July 26, 2014

Washington Budget Report: Oct. 25, 2011

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GAO Projections Underscore Need for Fiscal Reform

The Government Accountability Office (GAO) released projections this week that serve as a reminder of the importance of the deficit reduction committee’s work and the need for it to exceed the $1.2 trillion target necessary to avoid automatic spending cuts.

GAO concludes that “simulations continue to underscore the need to address the longer-term outlook as soon as possible while still recognizing the current weakness in the economy.” According to GAO, if the super committee is successful in reaching the $1.2 trillion deficit-reduction target for the next 10 years “even this level of deficit reduction is not sufficient to ensure sustainability.”

The fiscal outlook has improved somewhat due to savings in the Budget Control Act. However, even when these savings are accounted for, GAO’s alternative scenario (including more realistic spending and revenue assumptions) projects that by 2027 debt held by the public would exceed the post-World War Two high of 109 percent of GDP. Absent reforms, spending on Social Security and major health care entitlement programs would increase from 9.8 percent of GDP in 2011 to 14.5 percent of GDP by 2030.

The joint committee continued its work last week, meeting with the Senate’s “Gang of Six,” a bipartisan group that has recommended $4 trillion in deficit reduction over the next 10 years and served as a model for compromise on fiscal reform.

Tomorrow the joint committee is scheduled to hold a public hearing on discretionary spending in the federal budget and will hear again from Doug Elmendorf, director of the Congressional Budget Office.

‘Two-by-Two’ Programs Would Engage Public

If the super committee on deficit reduction continues to lock itself away in a congressional cloister, the public will have trouble understanding and accepting the difficult choices that the panel members must make to reach or exceed their assigned goal. And other members of Congress who are urging their colleagues on the committee to “go big” in their recommendations should do more than sit on the sidelines, says Robert L. Bixby, executive director of The Concord Coalition.

Bixby is calling on Democratic and Republican members of Congress to pair up for forums in their districts that would encourage civil discourse on the country’s budget challenges. In the programs the lawmakers could present agreed-upon facts and engage each others’ constituents about policy options.

Any number of formats could work. Bixby says a good example was set earlier this year by Senators Mark Warner (D-Va.) and Saxby Chambliss (R-Ga.), who held joint forums in Richmond and Atlanta.

In the last six years, Concord has also brought together analysts and political leaders of diverse perspectives for its “Fiscal Wake-Up” and “Fiscal Solutions” tour programs.

“Audiences across the country have been very receptive,” Bixby writes. “They often express the wish that their political leaders would talk about the issues with the same appreciation of each other’s point of view. More importantly, audience members begin to accept the need for compromise.”

AARP Ignores Key U.S. Challenges

As elected officials weighed reforms that could put the federal budget on a sustainable track, the AARP last week reiterated its opposition to even including Social Security and Medicare in the discussion. The organization’s recent explanations for what appears to be a new hard-line stance  “are not encouraging,” says Concord Coalition Executive Director Robert L. Bixby.

In a new blog post, he faults recent AARP ads and statements for failing to acknowledge the magnitude of our fiscal difficulties and the role that Medicare and Social play in them. He points out that offsetting the growing costs of Social Security and Medicare  over the next 25 years would require the equivalent of cuts in all non-defense discretionary spending of roughly 75 percent from current levels. Another unpalatable alternative: Raising individual income taxes by more than 50 percent.

The AARP, Bixby writes, overstates the budget savings that are possible by targeting government waste. Federal budget projections already assume a large amount of waste reduction, notably in health care.

Social Security trust fund projections, which AARP considers reassuring, are another problem area. “An ample Social Security trust fund surplus says nothing about where the Treasury will get the money to redeem the bonds,” Bixby says. Social Security is already running a cash deficit, which requires money from general revenues. Absent policy changes, this is projected to continue indefinitely.

“The issue is not whether Social Security and Medicare are good programs,” Bixby writes. “They are. The issue is whether they are sustainable over the long term in their present form. They aren’t.”

Updated Games Educate Players on Budget Choices

The Concord Coalition has updated its popular collection of educational exercises that highlight the importance of fiscal responsibility and the choices that must be made to put the country on a more responsible course.

These exercises put some of the most current policy debates in Washington in understandable packages that allow citizens at town hall meetings (often with members of Congress) or students in classrooms to engage with each other on critical issues, working within diverse ideological, demographic and political groups.

Concord’s experienced field staff members around the country lead these exercises and help teachers and others learn to do so as well.

The most popular exercise, "Principles and Priorities," is designed to help high school, undergraduate and graduate students learn about the competing pressures facing members of Congress as they make budget decisions for the next 10 years. "Debt Busters" is a condensed version of the game for groups with only brief time allotments.

The "Penny Game" can be used for elementary and high school students who want to learn the basics about how the government collects and spends tax money.

Material for these exercises can be downloaded from Concord’s website. Individuals who sign up for the “educator list” will be notified whenever the exercises are updated or new activities become available.