The Bottom Line

November 6, 2015

The recently-enacted budget deal does not offset its ten-year cost like advocates have claimed, but what about the longer-term impact?

The deal clearly falls short of fiscal responsibility in the shorter term and relies in part on timing gimmicks, but the costs are temporary and some of the savings do grow over the long term. As a result, by our rough estimate, the bill will eventually pay for itself, but only after 20 years.

Given our country's fiscal situation, this is quite a long time to wait for a bill's costs to get paid back, which is why legislative scoring rules normally require costs to be offset within 10 years.

Moreover, the bill takes even a few years longer to pay for itself if you don't count the Social Security savings that are being used to close 1.5 percent of Social Security's total shortfall. It's with good reason the pay-as-you-go rules do not allow off-budget savings (e.g., from Social Security) to pay for on-budget costs. The same money cannot be used twice. If one accepts trust fund accounting for Social Security, money from the trust fund cannot be used to pay for general costs unless funds are explicitly transferred out of the trust fund.

(See the link for more on the unified budget and on-budget vs. off-budget effects.)

November 5, 2015

The Bipartisan Budget Act of 2015 is now the law of the land. While the law does not necessarily prevent a government shutdown, it does raise the sequester-level discretionary spending caps to provide for eventual full funding of the government. In addition, it utilizes (and possibly expands) the war spending gimmick.

The novelty of Overseas Contingency Operations (OCO) funding in the budget deal is that it allows OCO to be used as a slush fund for nondefense discretionary spending via the State and Foreign Operations appropriations bill. When appropriators write up an omnibus appropriations package, they could conceivably shortchange the State and Foreign Operations bill, subject to budget caps, by about $8 billion while increasing the unoffset and uncapped OCO funding to the full level provided in the budget deal – about $15 billion – thus backfilling State and Foreign Operations. By doing this, it frees up room under the nondefense discretionary spending caps for other nondefense spending. Appropriators would be able to spread about $8 billion over the other subcommittee allocations. For the first time, OCO could seemingly become a slush fund for both the Department of Defense and the rest of the nondefense budget. For more on the FY 2016 appropriations process, see our appropriations watch.

So how did we get here? The section of the budget deal on OCO sets amounts of it for both defense and international nondefense spending for both Fiscal Years (FY) 2016 and 2017 at $58.8 billion for defense and $14.9 billion for international nondefense. Last year’s $74 billion in OCO was divided roughly by $65 billion for defense and $9 billion for international nondefense. Relative to the baseline, which assumes FY 2015 levels adjusted for inflation, the $58.8 billion for defense, if appropriated, wouldn't increase spending, but the $14.8 billion for international nondefense would do so by roughly $5 billion in one year.

November 2, 2015

During last week's debate on the Bipartisan Budget Act of 2015, Sen. James Lankford (R-OK) offered up an amendment making many further changes to the Social Security Disability Insurance (SSDI) program beyond the ones already included in the law.

Sen. Lankford's amendment contained a number of well-known ideas for improving the program, including some presented by the McCrery-Pomeroy SSDI Solutions Initiative.

November 2, 2015

The budget deal recently signed into law relied heavily on one-time savings and gimmicks to offset the costs of the package, with less than half of the full cost offset by real savings, but it did include a few permanent savings from real entitlement reforms.

Unfortunately, before the ink was even dry on the agreement there were reports that Congressional leaders had agreed to reverse one of the few real reforms in the package, regarding crop insurance.

CBO Score

The version released last Monday night included crop insurance reforms which the Congressional Budget Office (CBO) estimated would save $3 billion over ten years. The provision would change the target rate of return on investment (ROI) for private companies which sell subsidized crop insurance plans from 14.5% of total premiums to 8.9%.

As Eric Belasco and Vincent Smith of the American Enterprise Institute noted in a post regarding this provision, the effective government guarantee of positive underwriting gains over the long term largely protects private crop insurance companies from risk. Citing a recent USDA study, CBO has said that the current ROI for crop insurance companies is higher on average than that of other private insurance companies.

October 30, 2015
Happy Halloween from CRFB

With the Senate passing the Bipartisan Budget Act of 2015 in the wee hours of the morning the bill now heads to the President's desk for signature. For Halloween we are weighing in on the tricks and the treats in this bill.


October 29, 2015

The recently-introduced Bipartisan Budget Act of 2015 tackles a laundry list of items that lawmakers needed to address over this Congress, including the upcoming exhaustion of the Social Security Disability Insurance (SSDI) trust fund. Because the Social Security Trustees and the Congressional Budget Office (CBO) had estimated that the trust fund would run out of reserves by the end of 2016 and in the beginning of Fiscal Year (FY) 2017, respectively, leaders included a payroll tax reallocation to shore up the trust fund. This is coupled with very modest changes to Social Security, including one that would close loopholes in the Old-Age and Survivors' Insurance (OASI) program as well as a number of measures that affect the disability program.

According to estimates from Social Security's Chief Actuary, the changes would improve long-term solvency of the combined OASDI trust fund by 0.04 percent of payroll over 75 years. Over the next 10 years, the Chief Actuary estimates these changes will save the trust funds between $5 billion and $9 billion, and CBO estimates these changes will save about $3 billion. This bill would close 1.5 percent of the 75-year shortfall and reduce total Social Security costs by about 0.1 percent.

October 29, 2015

This blog is part of the “Fiscal FactCheck” series designated to examine the accuracy of budget-related statements made during the 2016 presidential campaign. 

Last night, the GOP candidates convened for their third debate of this campaign season. This debate highlighted many budget issues including entitlements, debt, deficit, and the economy. We conducted a live analysis of the candidates’ claims on Twitter at @FiscalFactCheck and posted out findings at our fact check site of

For easy reading, we've summarized our coverage below. Full details are available at our FiscalFactCheck page.  

1. Entitlements

Governor Christie again claimed that Social Security will be insolvent in 7 to 8 years, however this is largely false because the Social Security Trustees estimate that the combined trust funds will be depleted by 2034 (in 19 years). Even the Harvard-Dartmouth study that Christie cites does not give a specific insolvency date. Senator Rand Paul was correct to say that the ratio of workers to Social Security beneficiaries has declined from 16:1 to 3:1. Senator Paul also correctly said that the average person pays $100,000 in lifetime Medicare taxes while receiving about $350,000 in benefits.

October 28, 2015
Tonight’s Resource for Candidates’ Claims on Fiscal Matters

We are pleased to launch the Fiscal FactCheck series, a project of the Committee for a Responsible Federal Budget. Beginning during tonight’s presidential debate and continuing throughout the 2016 campaigns, our experts in budget, tax, health, and spending policy will evaluate the truthfulness of the candidates’ claims on fiscal and economic issues.

October 28, 2015

This blog has also been posted at our Fiscal FactCheck website. Be sure to check out the site or find us on Twitter (@FiscalFactCheck) for more on the 2016 campaign.

Republican Presidential candidate Ben Carson has frequently talked about constraining the growing national debt, and this summer said that "you could balance the budget by just not spending one penny more than we do today each year for the next three years. No cuts, just no growth for three years. Surely, serious adults could agree on that." This claim is technically correct, but unrealistic as it lacks context of what it would actually take to freeze all spending.

According to CBO, the federal government spent $3.68 trillion in FY 2015, which would be $50 billion lower than the $3.73 trillion of projected revenue in 2018. Yet freezing total spending is not as easy as Carson suggests. It would mean allowing spending to erode relative to inflation, population growth, GDP growth, and other pressures. In fact, relative to projected spending, it would represent a $500 billion spending cut in 2018 alone – a 12 percent cut to total spending and 13 percent to non-interest spending.

October 27, 2015

This blog is part of a series of "Policy Explainers" for the 2016 presidential election, where we explain some of the candidates' policy proposals that affect the federal budget.

Today, Republican presidential candidate and former Florida Governor Jeb Bush unveiled a new plan – among the most detailed we have seen so far from any presidential candidate – to reform Social Security and Medicare. According to our estimates, Gov. Bush's plan would save about $285 billion (including interest) over ten years and very roughly $2.7 trillion over twenty years. It would also close Social Security's shortfall over 75 years and beyond.


October 27, 2015

Lawmakers are currently considering a budget deal that would increase appropriated spending, suspend the debt limit until March 2017, reallocate revenue to the Social Security Disability Insurance trust fund, and avoid a spike in some Medicare premiums. Although this bill is being hailed as a fiscally responsible sequester replacement bill, we estimate that when interest is added and gimmicks are removed, only half of the bill's cost is truly paid for.

The legislation includes about $80 billion of direct sequester relief and another $8 billion of Medicare premium relief. But when you include the additional $31 billion increase in war spending (a gimmick that lets policymakers backfill discretionary spending without offsets) and $36 billion of interest costs, the total cost of the bill rises to $154 billion.

Of this $154 billion, about $78 billion is paid for honestly: through a combination of Medicare reforms, reductions in farm subsidies, increases in PBGC premiums, asset sales, tax compliance measures, and other changes (plus the subsequent interest savings). The legislation also includes $20 billion of phony or double-counted savings, mainly from pension smoothing and other timing gimmicks but also from $3 billion of crop insurance savings that lawmakers have promised to repeal later. And the remaining $56 billion of the legislation – mostly the war spending increase and interest costs – is not paid for at all.

October 26, 2015

Over the weekend, the Washington Post editorial board wrote a piece praising the sequester plan that Rep. Scott Rigell (R-VA) released last week. The plan replaces three-fourths of the sequester's discretionary spending cuts and repeals the mandatory sequester while offsetting the $765 billion cost with $820 billion of smarter savings.

The Post notes that the looming threat of the sequester has been paralyzing the budget process, so lawmakers will need to come together to agree on funding levels for FY 2016 (and beyond). Rigell's plan is a reasonable way forward, proposing smart entitlement reforms with potential bipartisan support to replace the blunt sequester cuts:

Ideally, Republicans and Democrats would work on a long-term plan to lift sequestration for both military and domestic programs, paid for with a mix of taxes and savings — the latter including entitlements, which are the true cause of the country’s fiscal predicament.

Anyone looking for ideas should read the bill Rep. Scott Rigell (R-Va.) introduced Wednesday. Mr. Rigell’s proposal would restore 75 percent of the sequester cuts, a total of $765 billion in restored spending (over 10 years), divided evenly between defense and domestic priorities, just as President Obama wants. It would pay for $200 billion of this through new revenues, achieved by eliminating tax breaks for upper-income Americans and applying the more accurate “chained CPI” inflation adjustment to the tax code — huge concessions to the Democrats from a member of the no-new-taxes party.

The vast majority of the remaining savings in Mr. Rigell’s plan come from entitlements, including a series of Medicare reforms, many drawn from Mr. Obama’s past proposals, worth $455 billion. He would apply the chained CPI to Social Security, thus reducing future cost-of-living adjustments, but with built-in protections for the poorest beneficiaries. Mr. Rigell unfortunately gives back about $25 billion by repealing the medical device tax, but other than that shortsighted attack on Obamacare’s funding, the bill is a remarkably balanced, non-ideological approach.

October 26, 2015
Too much debt, not enough solutions

Alan Simpson is a former Republican senator from Wyoming, former co-chair of the Simpson-Bowles Fiscal Commission, and a member of the Committee for a Responsible Federal Budget. Maya MacGuineas is the president of the Committee for a Responsible Federal Budget. They wrote an op-ed for The Denver Post. It is reposted here.

October 26, 2015

Recent press reports indicate that the ongoing budget negotiations between Congressional leaders and the White House may lean on the use of the Overseas Contingency Operations (OCO), or war funding, account to boost defense spending. Doing so would allow them to spend above the defense budget caps without offsetting the cost.

As policymakers work toward a plan to offset the cost of sequester relief, they should resist the temptation to make their job easier by relying on the OCO gimmick. We recognize that there is significant pressure to increase defense spending above the caps. Indeed, over 100 House Republicans signed a letter insisting on at least $38 billion above the Fiscal Year (FY) 2016 cap for defense, or $561 billion total.

As Congressional Quarterly reported (paywall) recently, the author of the letter, Rep. Michael Turner (R-OH) said:

“We would be willing to do OCO  . . .  As long as we get the aggregate amounts of spending, I think we’re comfortable that we will have funded our national security,” Turner said.

October 23, 2015

The Senate Budget Committee held a hearing this week, the first in a series, on the need to reform the federal budget process. Testifying were Michael Peterson, President and CEO of the Peter G. Peterson Foundation, Douglas Holtz-Eakin, President of the American Action Forum and former Congressional Budget Office (CBO) Director (2003-2005), and Deborah Weinstein, Executive Director for the Coalition on Human Needs.

Chairman Michael Enzi (R-WY), began the hearing pointing out the many problems with our country’s current budget process and how it has failed taxpayers. He highlighted how a well-managed budget process is supposed to strengthen democracy by giving citizens a better idea of government’s role and ensuring that their tax dollars are being spent wisely.

Enzi noted that prior to this year’s balanced budget resolution, the last time one was passed was in 2001. He further explained that once the budget resolution establishes the top spending levels, Congress must pass 12 annual spending bills before the start of each Fiscal Year, but in the past 40 years, the appropriations bills have been done on time in only four years. Enzi noted:

In most years, Congress didn’t even come close to enacting all annual spending bills, in 15 of them, not even one appropriations bill was enacted on time. Instead, there were 173 short-term spending bills (CRs) to prevent government shutdowns, funding the government for an average of 186 days per year, more than half of the year.

October 23, 2015

Senator David Perdue, the junior senator from Georgia, and Maya MacGuineas, president of the Committee for a Responsible Federal Budget, wrote a guest post for The Hill's Congress Blog.  It is reposted here. 

As recently as 2007, our gross federal debt was 63 percent of the economy but has risen to over 100 percent this year and is projected to continue to exceed the size of our entire economy for some time if we don’t act. By the end of President Obama’s tenure in office, the United States will have added over $9 trillion to the national debt. It will require leadership to change course, and the current presidential campaign is an ideal forum to discuss this dangerous trend and to propose serious solutions. 

Unfortunately, the discussion so far has not focused on our national debt. In fact, it has barely been mentioned. With over 70 questions in over five hours of debate in the first two Republican presidential debates – not one single question has been about fixing the debt.

We need a substantive national conversation about our red ink, and the next presidential debate on October 28 among the Republican presidential contenders is a prime opportunity to address this issue. After all, the winning candidate won’t be able to escape the debt. The next president will inherit a gross federal debt of about $19 trillion.  

October 21, 2015

Congressman Scott Rigell (R-VA) released a plan today we might like even better than our own Sequester Offset Solutions (SOS) plan. Congressman Rigell's America First Act would permanently replace about three-quarters of the sequester-level cuts with a combination of mandatory spending cuts, Medicare reforms, limits on tax expenditures, and the savings and revenue from the adoption of the chained CPI. All told, it would reduce the debt by about $135 billion after a decade and according to our estimate nearly $2.5 trillion over twenty years.

Rigell's Plan would raise discretionary caps by about $630 billion over ten years and repeal $135 billion in mandatory sequester cuts, for a total cost of $765 billion. He would more than offset these costs with $820 billion of savings – including $620 billion from spending (and user fees) and $200 billion from tax revenue. He would also save $125 billion over ten years from Social Security, reducing the shortfall by approximately 15 percent.

To achieve these savings, Rigell's plan focusses largely on slowing the unsustainable growth of federal health spending. His plan includes over $450 billion of health savings. About one-third of this comes from beneficiary-oriented changes such as modernizing cost-sharing, restricting Medigap coverage, encouraging the use of generic drugs, and increasing means-tested Medicare premiums. Another half of the savings come from providers, where his plan would bundle payments for post-acute care, reduce hospital payments for medical education, equalize payments for services performed in different settings, reduce reimbursements for bad debts, and "rebase" nearly all payments to post-sequester levels.

The $165 billion of remaining spending reductions in the Rigell plan come from a variety of sources, many of which we recommend in our Sequester Offset Solutions (SOS) plan. For example, his plan would index various user fees to inflation, increase federal employee retirement contributions, increase PBGC premiums, and adopt the chained CPI for other spending, among other changes.

October 20, 2015

We are coming down the home stretch of calendar year 2015, with only a little more than two months left. Lawmakers will have to get to work as they have four "Fiscal Speed Bumps" – mandatory budget deadlines – to deal with. The first comes just next week as the authorization for highway spending will be expired by October 30, or federal highway spending will cease. The Treasury Department has also told Congress that the debt ceiling will need to be raised by November 3, or they will run dangerously low on cash on hand and risk default.

In December, lawmakers will need to agree on FY 2016 spending levels and fund the government before December 12 either with full appropriations bills or another continuing resolution. Without a funding deal, the government would shut down. And by the end of the year, lawmakers face a soft deadline for retroactively reviving the 50+ tax breaks, called the extenders, which expired at the end of 2014.

October 19, 2015

September 30th marked the end of the Fiscal Year, and the final numbers are in.  The deficit for last year was $439 billion, according to the final report by the Treasury Department (a previous estimate from the Congressional Budget Office (CBO) had projected the deficit at $435 billion). We've released a short paper FY 2015 Deficit Falls to $439 Billion, but Debt Continues to Rise that shows even though this is roughly 10 percent below the FY 2014 deficit and nearly 70 percent ($439 billion) below its 2009 peak ($1.4 trillion), the country remains on an unsustainable fiscal path.

Click here to read the full paper

The decline in deficits from 2009 to 2015 was largely expected as a result of the recovering economy and the fading of measures intended to boost the recovery. While legislated spending reductions, tax increases, and other factors have played a role in reducing short-term deficits, the long-term challenge is still largely unaddressed: growing mandatory spending and relatively flat revenue are projected to cause deficits and debt to rise over the next decade and beyond, with trillion-dollar deficits returning by 2025, if not sooner.

October 15, 2015

Republican Presidential candidate Gov. John Kasich (R-OH) has released an "Action Plan" that plots a path to (on-)budget balance by 2025. Perhaps not surprisingly for a former House Budget Committee chairman, his plan is more akin to a Congressional budget resolution, laying out numbers and some specifics but not all of the policies necessary to get to those numbers. His plan includes reforming the tax code, downsizing some federal programs, retaining non-defense discretionary spending restraint, and provides general ideas for Medicare. Overall, it is an encouraging commitment to deficit reduction, and we look forward to seeing more details to achieve the savings he calls for.

Kasich's plan calls for the on-budget deficit – the deficit excluding Social Security and the Postal Service – to be eliminated by 2025, leaving about a $250 billion total budget deficit. His plan calls for $2.6 trillion of savings through 2025, mostly concentrated in health care and apparently revenue. These savings would put debt on a downward path to 67 percent of Gross Domestic Product (GDP) by 2025, about 10 percentage points lower than CBO's baseline.

Kasich's tax reform plan intends to raise $1 trillion of revenue through 2025, judging by its revenue totals, despite specifically mentioning cutting taxes and detailing many more changes that would cut taxes than ones that would raise taxes. It is not clear whether the plan relies on aggressive assumptions about economic growth to raise revenue or relies on reducing unspecified tax breaks.

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