CRFB Releases and Events
CRFB has released its analysis of CBO's latest ten-year budget projections, detailing the important facts from the report and how it has changed from previous estimates. As we noted earlier, the new baseline is very similar to the previous one released in March, showing a relatively subdued outlook for debt in the short term but growing deficits and debt for several years thereafter.
Click here to read our analysis.
Debt is projected to decline slightly in the near term from 74 percent of GDP in 2015 to 73 percent by 2018 before rising to 77 percent by 2025. Extrapolating further, we estimate that debt held by the public would exceed the size of the economy by 2040.
There is a similar story for deficits, which will fall to a low of 2.1 percent of GDP in 2017 before rising to 3.1 percent in 2020 and 3.7 percent in 2025, when the deficit will reach $1 trillion. These widening deficits in later years are the result of spending rising – driven by increases in health care, Social Security, and interest spending – while revenue stays largely flat.
On Tuesday, August 4, 2015, the McCrery-Pomeroy SSDI Solutions Initiative hosted its SSDI Solutions Conference, presenting the 12 papers commissioned by the initiative as well as various discussions around improvements that can be made both to the program and to the larger role that government plays in supporting people with disabilities. The day-long conference, attended by nearly 200 people and watched via livestream by over 900, featured remarks from Senate Finance Committee Chairman Orrin Hatch (R-UT) and Center for Budget and Policy Priorities (CBPP) President Bob Greenstein, panel discussions with the authors and disability research experts, and a closing panel discussion with the Co-Chairs and Social Security experts. With the Social Security Disability Insurance (SSDI) trust fund set to exhaust its reserves by the end of 2016, many experts have begun discussing long-term changes that could be paired with short-term funding options that alleviate the impending 19-percent across-the-board cut to benefits if nothing were to be done. The program for the event can be found here.
The event kicked off with opening remarks from Congressmen Jim McCrery (R-LA) and Earl Pomeroy (D-ND), co-chairs of the initiative, discussing the opportunity presented by the imminent legislative action needed on SSDI. Both stressed that no idea would be perfect nor would any idea alone solve the problems facing the program, but they envisioned these ideas as part of a broader discussion to improve SSDI both financially and effectively for the people who rely on it. While avoiding trust fund exhaustion may be the reason for the congressional action that will take place in the next year, the co-chairs reiterated their commitment to making the SSDI Solutions Initiative about helping people with disabilities.
Lawmakers have dealt with several Fiscal Speed Bumps – budgetary deadlines – throughout the year, but quite a few will appear over the next few months, making for an eventful fall. CRFB's latest report, "The Gathering Storm: Fiscal Clouds Amass This Fall" details what policymakers have to address and the stakes associated with each remaining Speed Bump.
Click here to read the full report.
There are four big deadlines remaining for the rest of 2015:
- The end of 2015 appropriations and return of sequestration (October 1)
- The expiration of the highway bill and insolvency of the Highway Trust Fund (October 30)
- The exhaustion of extraordinary measures to avoid raising the Debt Ceiling (mid-Fall)
- The deadline to renew tax extenders retroactively (December 31)
Today marks Social Security's 80th birthday, celebrating the anniversary of the establishment of the old-age portion of the program in the Social Security Act of 1935. To kick off the celebration, CRFB released a new report yesterday, "Debunking 8 Social Security Myths on Its 80th Birthday," that seeks to clear up the conversation about the program.
The 8 myths are:
- Myth #1: Social Security does not face a large funding shortfall
- Myth #2: Today’s workers will not receive Social Security benefits
- Myth #3: Social Security would be fine if we hadn’t “raided the trust fund”
- Myth #4: Social Security cannot run a deficit
- Myth #5: Social Security has nothing to do with the rest of the budget
- Myth #6: We don’t need to worry about Social Security for 20 years
- Myth #7: Social Security reform is code for slashing benefits, especially for the poor
- Myth #8: Social Security is too hard to fix
The next President will need to confront a number of budgetary challenges and will likely sign into law many federal tax and spending changes. But election campaigns are often about telling voters what they want to hear rather than what they need to know. Today we released our new report, Fiscal FactCheck: 16 Budget Myths to Watch Out For in the 2016 Campaign, in which we identified 16 myths that may come up during the campaign. The myths span things we think candidates from both parties may say or have said about matters related to our national debt, taxes, health care, Social Security, and one-size-fits-all solutions that they think will dismiss the need for real action. The myths report is the first of a Fiscal FactCheck series that will fact check candidates on their statements throughout the 2016 campaign.
The 16 myths are:
The Committee for a Responsible Federal Budget has named three of the nation's foremost budget experts as its new co-chairs: Mitch Daniels, Leon Panetta, and Tim Penny. We are confident that the organization, as well as fiscal hawks across the country, will benefit greatly from their leadership.
“We are uncommonly lucky to have these three great leaders join together to lead the Committee for a Responsible Federal Budget,” said Maya MacGuineas, president of the Committee. “Between them, they have written several books; led states, congressional committees, and federal agencies; and headed the Office of Management and Budget — not to mention all being well-known leaders in calling for fiscal responsibility.”
CBO's Long-Term Budget Outlook, released yesterday, is a detailed 130-page document, filled with budget projections for the next 25 years, along with a supplemental spreadsheet with projections for the next 75 years. We've boiled down the document into a concise 6-page analysis with key facts and findings. CBO's debt projections have changed only slightly since last year – slightly higher debt in the next few years and a very modest decline in the still unsustainable upward track thereafter.
As we explain in our paper, CBO projects deficit and debt levels to remain fairly stable over the next few years, but then rise dramatically. Under CBO's "Extended Baseline Scenario," which generally reflects current law, deficits will rise from 2.7 percent of GDP over the next several years, to 3.8 percent by 2025, 5.9 percent by 2040, and 9.5 percent by 2090. As we explain, this will have major implications for debt:
The combination of deficit reduction legislation earlier this decade, low interest rates, and a slowdown in health care cost growth have certainly improved the long-term fiscal outlook, yet debt remains at record-high levels and is set to continue growing unsustainably with no end in sight. If policymakers continue to act irresponsibly – as they did with the “doc fix” legislation earlier this year – the situation will be far worse."
Over the past few years, we have seen many attempts by lawmakers to wriggle out of budgetary discipline by resorting to budget gimmicks. A new CRFB chartbook and one-pager highlight many of these gimmicks, including when they have been used and just how they work.
The one-pager, in particular, focuses on four of the most-frequently used gimmicks in recent years.
With the deadline for extending the surface transportation authorization just a few weeks away and Highway Trust Fund (HTF) bankruptcy approaching this summer, CRFB has released the The Road to Sustainable Highway Spending, a detailed plan to fix the HTF's finances and bring greater rationality to the process of determining highway spending and revenue. The plan would fully close the $175 billion trust fund shortfall through 2025 and set up processes to make future general revenue transfers to the fund much less likely.
Click here to read the full plan.
The plan first articulates three principles that any responsible highway solution should abide by:
- Act quickly to ensure adequate funding. Congress must extend the highway bill this month and provide sufficient funding to avoid disruptions this summer.
- Offset any general revenue transfers with real savings. While at least a short-term general revenue transfer is likely needed, it would be irresponsible to enact a transfer without equal-sized spending cuts or revenue increases to offset the cost. Resorting to gimmicks such as pension smoothing undermines the trust fund’s credibility.
- Close the structural imbalance. Lawmakers cannot rely on general revenue transfers in perpetuity and must ultimately bring highway spending and dedicated revenue in line. Plans should close this gap, and any that fail to do so should acknowledge that further action will need to be taken in the future.