October 30, 2014

Washington Budget Report: March 13, 2012

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Panels Vote to Repeal Medicare Advisory Board

An important cost-containment feature in the 2010 health care legislation has come under attack in the House, where two committees voted last week to do away with the Independent Payment Advisory Board (IPAB) without approving an alternative.

The Concord Coalition has long supported the IPAB mechanism, which was designed to rein in future growth in Medicare spending. The board will consist of 15 independent experts, appointed by the president and confirmed by the Senate. If Medicare spending growth exceeds certain targets, the IPAB will develop recommendations to reduce the per capita rate of growth. Unless Congress acts to overturn these recommendations, they will automatically be put into effect.

The House Energy and Commerce Committee voted to abolish the IPAB last Tuesday, followed later in the week by Ways and Means. Sara Imhof, a health care policy analyst and Midwest field director for The Concord Coalition, calls this “an alarming attempt to undo a key cost-saving enforcement mechanism without putting anything in its place.”

Critics claim the advisory board would usurp congressional authority and result in “rationing.” But if Congress doesn’t like IPAB’s recommendations, it can replace them with its own cost-saving measures. As for “rationing,” that term could be used to describe anything that imposes some limits on health care expenditures.

“Fiscal and health care policy experts agree that controlling the growth of health care spending will be essential to putting the federal debt on a sustainable path,” Imhof wrote in a blog post Monday. “The IPAB is certainly not a panacea. However, it is one tool among many that offers hope for progress toward a more efficient and cost-effective Medicare program.”

Read more with You Can’t Repeal IPAB Without a Credible Alternative

CBO Updates Its Budget Projections

The Congressional Budget Office (CBO) today updated the baseline projections for federal spending and revenue that it put out in January, saying that the “fundamental story” about the federal budget had not changed.

CBO said its current estimate of the budget deficit for Fiscal Year 2012 is $1.2 trillion, which is $93 billion larger than projected in January. But the new baseline projection of the cumulative deficit for the coming decade is $186 billion smaller than two months ago.

The deficit increase for 2012 is primarily the result of recent legislation to extend the Social Security payroll tax cut through the end of the year.

“Although the deficit is starting to shrink,” CBO said today, “it remains very large by historical standards. How much and how quickly it declines will depend in part on how well the economy performs over the next few years. Probably more critical, though, will be the fiscal policy choices made by lawmakers as they face the substantial changes to tax and spending policies that are slated to take effect within the next year under current law.”

The update was in conjunction with CBO’s analysis – to be released in a few days -- of President Obama’s proposed 2013 budget. The budget office has not revised its economic outlook since January, but the new baseline projections reflect recently enacted legislation and updated technical assumptions.

Federal Debt Approaches GDP

Americans face an unpleasant fiscal landmark this election year: Sometime between now and when they vote in November, the national debt will exceed the U.S. economy’s entire annual production.

That hasn’t happened since World War II. Once that conflict was over, however, the debt stabilized and then fell steadily as a percentage of the economy.

“Unfortunately, nothing like that is on the horizon today,” warns Paul Hansen, Rocky Mountain States regional director for The Concord Coalition. “On the contrary, government projections show the federal debt – which recently topped $15.5 trillion -- continuing to increase rapidly in the years ahead as we continue to borrow and as today’s unusually low interest rates eventually rise toward their historic average.”

In a blog post today, Hansen notes that Concord's deficit-reduction exercises and other public engagement efforts across the country show that people of all ages and different ideologies are willing to make difficult budget choices  as long as there is shared sacrifice, with all options on the table.

“Progress on fiscal reform will be difficult in an election year,” he says. “But further delay would be irresponsible and could jeopardize our children’s future.”

Read more with The Current State of the Debt

GAO Details Problems with U.S. Financial Management

Serious financial management problems in some departments and agencies continue to hinder efforts by auditors to assess the government’s books. That in turn hurts the government’s ability to measure the cost and performance of certain programs and to make necessary improvements.

The Government Accountability Office (GAO) recently released a study detailing some of these problems and underscoring the need to address the country’s long-term fiscal challenges. The study reported three “major impediments” that have prevented it from expressing an opinion on the government’s accrual-based consolidated financial statements.

First, GAO singled out the Department of Defense for “serious financial management problems” that prevent audits of the department’s financial statements. The GAO said it was encouraged, however, by the commitment of Pentagon leaders to eventually “achieving auditability.”

The second big problem noted in the new study: Some federal entities are unable to “”adequately account for and reconcile intragovernmental activity and balances.” A third concern for the GAO is the government’s “ineffective process for preparing the consolidated financial statements.”

These weaknesses need to be addressed as quickly as possible. Otherwise, as the GAO points out, they will continue to hamper the government’s ability to reliably report “a significant portion of its assets, liabilities, costs, and other related information.”

On the positive side, the head of the GAO, Comptroller General Gene L. Dodaro, recently told a House subcommittee that federal agencies and Congress – faced with budget pressures – are “creating an environment for fiscal improvements.”

The GAO also notes that the Financial Report of the United States Government includes long-term projections that, like GAO’s simulations, include savings from the Budget Control Act of 2011. While assuming these savings continue well into the future produces an improved fiscal picture, GAO warns, “it does not make the path sustainable.”