the President as well as Director of the National Economic Council Gene Sperling and Director of the Office of Public Engagement Jon Carson.