The "Low Hanging Fruit" of the Budget Debate

The latest edition of CQ Weekly has a piece on the "low-hanging fruit" of the budget debate -- provisions that have been proposed or negotiated by members of both parties. A table from the article is a very welcomed addition to our own overlapping policy grid, which also shows a surprising level of commonality between some budget plans and discussions.

The type of policies featured in the CQ article are generally in health spending and other mandatory spending. They include reductions to health provider payments and other measures to lower health care utilization that have been discussed by groups such as the Medicare Payment Advisory Commission (MedPAC). Also, there are changes to beneficiary cost-sharing and premiums, such as restricting Medigap coverage and raising premiums for high-income earners in Medicare. In terms of non-health policies, the list includes some policies that have been partially or fully enacted -- increasing federal employee retirement contributions and increasing PBGC premiums -- or policies that are currently under discussion, such as cuts to farm subsidies and food stamps.

In a similar vein as this article, our comparison grid of prominent budget plans also includes many of the same mandatory spending policies, but also larger health savings policies and some revenue-raisers as well. Some of the options we included may be more controversial but have seen support in at least a few of the major plans out there.

While there is indeed substantial overlap on various deficit reduction measures, many of these options are being harvested as offsets in various extension bills -- for example, the payroll tax cut extension or the recently-passed transportation/student loan bill. If more and more of these type of temporary extension bills are passed instead of a larger package that seeks to put debt on a downward path, these policies will dwindle in number. Second, while these policies can help bring down future deficits and debt, they cannot tackle the debt sufficiently to put it on a downward path. For that, lawmakers will have to look at a full range of health care, Social Security, and tax reforms that do not have consensus yet. 

Still, with regards to steps beyond reining in discretionary spending, the low-hanging fruit are a good starting point to build off of, and they will certainly be important in any budget deal. But the true success of a deficit reduction plan will hinge on the more contentious areas of debate.

Budget Reduction Plans

For any meaningful budget deficit reducion plan to be successful, one first must come up with a reasonable set of projections.  We're still waiting for that to come out of Washington!

 

The CBO produced 2012 Baseline Projections in January and updated them a few weeks later.  But the CBO projected inflation to average 1.6% for 2012 - 2015.  We are well on our way to surpassing their 2013 year end CPI value at the end of 2012.  Understating inflation impacts their 10 year projections in two ways.  First the principle of compounding (is that why they started their 10 year projections with such ridiculously low values?) and second is the fact that interest rates are tied to inflation.  So understating inflation will also understate Interest Outlays!  With debt set to pass $20 trillion in the near future, the impact on the budget projections would be HUGE!

 

The WH OMB isn't any better as they projected inflation will average 2% and not exceed 2.1% over the 10 year projections.  This is the fourth year in a row they've used values that average 2% and have 2.1% as a maximum value.  They've done that despite dramatically different prior year actual inflation values!  So mch for having economic principles rather than politics drive your projections.

 

So maybe we should ask (or even demand) that the CBO and WH OMB get serious with their projections so we can truly understand the extent of our fiscal crisis and the level of changes that are required to bring fiscal sanity back to the Country.  That's wehere we should start before we're asked to make choices as to what our solutions should be.

 

Alan R. Davis

Private Citizen

Chillicothe, OH

Post a New Comment

  • Web page addresses and e-mail addresses turn into links automatically.
  • Allowed HTML tags: <a> <em> <strong> <cite> <code> <ul> <ol> <li> <p> <br><img><div><span><object><embed><blockquote> <!--break-->
  • Lines and paragraphs break automatically.
  • Insert a chart by placing [chart:nid] into your content, where nid is the node ID.

More information about formatting options

By submitting this form, you accept the Mollom privacy policy.