House Budget Plan Seeks Deficit Reduction But Relies on Questionable Spending Assumptions and Revenue Projections

WASHINGTON, March 17, 2015 /PRNewswire-USNewswire/ -- The Concord Coalition today welcomed the proposed House budget resolution for its goal of reining in future deficits but cautioned against assumptions of reduced spending that are vague and unrealistic, and against revenue projections that are at odds with recent tax-cut legislation in the House.

"Balancing the budget by a specific date provides a clear, understandable goal to guide legislation," said Robert L. Bixby, Concord's executive director. "As an economic matter, however, the more relevant concern is not whether balance is achieved in a targeted year but whether the policies enacted pursuant to this budget reduce the debt as a share of the economy and make sure that it remains on a responsible downward path." 

The House budget plan achieves much of its proposed $5.6 trillion in deficit reduction over 10 years from a number of policy assumptions that would be very difficult to achieve. It assumes $2 trillion in savings from repeal of the Affordable Care Act (ACA), $913 billion from block granting Medicaid, $1 trillion in unspecified other cuts in mandatory spending, and $759 billion in domestic discretionary cuts below the caps set by the Budget Control Act. Only $148 billion would come from Medicare, while hardly anything would be done on Social Security and there would be no new revenues. Meanwhile, defense spending would increase by almost $400 billion above current-law spending caps.

The budget resolution also raises defense spending in Fiscal 2016 by increasing funding for Overseas Contingency Operations (OCO) well above the administration's request. This raises the prospect that OCO funding might be improperly used to bolster parts of the defense budget not directly related to war efforts -- as has occurred in the past.

Given the political realities in Washington, it is highly unlikely that substantial increases in defense spending can be financed by even deeper cuts in domestic discretionary spending. This domestic spending is already projected to drop below its historic low. The fact that the proposed House resolution would postpone these deeper cuts until next year is one indication that such cuts are polarizing and likely not feasible. 

The revenue assumptions in the budget present still more questions. House Republicans have recently passed legislation to make a number of costly tax breaks permanent, without offsetting the lost revenue. Yet the revenue number assumed in the budget plan does not account for the revenue that would be lost by extending these and other tax breaks.

Similarly, repeal of the ACA would reduce revenues relative to current law, but the budget assumes that the same amount of revenues will be collected.

"To be credible, a budget resolution should take into account legislative proposals that are at or near the top of the priority list for its authors," Bixby said. "They can't have it both ways; they shouldn't be counting on revenue from taxes they say the government shouldn't be receiving."

He also expressed skepticism about the resolution's call for a bipartisan Social Security commission to study the system's problems and report back with proposals.

"One more commission might not do any harm, but studies and proposals of this nature already fill many agency and think-tank shelves in Washington," Bixby said. "The impending insolvency of Social Security's Disability Insurance trust fund and the longer-term structural challenges really require legislation, not another commission."

A copy of this press release can be found here on our website.

The Concord Coalition is a nonpartisan, grassroots organization dedicated to fiscal responsibility. Since 1992, Concord has worked to educate the public about the causes and consequences of the federal deficit and debt, and to develop realistic solutions for sustainable budgets. For more fiscal news and analysis, visit concordcoalition.org and follow us on Twitter: @ConcordC

SOURCE The Concord Coalition