July 22, 2014

Washington Budget Report: Feb. 12, 2013

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State of the Union: In Need of Fiscal Reform

President Obama has repeatedly expressed interest in reaching a broad, bipartisan agreement that could put the federal budget on a more responsible and sustainable path. With tonight’s State of the Union, he has the opportunity to lay solid groundwork for such an agreement this year by emphasizing the urgent need for one and offering a clear view of what he has in mind.

Last week’s Budget and Economic Outlook report from the Congressional Budget Office offered a timely reminder of the need for sweeping, long-term budget reforms. Under current law, the CBO projects, cumulative deficits over the next decade would total nearly $7 trillion.

Under some alternative assumptions, there could be another $2.5 trillion in deficits over 10 years, with debt held by the public approaching 90 percent of GDP by 2023. And in the decades after that, the aging of the population and rising health care costs are expected to put more and more pressure on the federal budget.

That’s why Obama and members of Congress in both parties must show the courage to move beyond cuts in annual “discretionary” spending – which is already scheduled to decline relative to the economy -- and deal with extensive tax and entitlement reforms as well. These changes, which will require bipartisan cooperation and compromise, can be phased in as the economy strengthens.

On Monday the Campaign to Fix the Debt held a “State of the Debt” media briefing to introduce its new Congressional Fiscal Leadership Council, a bipartisan group of former lawmakers who will urge the President and congressional leaders to move forward on “a comprehensive debt deal” in the coming months.

At the briefing, former Sen. Judd Gregg, a Fix the Debt co-chair, disputed the idea that past discretionary cuts and recent tax legislation meant deficit reduction was no longer important. Gregg also serves on The Concord Coalition’s Board of Directors.

“The fact is our debt is still going up at a disproportional rate to what we can afford to pay,” Gregg said. “And if we don’t get it under control fairly soon, and have Congress and the President lead us in this area, then we will end up with a nation which is insolvent. And that’s not fair to our children.”

Manchester Forum Underscores Risks of Current Policies

David M. Cote, chairman and CEO of Honeywell, warned at a New Hampshire forum on the federal debt Monday that the nation’s current fiscal policies would harm future generations of Americans.

“All we’re doing is setting up this big debt problem that’s going to fall on your kids and your grandkids, so they will never be able to live as well as you did,” Cote said. “That, to me, is unconscionable.”

Cote was joined at the forum by Concord Coalition Executive Director Robert L. Bixby, Nashua Mayor Donnalee Lozeau,  State Senator Lou D’Allesandro, and Nashua businessman David Pastor. The program, held at the New Hampshire Institute of Politics at St. Anselm College in Manchester, was co-sponsored by Concord and the Campaign to Fix the Debt.

Cote is a member of the national steering committee for Fix the Debt. He also served on the National Commission on Fiscal Responsibility and Reform, which produced a plan that would have reduced projected deficits by $4 trillion over 10 years – a goal he said would at least put the federal debt on a “downward-sloping path.”

Bixby emphasized the urgent need to reform the big federal entitlement programs. While these reforms can be phased in, he said, they must begin soon because of the rapidly growing number of retirees.

D’Allesandro, citing his experience as a state legislator, stressed the need for bipartisan compromise.  Mayor Lozeau sounded a similar theme, calling for “an honest discussion about what we can do to address these issues.”

Pastor said uncertainty about future federal policies can make consumers and businesses so cautious that it can slow the economy.

Concord and Fix the Debt will sponsor other programs around the country in the coming weeks. Alice Rivlin, former vice chair of the Federal Reserve and one of the nation’s leading experts on the federal budget, will headline two programs in Des Moines next Tuesday.  

Key Budget Decisions Ahead

The next three months will be critical in terms of addressing the nation’s mounting fiscal challenges, according to Dave M. Walker, founder and CEO of the Comeback America Initiative and former U.S. comptroller general.

“There are many fiscal issues that need to be resolved in the next 100 days, and the action, or lack of action, taken will largely determine whether a fiscal ‘Grand Bargain’ is going to be reached in 2013,” Walker writes in a new guest blog for The Concord Coalition.

He notes the approaching “sequester” spending cuts, the March 27 expiration of the Continuing Resolution that is now funding federal agencies, the April 15 deadline for a congressional budget resolution, and needed action on the debt ceiling after that.    

“These issues must be dealt with, and we must quit moving from one short-term cliff to the next,” Walker writes. “But how can Congress make any real progress if members are spending most of their time outside of Washington? Between February and May, both the Senate and the House will spend five weeks in recess and outside of Washington.”

Walker’s organization has joined with several others to send a message to Congress:  “Don’t take any long breaks until you reach a deal that will reduce our debt to a sustainable level over time.” His blog explains how readers can join this campaign.