November 1, 2014

Washington Budget Report: Feb. 6, 2013

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New CBO Projections Underscore Need for Reforms

The Congressional Budget Office released its new Budget and Economic Outlook Tuesday, providing an array of statistics that show why elected officials must focus this year on structural reforms to put the federal budget on a more sustainable course.

“Congress and the Obama administration might be worn out by the fiscal cliff debate, but they need to get back to the negotiating table,” said Concord Coalition Executive Director Robert L. Bixby. “So far, their deals have resulted in short-term crisis management and discretionary spending caps while leaving the heavy lifting of entitlement and tax reform for another day.”

The CBO says that under current law, cumulative deficits over the next decade would total nearly $7 trillion. By 2023, debt held by the public would reach 77 percent of GDP.  Under some alternative but realistic assumptions, however, the CBO projects an additional $2.5 trillion in deficits, with debt held by the public growing to nearly 90 percent of GDP by 2023.

“The trends reflected in the CBO’s report make clear that Congress and the President must put policies in place that look well beyond the government’s traditional 10-year budget window,” Bixby said. “Our main emphasis should be long-term stabilization of the growth rate of the debt rather than the specific level at which it stands by the end of any particular 10-year budget window.”

Because of the aging population, the CBO emphasizes, medical costs and big entitlement programs will put more and more pressure on the federal budget in coming decades. Further delays in planning for this will only make the job harder and require more public sacrifice. The necessary structural reforms can be phased in to avoid jeopardizing the economic recovery.

Debt Limit Suspended as Budget Debates Continue

President Obama signed legislation this week to suspend the federal debt limit until mid-May as Democrats and Republicans continued to debate a range of budget issues. The Senate approved the debt limit legislation on a 64-34 vote last Thursday that followed House approval the previous week.

The legislation – developed by House Republicans – suspends the debt limit until May 18 and then automatically raises it to accommodate any additional borrowing up to that point. It also calls for withholding pay from members of Congress if their chamber fails to pass a budget blueprint by April 15.

The Concord Coalition has urged elected officials to reform the ineffective debt limit process. Concord said the decision to suspend the debt limit until May was a constructive shift away from default threats and towards the need for Congress to quickly approve responsible budget plans.

Concord this week also praised efforts by a bipartisan group in the House to encourage a long-term budget plan based on the principles of the 2010 National Commission on Fiscal Responsibility and Reform (Simpson-Bowles). In a vote today, 75 House members from both parties showed the courage to support a legislative amendment sponsored by Representatives Kurt Schrader (D-Ore.), Frank R. Wolf (R-Va.), Jim Cooper (D-Tenn.) and Chris Gibson (R-N.Y.)

“This is a simple idea with a powerful message,” said Robert L. Bixby, Concord’s executive director. Unless compromises can be struck across party lines, he said, “there is little hope of enacting the kind of comprehensive long-term plan we need.”

Lawmakers in both parties have promised to pass budget resolutions for the coming fiscal year. In addition, Congress must decide what to do about the Continuing Resolution that is funding the government this year but expires on March 27 -- an issue where partisan differences could lead to a government shutdown.

Lawmakers are also considering possible action on the “automatic” spending reductions that resulted from 2011 legislation on the debt limit. These cuts were supposed to take effect in January but were delayed for two months.

On Tuesday Obama suggested that if a big budget deal could not be reached immediately, Congress should at least quickly pass a smaller alternative package of spending cuts and revenue-raising tax reforms to avoid the automatic cuts.

Also this week, the President missed the statutory deadline to submit his FY 2014 budget. In a letter last month to House Budget Committee Chairman Paul Ryan, OMB Deputy Director Jeffrey Zients cited the “protracted ‘fiscal cliff’ negotiations” as one reason for the delay.

Nashville Forum Looks at Ways to Fix the Debt

Speakers at a forum last week in Nashville explained why the rising federal debt jeopardizes the country’s future and urged Tennesseans to support bipartisan efforts to deal with the problem.

“In the past we ran big deficits in response to specific situations,” said former Tennessee Gov. Phil Bredesen, a member of the National Steering Committee for the Campaign to Fix the Debt. “These events came to an end and deficits went down, such as (after) World War II.” What’s different now, he said, is that “there is no end” to large projected deficits.

The forum, co-sponsored by Fix the Debt and The Concord Coalition, was the first in a series of public programs that will be presented in six states in the coming weeks.

Last week’s program, held at Lipscomb University’s Ezell Center, also featured Tim Pagliara, chairman of CapWealth Advisors and a Tennessee co-chair for Fix the Debt, and Robert L. Bixby, executive director of the Concord Coalition. Turney Stevens, dean of Lipscomb’s College of Business, served as moderator.

They made clear the importance of political cooperation and compromise in considering the many possible solutions that bipartisan groups have suggested.

“The debt is on an unsustainable track,”  Bixby said. “That’s not a Democratic or Republican statement. It’s a fact.” He said a large and growing debt is not a legacy that Americans want to leave to future generations.

Bixby pointed out that the main cost-drivers in the budget are popular programs such as Medicare, Medicaid and Social Security. He urged that reforms concentrate on these programs as well as various tax breaks that function as government subsidies.

Pagliara expressed concern about the uncertainties facing American businesses as the result of inaction on the nation’s fiscal and economic challenges, including rising health care costs.

But Pagliara also sounded an optimistic note: “When you see the problems we have, and the solutions  we have, I think we will get around to doing the right thing.”

The next program in the series will be presented at 11 a.m. Monday at Saint Anselm College in Manchester, New Hampshire. Speakers will include David M. Cote, chairman and CEO of Honeywell; Donnalee Lozeau, mayor of Nashua; State Senator Lou D’Allesandro, and Bixby.