Concord Coalition Says President's Budget Would Stabilize Debt But Not Put It On A Sustainable Path

Feb 09, 2016, 15:46 ET from The Concord Coalition

WASHINGTON, Feb. 9, 2016 /PRNewswire-USNewswire/ -- The Concord Coalition said today that while President Obama's proposed budget would lower projected deficits and keep the debt stable as a share of the economy over the next 10 years, it would do so with a mix of policy options that have no chance of being enacted by a Republican Congress and would not, in any event, put the debt on a sustainable downward path.

"The budget leaves in place a dynamic that will be increasingly difficult, if not impossible, to maintain," said Robert L. Bixby, Concord's executive director. "As Social Security, Medicare and Medicaid grow on autopilot, funding for other programs will be squeezed and revenues will need to rise. That's what happens in this budget. Even with the new investment initiatives, discretionary spending is essentially held flat over 10 years while mandatory programs account for almost all of the non-interest spending growth. Revenue increases of nearly $3 trillion are needed to keep deficits from steadily rising."

Under the proposed budget the administration officially unveiled today, spending would rise from 21.5 percent of GDP in 2017 to 22.8 percent in 2026, while revenues would rise from 18.9 percent of GDP next year to 20 percent in 2026. At the end of the projection period, the President's budget estimates spending and revenue would be well above their historical averages. Debt held by the public would decline relative to the size of the economy, going from 76.5 percent of GDP this year and in 2017 to 75.3 percent in 2026.

The president's plan calls for additional funding for an array of domestic programs that include Medicaid expansion, clean energy initiatives, transportation infrastructure, cancer research, conservation work, jobs training and improved access to higher education. In addition, the administration wants funding to strengthen the U.S. commitment to NATO.

"While the administration deserves credit for suggesting ways to fund its additional spending plans, that alone is insufficient," Bixby said. "As the Congressional Budget Office (CBO) recently warned, we are already on track to add trillions to the debt over the coming decade as the result of an aging population, rising health costs and rapidly increasing interest payments. And if funding mechanisms are used to finance new spending, they will not be available to help meet the promises and obligations the government already has in place."

A notable shortcoming in the budget is that it does not propose meaningful repairs to Social Security, despite the repeated warnings of the Social Security trustees that the longer reforms are delayed, the more difficult they are likely to be for beneficiaries and taxpayers.

As in prior budgets, the administration has included health care savings proposals that are focused on further delivery-system and other Medicare reforms. The administration claims these proposals would save $378 billion. However, that number would be higher by around $200 billion were it not for new health care spending proposals, primarily increasing Medicaid spending.

One important proposal is an effort to reform the so-called "Cadillac Tax" on high-cost health insurance. The tax, delayed by congressional action late last year, represents an important piece of the Affordable Care Act because of its potential to both collect revenue and lower health care costs. The budget proposal offers two reforms to the tax to address concerns that it will grow to cover too many people and that it doesn't take into account regional differences in the cost of health insurance.

"The administration's attempt to seriously grapple with valid concerns over the design of the Cadillac Tax deserves commendation and consideration," said Concord Policy Director Joshua Gordon. "Those who oppose the tax should show similar seriousness by offering reform proposals that address the needs for revenue and lower cost growth. Knee-jerk or herd-like opposition to the tax in both parties without offers of a responsible replacement indicates a fundamental callousness about citizens' health care insurance and the nation's fiscal challenges." 

For 2017 discretionary spending levels, the budget follows last October's bipartisan agreement that did away with most of the scheduled sequester cuts. Sticking to the agreed-upon budget levels improves the chances for the appropriations process to proceed without the threat of a government shutdown this fall. The congressional budget should stick to the agreement as well.

For discretionary spending in future years, the budget proposes to eliminate sequestration entirely and would pay for the new spending with tax increases and mandatory spending cuts. That specific trade-off may have some appeal, yet in the larger budget picture it is another instance of using offsets for new spending instead of lowering large, long-term projected deficits.

The President also proposes a new $10 per barrel fee on oil to help reduce carbon pollution and invest in mass transit and the development of new vehicles and aircraft. By using a funding mechanism related to transportation, the proposal supports investment in "clean" infrastructure and eliminates the solvency gap in the highway trust fund -- maintaining an important linkage. Unfortunately, the President also proposes using a one-time funding source that is unrelated to transportation -- revenue from repatriation of corporate profits -- to help pay for new infrastructure investments.

In an inauspicious development, congressional Republicans announced even before the President's plan was released that, in a break with tradition, they would not invite the White House budget director to testify before the House and Senate budget committees.

The Concord Coalition urges the budget committees to reverse this decision and hear from the President's budget director as a matter of regular order and bipartisan cooperation.

"It's sad to think that we have reached a point where congressional committees would refuse to even listen to proposals with which they disagree," Bixby said. "Resolving differences to solve problems must begin with an open dialogue."


SOURCE The Concord Coalition