October 1, 2014

Washington Budget Report: Feb. 26, 2013

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Washington’s Unaffordable Promises

“Our government shouldn’t make promises we cannot keep,” President Obama said in his State of the Union Address, “but we must keep the promises we’ve already made.”

While that was a good applause line, Concord Coalition Executive Director Robert L. Bixby says,  it glossed over a key point: “The promises we’ve already made are the ones we cannot keep.”

Washington has been making large unfunded promises for years, leaving us with an unsustainable fiscal policy. “Yet, if we decide that all promises must be kept,” Bixby writes in a new blog post, “we can’t change anything without ‘breaking a promise.’”

A bipartisan group of former members of Congress warned after their Strengthening of America forum series last fall that we cannot put our debt on a sustainable path without reductions in the projected cost of entitlement programs, cuts in discretionary spending and higher federal revenues.

“Strictly speaking,” Bixby points out, “any of those things could be characterized as breaking a promise.” He also notes that the biggest promises are in the two major social insurance programs: Social Security and Medicare.

Even with much of the Baby Boom generation still in the work force, the Social Security and Medicare Part A payroll taxes do not cover the cost of the benefits that are currently being paid. Medicare Parts B and D premiums are set to cover just 25 percent of the cost of benefits, with the rest paid out of general government revenues.

Absent reform, the resulting pressure on the federal budget will simply worsen as more people retire and health care costs rise faster than the rest of the economy.

“President Obama was right to acknowledge that the government shouldn’t make promises it cannot keep,” Bixby says. “If he wants this to be a reality, however, it is crucial to also acknowledge that reform of our existing programs is not the same thing as breaking a promise. But if we do want to think in terms of promises, why not promise an overall fiscal policy that is sustainable? “

‘Misdirected’ Sequester to Start Friday

Unless Congress and President Obama reach agreement before Friday, about $85 billion in poorly designed spending cuts for Fiscal Year 2013 will begin hitting a broad cross-section of programs across the federal government.  

The Concord Coalition supports replacing these automatic cuts with a targeted proposal that makes fiscally responsible trade-offs between specific revenue and spending priorities. Concord Co-Chair Sam Nunn last week called the sequester “misdirected and ill-timed” and urged lawmakers to replace it using the fiscal framework recently proposed by Erskine Bowles and Alan Simpson.

The automatic cuts (or sequester) are the result of the Budget Control Act’s requirement to achieve an additional $1.2 trillion in deficit reduction over 10 years. The cuts were originally scheduled to take effect in January but the “fiscal cliff” agreement delayed them two months. The cuts will be evenly divided between defense and non-defense spending.

In recent days federal agencies have begun detailing  the expected impact of the sequester, and members of both parties have continued to make partisan speeches blaming each other for the cuts. No significant progress appears to have been made in reaching a compromise, and many policymakers have suggested that the cuts are likely to go into effect.

Obama and most congressional Democrats support replacing the cuts with a combination of revenue increases and spending cuts. Most Republicans oppose any additional revenue increases, and House Speaker John Boehner has called for spending cuts sufficient to balance the budget over 10 years.

This week the Senate is scheduled to vote on Democratic and Republican proposals to address the cuts. The Democratic proposal would replace the cuts through next January with $110 billion in revenue increases and spending cuts -- including increased taxes on wealthy individuals and corporations, as well as cuts to defense and agriculture spending.

Senate Republicans have not publicly released their proposal yet, though it is expected to provide federal agencies with increased flexibility in implementing the cuts.

Over the next several weeks, policymakers will also need to decide how to address the continuing resolution that is currently funding federal agencies at levels included in the Budget Control Act. If no agreement is reached before the resolution expires on March 27, a government shutdown will occur.

Concord Coalition/Fix the Debt Forums: Des Moines

Alice Rivlin, a member of two prominent fiscal commissions, called for renewed bipartisan cooperation on comprehensive budget reform in the most recent in a series of forums around the country co-sponsored by The Concord Coalition and the Campaign to Fix the Debt.

"We need to stop the blame game and get on to constructive proposals . . . ," Rivlin said in Des Moines, where two programs were presented last Tuesday. “We've got to get the President and congressional leaders back to the bargaining table -- to get a grand bargain or a sort-of-grand bargain, where debt is stabilized."

Rivlin, a former vice chair of the Federal Reserve, is a member of the National Steering Committee for Fix the Debt. In introducing her at a breakfast program, David Oman, a co-chair of Fix the Debt’s Iowa Steering Committee, also stressed the need for broad fiscal reforms in the near future.

David Vaudt, Iowa state treasurer and another member of the state steering committee, and Sara Imhof, Concord’s Midwest regional director, joined Rivlin in speaking at a Greater Des Moines Partnership Luncheon.

Vaudt called for both smart spending restraints and growing federal revenue. Imhof discussed the two biggest drivers of projected deficits: Health care costs and the aging of the U.S. population.

Peterson Foundation’s Video Competition

Americans who are concerned about the nation’s fiscal difficulties have a good opportunity to voice their opinions through a grassroots competition put together by the Peter G. Peterson Foundation, according to a new blog post by The Concord Coalition’s Stefan Byrd-Krueger.
 
The foundation is soliciting videos from people across the country that tell why fixing the national debt is critical to our future. The two best videos will each receive a $500 prize.

“These videos will bring together a range of voices to show that wherever you go, Americans understand the importance of fiscal responsibility and want their leaders to start making the right choices,” writes Byrd-Krueger, Concord’s outreach and new media director.