July 30, 2014

Washington Budget Report: June 5, 2012

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CBO Projections Show a Political Disconnect

The Congressional Budget Office today released long-term projections that the Concord Coalition said showed how disconnected today’s political debates are from the key issues that must be dealt with to put the federal budget on a more sustainable path over the next 25 years.

“Candidates and elected officials this year have been focusing on cuts to domestic and defense appropriations even though these programs are not the source of future budgetary pressures,” said Robert L. Bixby, Concord’s executive director. Meanwhile, he said, “the tax debate has largely been about whether to extend all or part of the expiring tax cuts and less about the kind of base-broadening, revenue-increasing reforms we need.”

The new CBO report, Bixby said, is an important reminder “that the aging U.S. population and rising health care costs will dramatically increase pressure on the federal budget from the largest entitlement programs over the next 25 years, and that the projected gap between spending and revenue under current policies is simply unsustainable.” He called on this year’s political candidates to focus more on proposed solutions to this fiscal gap.

The CBO’s 2012 Long-Term Budget Outlook makes projections well beyond the usual 10-year “budget window,” incorporating the long-term impacts of demographic trends and rising health care costs. It offers two scenarios: One assumes current laws will remain in place, and an alternative and  “much bleaker” scenario assumes that certain federal policies would be renewed and that some provisions in current law would be modified.

To deal with the long-term challenges explained in the report, Concord supports efforts in Congress to follow through on proposals developed by a bipartisan majority of the National Commission on Fiscal Responsibility and Reform (Simpson-Bowles) and other bipartisan groups.

Read more with New CBO Report Shows Disconnect in Today’s Political Debate

Forum Panel Reviews Fiscal, Economic Challenges

The country’s fiscal challenges and their impact on the economy dominated a Washington forum last week on domestic policy issues in this year’s presidential campaign.

The program, presented by National Journal and the Society for Human Resource Management, featured three panelists: Douglas Holtz-Eakin, president of the American Action Forum; Robert Shapiro, co-founder and chairman of Sonecon, and Robert L. Bixby, executive director of The Concord Coalition.

Bixby underscored the need for the country – and political candidates – to address short-term concerns about the weak economy while also laying the groundwork for credible, long-term structural reforms.

“I think the candidates have focused more on tactical issues in the short term than on addressing this long-term structural deficit,” Bixby said. The government’s structural deficits, he said, pose a larger threat to the country.

Health care costs are a key driver of the long-term budget problems. While President Obama and his Republican challenger have significant differences over health care, Bixby said, there are some similarities as well. Both, for example, hope to enhance private sector competition to help rein in costs.

Holtz-Eakin said it was “imperative to move quickly” in reducing federal deficits because high government debt was already dragging down economic growth and inhibiting job creation. The United States, he argued, is showing “the characteristics of countries that get into trouble” -- including heavy reliance on short-term borrowing and “hidden or disguised” fiscal liabilities.

Shapiro expressed particular concern that the rate of job creation relative to economic growth had declined in the last decade compared to the 1980s and 1990s – not because of policy mistakes but because of how the U.S. economy has evolved. “The question is, How do we address that?” he said.

Shapiro and Holtz-Eakin differed sharply over the President’s record and positions on fiscal and economic issues. Shapiro said Obama had presented a fairly detailed deficit-reduction plan while Holtz-Eakin complained that the President’s plans for a second term were a mystery.

Congressman Sees Consensus in Budget Exercises

A tax code with tens of thousands of pages. The huge defense budget. The complexities of Medicare and Social Security, plus a myriad of government programs for which Congress approves money on an annual basis . . . . All this – plus politics, of course -- helps explain why federal budgeting “isn’t for the faint of heart,” according to Phil Smith, The Concord Coalition’s political director.

But as he notes in a blog posting this week, many non-politicians have managed to discuss important choices about the federal budget with each other and arrive at reasonable compromises that would reduce projected federal deficits over the next decade by trillions of dollars. They’ve done so in “Principles and Priorities,” Concord’s flagship budget exercise.

In three recent programs in the Florida district of Rep. Rich Nugent, for example, nearly all of the 30 different groups of participants were able to reach agreement on budget plans that would cut deficits by an average of about $3 trillion over 10 years. Smith, who is also Concord’s Southern regional director, notes that the Republican congressman was impressed by the ability of the participants to reach consensus.

As Nugent pointed out in a statement afterward, these exercises can help clear up popular misconceptions about foreign aid and congressional earmarks. “I strongly believe,” he said, “that we need to scale back foreign aid -- particularly to these countries that don't like us -- but the truth is, foreign aid is also only about one percent of the budget and that isn't going to get us home . . . .”

Read more with Constituents’ Budget Decisions Impress Florida Congressman