September 1, 2014

Washington Budget Report: April 8, 2014

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House Democrats Offer Alternative Budget, Rising Deficits

House Democrats released a proposed 10-year budget Monday that would protect non-defense spending from steep cuts but cause federal deficits to rise for several years in the coming decade.

Relative to the Congressional Budget Office baseline, it would reduce deficits by $1.8 trillion, mostly from higher revenues. The debt-to-GDP ratio would remain above 70 percent throughout the period.

The proposal follows the unveiling last week of the House Republicans’ budget plan.

Both sides in the House deserve credit for proposing 10-year budgets when it would have been easier in an election year to go no further than the two-year appropriations cap agreement reached in December.

Unfortunately, the Senate Budget Committee has no plans to draft a budget resolution this year. As a result, there will be no concurrent congressional budget resolution and no prospect of an agreed-upon fiscal plan that looks out beyond 2015.

Under their plan, the House Democrats say, the deficit would be growing more slowly than the economy at the end of the 10-year “window” for budget estimates. However, deficits would be significantly higher in several earlier years, hitting 3.1 percent of GDP in 2021 and 2022 before ostensibly dropping to 2.3 percent by 2024.

The Democrats’ budget suggests extending long-term unemployment compensation, which expired in December, for a full year. The Senate, however, voted 59-38 on Monday to extend that program for only five months.

While extended unemployment assistance is reasonable, the Senate bill relies on poor funding provisions, including a “pension smoothing” gimmick that would actually cost the government money in the long run.

The Wrong Direction With Renewing Tax Extenders

Tax writers in the House and Senate are considering legislation to retroactively extend a number of tax provisions that expired at the end of last year. These provisions -- collectively known as “tax extenders” -- are temporary measures that, like other tax expenditures, essentially subsidize certain special interests.

Alternative energy producers, Puerto Rican rum producers, NASCAR race tracks and the owners of racehorses are just some of those who benefit from these provisions.

It is unfortunate that tax writers in both the House and the Senate are reviving the extenders just three months after letting them expire, which they did to generate momentum for comprehensive tax reform.

Now lawmakers are essentially admitting that they will not pursue such reform this year. Even worse is the movement towards extending these special provisions without paying for them. Instead, they would simply add to the deficit.

Last week the Senate Finance Committee, under the direction of its new chairman, Ron Wyden, marked up legislation extending nearly all of the expired provisions at a cost of $85 billion without offsets.

The mark-up itself was a display of fiscal irresponsibility and special-interest influence as provisions were added to the extenders legislation on an ad-hoc basis, reflecting senators’ preferences and lobbying from interest groups. There was little analysis of whether the provisions added back in would actually accomplish their stated purposes -- a test that most provisions have never had to meet.

In Budget Exercises, Citizens Embrace Fiscal Reform

About a hundred people in Colorado’s 1st Congressional District recently tried their hands Saturday at federal deficit reduction through The Concord Coalition’s “Principles and Priorities” exercise. U.S. Rep. Diana DeGette hosted the event at the Columbine High School in Littleton.

“After almost two hours of hard work, good-natured debate, arm-twisting, calls for the question, votes, re-votes, several outbreaks of laughter and, most of all, compromise – the groups reported on their budget plans,” writes Concord’s Paul Hansen in a new blog post. “While every group had a different solution, each of them found a way to significantly reduce projected budget deficits over the next 10 years.”

Late last month about 120 residents of the San Jose area participated in a similar Principles and Priorities exercise. It was hosted by U.S. Rep. Anna G. Eshoo and featured Joshua Gordon, Concord’s policy director, and Jason Peuquet, a research fellow with the Committee for a Responsible Federal Budget.