CRFB Releases and Events
We published a paper with our partners at Fix the Debt last week to help answer questions about the budget conference committee that met for the first time yesterday. The paper answers many common questions about a budget conference – from its goals and its timeline to the differences that the conferees need to settle –and tells us what we can expect when they agree to a concurrent resolution. Below are some of the highlights.
Click here to read the full paper.
What is a budget conference?
A budget conference is a process by which the House and Senate iron out the differences in the budget resolutions they each passed separately to arrive at a unified “concurrent budget resolution” that each chamber will then vote on whether to adopt. The leaders of each party and budget committee in both the Senate and House chose members to participate in the conference committee.
What is a concurrent budget resolution?
After both chambers agreed to their own budget resolutions that set spending and revenue levels over the coming years, they must pass a single agreed-upon concurrent resolution. Although the House and Senate both vote on a concurrent budget resolution, it is not signed by the President and thus does not carry the force of law; however, it can establish rules for Congress that make future laws easier or harder to enact. For more on the rules aspects in these budgets, see our paper Budget Process in the FY 2016 Budget Resolutions.
With the House and Senate preparing to go to conference to work out the differences between their budget resolutions, we published a paper Tuesday outlining the various budget process measures contained in the respective resolutions as well as our recommendations about which should be kept. Both budget resolutions contain several items that could help or hurt the process, and we suggest that the conference committee hammer out these differences in line with the recommendations we've made in the Better Budget Process Initiative. We also published a blog and press release containing some recommendations not related to budget process.
Both budgets tackle process reform by enacting provisions to address the lack of accountability, transparency, and long-term focus in current budgeting.
The federal government will reach its second Fiscal Speed Bump today, as the debt ceiling will be reinstated after having been suspended since last February. The Treasury Department will be able to push back the actual day of reckoning until the fall with "extraordinary measures," but lawmakers will have to lift it later this year to avoid a default on the debt. At times, raising the debt ceiling has involved unnecessary brinkmanship, but it has often been used as a catalyst to make important fiscal reforms. To further the latter and minimize the former, the Better Budget Process Initiative has proposed ten options to change the debt ceiling to make it a more effective tool for fiscal responsibility while improving financial stability in a new paper entitled "Improving the Debt Limit".
The paper divides the changes into four broad categories: linking debt limit changes to achieving fiscal targets, incorporating the debt limit into Congress's decision making, applying the debt limit to more meaningful measures, and replacing the debt limit with a limit on future obligations. The ten options are below:
Link changes in the debt limit to achieving responsible fiscal targets
1) Presidential authority to increase the debt limit if fiscal targets are met
2) Presidential authority to increase the debt limit if accompanied by a plan to put debt on a declining path as a share of GDP
3) Suspend the debt limit automatically if fiscal targets are met
We've released our analysis of CBO's estimate of the President's budget, breaking down the report and its supplementary data in less than six pages. Our paper explains that CBO finds that many policies would save less than the President's budget claims shows debt on an upward, rather than a downward path.
Although CBO shows lower debt as a percent of GDP than OMB does, it also shows debt on a slight upward path after 2020, meaning the budget is less likely to stabilize debt over the long term using CBO's numbers (OMB's numbers showed stable debt through 2040). Debt would fall from 74 percent of GDP in 2014 to 72 percent by 2020 before rising gradually to 73 percent by 2025. Thus, the budget would likely have to do more to truly put debt on a sustainable path.
Debt as a Percent of GDP in the President's Budget
Debt would rise after 2020 because deficits would increase throughout much of the ten-year window. Although they would fall from $486 billion (2.7 percent of GDP) in 2015 to $380 billion (2 percent) in 2016, they would rise continuously after that to $801 billion (2.9 percent) by 2025. The 2025 deficit is lower than CBO's baseline deficit of 3.8 percent but higher than OMB estimated deficit of 2.5 percent.
In light of the upcoming Fiscal Speed Bump when the most recent doc fix patch expires on March 31, yesterday we released an update to our Paying for Reform and Extension Policies (PREP) Plan, which illustrates how to responsibly replace the Medicare Sustainable Growth Rate (SGR) with a permanent solution. In just 3 pages, we describe a fiscally sustainable approach to finally solving the decade-long problem of the large physician payment cuts that the SGR proscribes (21 percent in the current iteration).
Building upon the bipartisan, bicamerial tricommittee bill introduced last year to replace the SGR with alternate payment models, we go one step further by proposing $215 billion of offsets to pay for the replacement and a package of "health extenders." Not only would this avoid adding to deficits, it would also provide greater incentives for high-quality, coordinated care and help to bend the health care cost curve.
Congress approached and addressed the first impending "Fiscal Speed Bump" this week, cleanly funding the Department of Homeland Security (DHS) with appropriations through the rest of the fiscal year. The updated set of speed bumps now have two more approaching in March - the expiration of the "doc fix" for the Medicare Sustainable Growth Rate (SGR) and the reinstatement of the debt ceiling (though the Treasury Department's "extraordinary measures" will move the actual date for action to this fall). We wrote this week on both the prospects for the doc fix can getting kicked down the road until later this year or next and the hard deadline for the debt ceiling in the fall.
In the coming weeks, lawmakers will release their budget resolutions outlining their blueprints for Fiscal Year 2016. Their passage starts the appropriations process, which requires bills to be passed before the October 1 deadline, which coincides with the expiration of the Ryan-Murray budget deal.
With the release of the President's FY 2016 Budget yesterday, CRFB published a condensed analysis of the President's baseline and major proposals.
Yesterday, CRFB published an analysis of CBO’s latest Budget and Economic Outlook. The six-page document summarizes the forecasts and emphasizes the return of trillion-dollar deficits over the next ten years. Although CBO projects slightly decreasing deficits over the next two years, there will be a jump from a 2016 low of $467 billion to a $1.09 trillion by 2025.
The Committee for a Responsible Federal Budget hosted a policy discussion this past Tuesday on dynamic scoring. CRFB President Maya MacGuineas opened the event by noting that dynamic scoring is an issue that will receive considerable attention over the coming months and could have an impact on fiscal policy decisions. Speakers offered their perspectives on the merits and challenges of using dynamic estimates in the legislative and budget process. Senator Rob Portman (R-OH) and Representative Chris Van Hollen (D-MD) offered remarks on their opinions and perspectives on dynamic scoring. A panel of dynamic scoring experts followed, moderated by CRFB President Maya MacGuineas. See CRFB's paper on dynamic scoring for a detailed discussion or our updated 2-page summary.
Sen. Portman spoke in favor of CBO and JCT providing dynamic estimates of bills. He argued that, at the very least, estimates should be done to inform staff and lawmakers how bills will affect the economy. He spoke about the bipartisan support for his bill, which passed by a vote of 51-48 with six Democrats voting in favor of it, when he offered it as an amendment during consideration of the FY 2014 Senate budget resolution. Portman acknowledged that there is a legitimate debate over which models and assumptions should be used, but he encouraged detractors to support presenting dynamic estimates as supplemental information, as his amendment would, not for official purposes. It would be apparent if dynamic estimates are significantly different than current methods, and policymakers would be able to look back to see which estimates were more accurate.
Congressman Van Hollen gave the opposing viewpoint. Van Hollen argued that dynamic scoring inherently demands that CBO or JCT adopt a specific ideology when estimating a bill. He mentioned estimates from the Heritage Foundation predicting revenue increases from the 2001/2003 tax cuts and claims that the 1993 tax increases would harm the economy. He also said that many models for dynamic analysis make assumptions about future actions to offset the cost of tax cuts, effectively giving legislation credit for policies not in the bill. He drew a distinction between the CBO estimate of immigration reform legislation, which took into account the direct impact of additional workers in the labor force, and dynamic estimates which incorporate the estimated indirect economic effects of legislation. Van Hollen reminded audience members that CBO and JCT already use microdynamic analysis in scoring bills—they weigh behavioral responses from individuals and businesses and the factors of supply and demand. He also acknowledged that dynamic analysis is useful as supplemental information, as long as policymakers understand the underlying assumptions.
Congress and the President need to prep for some important upcoming fiscal moments, and CRFB has a plan to help them do just that. The Paying for Reform and Extension Policies Plan, or the PREP Plan shows a path to restoring the expired tax extenders and avoiding the Medicare Sustainable Growth Rate cuts without adding $1 trillion to the deficit.
The PREP Plan assumes (but does not endorse) the passage of the Tricommittee SGR reform bill and a two-year tax extenders package. The plan includes over $250 billion of offsets, roughly two thirds from reforming incentives to slow health care cost growth and one third from improving tax compliance, along with a fast-track process for tax reform.
You can read the full plan here and view some of the details in the table below.
In addition to putting forward a plan, CRFB released a number of principles that should apply to any effort to continue extenders or reform the SGR.