The Bottom Line

February 9, 2016

Moments ago, President Obama released the final budget of his presidency. In the coming hours, days, and weeks, CRFB will be publishing analysis of the Fiscal Year (FY) 2017 budget. Below, we start with five quick takeaways. Based on our first look, the President's budget includes:

1. A Stable Debt, But at Record High Levels

Under the President's budget, debt held by the public will grow from almost $13.7 trillion today to $21.3 trillion by the end of 2026. Yet as a share of the economy – the measure generally preferred by economists – debt under the President's budget is projected to remain relatively stable at about 75 percent of Gross Domestic Product (GDP). Stabilizing the debt is an important first step to putting it on a sustainable path and is certainly an improvement over current law, under which (according to the Office of Management and Budget's adjusted baseline) debt will rise to just under 88 percent of GDP. Yet even under the President's budget, debt would remain the highest it has been in American history other than around World War II at nearly twice the historic average over the past 50 years.

February 9, 2016
Candidates need credible solutions to fix the debt

Robert L. Bixby, executive director of the Concord Coalition, and Maya MacGuineas, president of the Committee for a Responsible Federal Budget and head of the Campaign to Fix the Debt, wrote a commentary that appeared in Fosters, a southern New Hampshire publication, on the day of the New Hampshire primary. It is reposted here.

February 8, 2016

With the Congressional Budget Office releasing its final baseline last week, we know the dire fiscal future facing the country. Thanks to policymakers' disregard for fiscal discipline, the baseline is much worse than it had been in August.

February 8, 2016

The President has released a preview of the spending priorities in his FY17 budget, most of which are new although some were proposed in previous years. We collected a list of all the items in the preview, as well as other materials that the President released last week. Stay tuned to our blog for updates on the President’s Budget once it’s released tomorrow at 11 a.m.  

February 4, 2016

Democratic presidential candidate and former Secretary of State Hillary Clinton has proposed several new taxes that would raise taxes on the wealthy by between $400 billion and $500 billion to pay for new investments helping the middle-class.

February 3, 2016

Update: Since this analysis, the Sanders campaign has added additional offsets to their website that will reduce the plan’s gap between new spending and new revenues, most significantly the taxation of capital gains at death. In the coming days, we will be updating our analysis to reflect the new additions.


February 2, 2016

CBO's summary of its budget outlook included a short summary of the long-term debt outlook, which showed debt rising continuously and eventually exceeding the size of the economy. With the full budget report being released earlier this week, CBO has put out a little more detail on what the budget will look like over the next 30 years. Not surprisingly, it shows debt rising significantly in the coming decades with Social Security and particularly health care spending being the main drivers. The fuller detail in the report also allows us to estimate what happens if policymakers don't adhere to fiscal responsibility. The answer: debt goes even higher, reaching 185 percent of GDP in 2050 instead of 150 percent.

CBO's report shows debt reaching 116 percent of GDP by 2036 and 155 percent by 2046, including the negative effects of debt and higher marginal tax rates on the economy. Excluding the economic effects, we estimate that debt would reach 150 percent of GDP by 2050. However, CBO's baseline includes some policy assumptions that may not actually hold up, such as policymakers keeping the sequester in place and allowing temporary tax provisions that have routinely been extended to expire.

Bridge from CBO Baseline to Alternative Budget Outlook
  2026 Debt Effect (Dollars)
2026 Debt Effect (Percent of GDP)
CBO Baseline Debt $23.8 trillion 86.1%
Repeal Sequester $897 billion 3.2%
Repeal Health Care Taxes $256 billion 0.9%
Extend Bonus Depreciation at 30% $149 billion 0.5%
Extend Other Temporary Tax Provisions $178 billion 0.6%
Interest $233 billion 0.8%
Total Changes $1.7 trillion 6.2%
Alternative Budget Outlook Debt $25.5 trillion 92.3%

Source: CBO, CRFB calculations

February 2, 2016
Estimates Vary Between Experts and the Campaign

Democratic presidential candidate Sen. Bernie Sanders (I-VT) recently released arguably his most ambitious policy proposal yet, to move to a single-payer health care system in the U.S., but debate quickly arose over just how much such a far-reaching proposal would actually cost.

The Sanders campaign relies on an estimate from UMass-Amherst economist Gerald Friedman suggesting the plan would cost $13.8 trillion over ten years. But Emory University health economist Kenneth Thorpe contends that it could actually cost closer to $24.7 trillion, particularly without simultaneously enacting very large provider payment cuts – which are not mentioned anywhere in Sen. Sanders's plan.

The Plan

Sen. Sanders's single-payer proposal would cover every American under a single government-administered health insurance plan that would provide a comprehensive set of benefits, including things like mental health services and long-term care, with no cost-sharing. He also proposed several tax increases that his campaign claims would fully offset the cost of the plan.

Differing Cost Estimates

However, with many of the details left unspecified, including the exact services that would be covered and provider payment rates, different estimates have been produced that project widely different costs.

Friedman's estimate used by the campaign assumes that moving to single-payer would reduce national health spending by $10 trillion – or a full fifth – due to reduced administrative costs, reduced prices for pharmaceuticals and medical devices, and controls on administrative costs and drug prices (the estimate also assumes $3.7 trillion of added costs due to higher health utilization). It is unclear exactly how such dramatic savings would be achieved, and it would likely require tough choices that go far beyond simply adopting a single-payer plan, including significantly cutting provider payment rates closer to the much lower levels seen in some other nations with single-payer systems.

January 29, 2016

Senators James Lankford (R-OK) and Joe Manchin (D-WV) sent a letter Thursday to Senate Finance Committee Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR) pushing for sustained momentum on addressing improvements to the Social Security Disability Insurance (SSDI) program.

Despite the postponement of the SSDI trust fund’s exhaustion until 2022 by the payroll tax reallocation contained in the Bipartisan Budget Act (BBA) of 2015, more is needed to be done in order to achieve long-term program sustainability. Lankford and Manchin commended the BBA’s small SSDI reforms while urging the Finance Committee to continue working further on options that will improve the program’s solvency. Quoting the 2015 Social Security Trustees’ report, they note:

The 2015 Social Security Trustees report recommended “Any necessary resource reallocation that does occur should not be regarded as a substitute for action to sustain the finances of DI and Social Security as a whole, nor enacted in a manner that has the effect of further postponing those required corrections.” Although the Act temporarily extended the solvency of the SSDI program and included some small improvements to the program, it did little to improve the program’s long-term finances or to improve the structure of the SSDI program for beneficiaries and taxpayers. We hope you agree that more substantial reforms are needed.

January 29, 2016
In Charts!

We've published a new chartbook to illustrate the most important facts and figures from this week's report by the Congressional Budget Office (CBO), which shows debt and deficits are now projected to rise much higher than previously projected.

January 22, 2016

The deficit will grow from less than $550 billion in 2016 to $1.4 trillion in 2026, according to this week's report by the Congressional Budget Office (CBO), driven by a $2.5 trillion rise in spending that is only partially offset by a $1.7 trillion revenue increase. And according to CBO, nearly three-quarters of that spending increase comes from just three items – Social Security, Medicare, and interest on the debt.

CBO projects that Social Security spending will increase by about $700 billion over the next 10 years, while Medicare spending will increase by about $500 billion over the same period. These two programs account for 50 percent of the spending increase. Meanwhile, interest spending will rise nearly $600 billion over the decade – accounting for another quarter of the spending increase.

January 22, 2016
What CBO’s Debt Projections Suggest About Congress and the Budget Process

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, wrote a commentary that appeared in the Wall Street Journal Washington Wire. It is reposted here.

It should be no surprise that the Congressional Budget Office projections published this week are as bad as they have become. More than $100 billion was added to the deficit projection for this year alone, much of it from the spending-and-tax-cuts bonanza Congress and the president went on last year. Going forward, more than $10 trillion is projected to be added to the debt by 2026.

This makes putting together a meaningful budget resolution all the more difficult. Last year Republicans passed a budget resolution that got to balance by 2024. But it was so tough to stick to that policy makers ignored many of the major components of their own budget. They failed to follow through on any major entitlement savings and ultimately passed almost $700 billion worth of taxcuts that weren’t in their budget. The same lawmakers who agreed to a budget that had $5.8 trillion in savings over 10 years added $750 billion to the debt instead.

January 22, 2016

The Congressional Budget Office's (CBO) summary of their upcoming budget projections showed a much worse ten-year outlook for deficits and debt, so it should come as no surprise that the long-term outlook looks worse too. CBO provides little detail at the moment about the long-term picture but does say that debt held by the public would grow to 155 percent of Gross Domestic Product (GDP) in three decades. That would be much higher than the historical record of 106 percent in 1946 and well above the 110 percent that CBO projected for the mid-2040s last year.

While CBO does not provide a detailed long-term outlook, we have constructed a rough long-term budget projection based on their ten-year numbers and the long-term debt number they do give. As expected, long-term debt, which was already set to rise rapidly, is on a much sharper upward trajectory now. We roughly project it will exceed the size of the economy in the early 2030s (compared to the late 2030s in last year's projection) and will double the size of the economy by around 2060, something that would not have occurred in last year's projection until around the turn of the next century.

Driving this increase in debt are the same forces behind the ten-year numbers. Social Security and health care spending will rise, especially over the next few decades, due to population aging and health care cost growth. Revenue will also rise but from a lower starting point and at a slower rate. And as debt rises, interest spending will do so as well.

January 21, 2016
Modernizing Social Security and Medicare Starts with Leadership

Maya MacGuineas, president of the Committee for a Responsible Federal Budget and head of the Campaign to Fix the Debt, was interviewed by the George W. Bush Institute and appeared in The Catalyst. It is reposted here.

Social Security, Medicare, and other entitlement programs face an uncertain future as the funds that run the programs dwindle. Strong leadership will be needed to save these programs.

We asked Maya MacGuineas, president of the Committee for a Responsible Federal Budget and head of Campaign to Fix the Debt, these questions about one of America’s most pressing domestic challenges: reforming entitlement programs.

MacGuineas has spent a large part of her professional career working on budget issues, advising members of both parties on tax and spending policies. As she makes it clear, modernizing these programs starts with strong leadership.

January 21, 2016
Balancing the Budget is Now an Even Harder Goal

Tuesday’s release of the topline numbers for this year's Congressional Budget Office (CBO) baseline is a gut punch to congressional budget writers. The already-difficult task of balancing the budget is now far harder, requiring nearly $1.4 trillion to plug the deficit in Fiscal Year (FY) 2026 alone. By our math, that would mean about $8 trillion of ten-year deficit reduction to balance the budget, and it would take $3.5 trillion just to stabilize the debt at its current record-high levels.

As we show in our paper on the CBO baseline, the debt is on an even more unsustainable path than previously projected, with deficits expected to rise every year going forward, reaching over $1 trillion by 2022. When comparing the 2016 to 2025 budget window in the January report to last August's numbers, the deficit is now expected to be $1.5 trillion worse than projected. Lower interest rate projections will also, somewhat counterintuitively, make budget goals more difficult to achieve since direct spending cuts and increases in revenue will now receive less credit for interest savings.

As a result, last year's budget resolution, which reached balance by 2024, would fall short this year. In fact, enacting the same budget resolution as last year would now lead to a $300 billion deficit in 2024 and a $400 billion deficit in 2026. Getting to balance will now require more than $2.2 trillion more in savings than last year's congressional budget resolution produced – bringing the total to about $8 trillion.* To put this in perspective, Congress would need to cut primary spending by 15 percent, raise revenue by 17 percent, or some combination of the two.

January 20, 2016

The era of declining deficits is over. That's the conclusion of our analysis of the Congressional Budget Office's (CBO) January 2016 Budget and Economic Outlook summary. The report shows that deficits will once again start increasing by $105 billion from Fiscal Year (FY) 2015 to 2016. They will balloon to $1.4 trillion by FY 2026. Trillion-dollar deficits will reappear as soon as FY 2022 – 3 years earlier than CBO projected in August.

Read the full analysis.

The paper discusses how this year's forecast is much worse than last year's, largely due to lawmakers' fiscally irresponsible behavior – including passage of the unpaid-for tax extenders and omnibus legislation in December – as well as a gloomier economic picture. At this rate, public debt levels are expected to reach 86 percent of Gross Domestic Product (GDP) by 2026 – an even-more unsustainable level than our current debt of 74 percent of GDP.

January 19, 2016

Update: You can view our full analysis here.

The Congressional Budget Office (CBO) just released baseline projections showing rapidly rising deficits and debt rising in the coming years – at a much faster pace than previously projected. CRFB will release a full analysis later today, but the report makes it abundantly clear that the near record-high national debt is on an unsustainable path.

CBO now projects deficits more than tripling, from $439 billion in 2015 to $1.37 trillion by 2026, with trillion dollar deficits returning by 2022 – three years earlier than prior projections.

Debt held by the public, meanwhile, will grow by over $10 trillion from $13.1 trillion at the end of 2015 to $23.8 trillion by 2026. As a share of Gross Domestic Product (GDP), debt will grow from 74 percent of GDP in 2015 – already twice its pre-recession levels – to 86 percent of GDP in 2026. By comparison, August projections showed debt on track to reach roughly 77 percent of GDP, or $21 trillion, by 2025.


January 15, 2016

Congressman Mark Sanford (R-SC) wrote a piece in The Fiscal Times that highlights the paucity of substantive discussion from the 2016 presidential candidates on the debt, deficit, and government spending. As he says:

There have been debates, bluster, TV coverage, and more, but you know what’s been lacking in this Presidential race…a serious discussion of the debt, deficit, and government spending. It’s been skipped, and the degree to which this issue is not in vogue these days fits with what I have seen since I came back to the US Congress two and a half years ago.

Candidates have been asked about this issue on the campaign trail, several have sat for a thirty-minute television interview on Fiscal Fridays to discuss their positions on fiscal responsibility, and the debate moderators have been asking tough questions about balanced budgets, entitlement reforms, and fiscally-sound tax proposals. 

January 12, 2016

President Obama's final State of the Union address is tonight at 9 p.m. ET. In preparation for his speech, we've brought back our State of the Union fiscal bingo game - DEBT-O!

Play with your friends and keep track of budget-related words and terms used by the President. Although the speech will cover many issues, President Obama should highlight how he'd like to address the nation's fiscal issues in his speech, previewing what is to be expected in his budget that will be released in a few weeks. Our partners at Fix the Debt also wrote the Top 7 Ways President Obama Can Strengthen His Fiscal Legacy.

Click here for a printable PDF of five different boards.


January 5, 2016

Kicking off the new year in style, the Congressional Budget Office (CBO) released its latest estimate of the reconciliation bill passed by the Senate that aims to repeal parts of the Affordable Care Act (ACA), updating its numbers to account for the enactment of last year's tax deal. The bill repeals many key provisions of the ACA, including:

  • Coverage expansions, including subsidies to purchase private insurance and the Medicaid expansion (starting in 2018);
  • Certain other spending changes (such as the Prevention and Public Health Fund and the reductions in Disproportionate Share Hospital payments);
  • Individual and employer mandates; and
  • Most of the law's tax increases.
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