July 28, 2014

Washington Budget Report: Jan 31, 2012

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CBO Report Should Be Required Reading for Candidates

The Congressional Budget Office today released new projections that should spur candidates for federal office to provide voters with realistic proposals to meet the country’s fiscal challenges.

Robert L. Bixby, The Concord Coalition’s executive director, said the CBO’s new Budget and Economic Outlook should be “required reading” on the campaign trail. “Among the risks we face this year,” he added, “are unrealistic campaign promises that fail to take into account the harsh realities reflected in this report. And sooner rather than later, the heated rhetoric of the campaign will run into the cold reality of these numbers.”

Even with some fairly optimistic assumptions, the CBO report projects steady growth in the federal debt over the next decade. Under current law the deficits over the next 10 years would total $3.1 trillion.

Concord’s Plausible Baseline, which applies more realistic assumptions, shows annual deficits remaining in the trillion-dollar range throughout the next decade, totaling almost $12 trillion.

These new projections underscore the need for Washington to move forward on fiscal reform this year, despite the difficulties of doing so in an election year.

“The CBO’s report, along with The Concord Coalition’s own projections, show that we cannot get the federal budget under control by just economizing here and there, or by simply focusing on the politicians’ favorite target: waste, fraud and abuse,” Bixby said.

CBO Director Douglas Elmendorf is scheduled to testify this week before the House and Senate Budget Committees.

Read more with Concord Coalition Says New CBO Report Should Be Required Reading On the Campaign Trail

State of the Union: Changes Needed

President Obama proposed significant changes in tax policy in his State of the Union address last week, emphasizing the need for fairness as the economy continues to recover from a severe recession. Gov. Mitch Daniels of Indiana delivered the Republican response, faulting Obama for what he and other Republicans say is a divisive approach to economic policy.

Joshua Gordon, policy director for The Concord Coalition, and Diane Lim Rogers, Concord’s chief economist, give the President’s speech mixed reviews in two new videos.

Rogers notes that the tax system could be made more fair by eliminating many of the special tax breaks that favor some individuals and businesses over others. These “tax expenditures,” which often receive only limited public scrutiny, tend to favor higher income households.

Broadening the tax base by eliminating such provisions, she said, is “one of the most promising areas for reducing the role of government . . . in a progressive manner.”

Gordon pointed out, however, that Obama also proposed a host of new or expanded tax deductions that would make the tax code more complex rather than simplifying it. Gordon said Daniels offered a “valid criticism” of Obama on this point.

Gordon is encouraged, however, that the President focused on the trade-offs between tax cuts and effective government spending and investment – and that Daniels seemed to acknowledge these trade-offs as well.

Many Options for Fiscal Reform

With the new session of Congress getting under way, three members of a bipartisan deficit-reduction commission told Kansas City business leaders and others last week that a wide range of fiscal reforms deserves to be high on the legislative agenda.

G. William Hoagland, Joseph J. Minarik and Robert L. Bixby – all members of the Bipartisan Policy Center’s Debt Reduction Task Force -- spoke Wednesday at a program hosted by the Greater Kansas City Chamber of Commerce.

Bixby, executive director of The Concord Coalition, emphasized the need for sweeping reforms such as those proposed by the task force (also known as Rivlin-Domenici) and the President’s bipartisan National Commission on Fiscal Responsibility and Reform (Bowles-Simpson).

He noted that more and more of the federal budget is “going on auto-pilot” – spent on entitlement programs that do not require annual congressional action. In addition, Bixby said, interest costs are “going to go through the roof” over the next decade if the government continues its heavy borrowing and interest rates rise much above today’s unusually low rates.

Hoagland, a longtime Senate staff member and current vice president of public policy for CIGNA Corporation, focused on the need for fundamental changes in U.S. health care. Factors that make it difficult to rein in high costs, he said, include expensive technology, lifestyle choices, a fee-for-service system that encourages excessive treatment, and the fact that many consumers know little about their medical costs.

Hoagland discussed one of the most promising proposals from the Rivlin-Domenici panel: a “premium support” plan that would allow older Americans to choose between traditional Medicare and an array of private plans. Competition would encourage greater efficiency, and the growth of government spending would be moderated.   

Minarik said it would be difficult to sufficiently rein in future deficits through spending cuts alone, pointing out that some members of Congress are already talking about undoing some of the “automatic” cuts that were included in last year’s debt limit legislation.

On tax policy, Minarik built the case for reducing or eliminating many of the special breaks that some taxpayers receive. This would enable to the government to lower tax rates while still raising additional revenue to help reduce federal borrowing.

Looking for Courage and Compromise

As Florida voters considered their options in the Republican presidential primary, a forum Thursday at Jacksonville University featured experts on the federal budget discussing some of the fiscal issues that should be on center stage in this year’s elections.

Mel Martinez, a former U.S. senator from Florida, emphasized the importance of political courage and a willingness of political leaders to work together to deal with the difficult fiscal challenges facing the country. So far, he said, they had fallen short.

“We need to achieve compromise to get things done,” said Martinez, who is currently chairman of Florida, Mexico, Central American and the Caribbean for JPMorgan Chase & Co. as well as chairman of the JPMorgan Chase Foundation.

Martinez also discussed some of the challenges facing Florida, including the excessive levels of individual debt.

David M. Walker, CEO of the Comeback America Initiative and former Comptroller General of the United States, discussed the need to reform the big entitlement programs that are projected to claim more and more of the federal budget in the years ahead.

Walker, an alumnus of Jacksonville University, also called for cuts in other domestic and defense programs, enactment of health care reforms and improvements in the federal budget process. Like Martinez, Walker said many political leaders were failing the American public.

“There is not a party of fiscal responsibility today,” Walker said.

Robert L. Bixby, executive director of The Concord Coalition, noted that Congress had spent far more in the previous decade than had been expected, while at the same time cutting taxes. The combination turned what was once a large projected surplus into trillion-dollar annual deficits.

Projections for the coming decade, he said, were “quite depressing” because of the large gaps between government revenue and anticipated federal spending. Continued heavy borrowing would push up interest costs as well and perhaps leave the country increasingly reliant on foreign lenders.

Among the possible solutions, Bixby said, were entitlement reforms to lower future costs, spending cuts on annually appropriated programs, and changes in the  tax system to raise revenue in a more economically efficient manner.

All three speakers praised the work of the President’s bipartisan deficit-reduction commission (Bowles-Simpson) and urged lawmakers to use it as a framework for legislation.