CRFB Releases and Events
Moments ago, CRFB published a new 6-page paper summarizing CBO’s latest Budget and Economic Outlook. Under its current law baseline, CBO estimates that federal debt held by the public will reach 74 percent of GDP by the end of 2014 – a post-war record and more than twice the level at the end of 2007. Debt will fall slightly to below 73 percent by 2018 but, beyond that, CBO’s forecasts show that debt levels will resume their upward trend, reaching 77.2 percent of GDP in 2024.
This growing debt is largely the result of a projected rise in spending levels not matched by equivalent increases in revenue. While CBO forecasts revenue to remain roughly stable as a share of GDP, at about 18 percent, spending will increase from 20.4 percent of GDP in 2014 to 21.8 percent in 2024. As we explain in our paper:
Much of this increase is due to the growth in the entitlement programs resulting from health care cost growth, population aging, and the coverage expansion under the Affordable Care Act. Social Security will grow from 4.9 percent of GDP in 2014 to 5.6 percent by 2024. Meanwhile, federal health spending will grow from 4.9 percent of GDP to 5.9 percent by 2024. The fastest growing portion of the budget, however, is interest payments; they will rise precipitously as a result of rising interest rates and growing debt levels. Net interest costs are projected to double between 2014 and 2021 -- from 1.3 percent of GDP in 2014 to 2.7 – and grow to 3 percent of GDP by 2024.
Overall, health care programs, Social Security, and interest spending will account for a striking 85 percent of the increase in spending over the next decade.
On August 15, PublicSquare.net hosted a debate on Social Security featuring CRFB's very own Ed Lorenzen. The event, titled "Can Simpson-Bowles Save Social Security?" involved Benjamin Veghte, Research Director at Social Security Works, and Lorenzen, a Senior Advisor at CRFB who served on the National Commission on Fiscal Responsibility and Reform that was chaired by Erskine Bowles and Al Simpson. The debate was moderated by Taylor Kinzler.
Before leaving town for August recess, Congress passed additional VA funding and a short-term patch to the Highway Trust Fund. However, more deadlines are approaching quickly, and Congress will have many "fiscal speed bumps" next year – all of which present firm deadlines for action.
The end of the fiscal year is September 30. At that point, Congress needs to have passed appropriations bills or a continuing resolution for next year to fund the government. Since Congress has not yet passed any of the 12 appropriations bills and are only in session a little over two weeks in September, it seems likely that a continuing resolution will be needed to avert a government shutdown. (See Appropriations 101 for an explanation of the process).
Beyond that, there will be pressure to revive tax extenders, a package of over 50 tax breaks. Although they expired at the end of 2013, they can be reinstated retroactively without much difficulty if done this year. The House and Senate have taken different approaches to the extenders (though both would add to the deficit), but they would need to come to agreement before the end of the year.
Next spring, several of this year's extensions will expire: The debt ceiling will need to be raised when it goes back into effect on March 16, and Medicare provider payments will be cut by 24 percent unless a "doc fix" is enacted by March 31. By the end of May, Congress will need to shore up the Highway Trust Fund and re-authorize the fund's spending. As part of a long-term highway fix, Congress will either need to raise highway revenues or cut spending as we explained in our paper, Trust or Bust: Fixing the Highway Trust Fund.
On Tuesday, the Committee for a Responsible Federal Budget hosted an event titled "Decoding the Social Security Trustees Report" to discuss the Trustees' latest update on Social Security's finances and policy options to reform the program. The event featured Social Security Chief Actuary Stephen Goss, Reps. Tom Cole (R-OK) and John Delaney (D-MD), and a panel discussion moderated by Damian Paletta of The Wall Street Journal.
CBO's Long-Term Budget Outlook is a long and detailed 140-page document – filled to the brim with facts, figures, scenarios and assumptions – and comes with a spreadsheet with even more data. To help people navigate the report and pull out its key takeaways, we've boiled down the document into a concise 6-page analysis with all the key facts and findings.
Yesterday, the Commmittee for a Responsible Federal Budget released a paper detailing the problems with the federal budget process. In light of the 40th anniversary of the enactment of the Congressional Budget and Impoundment Control Act of 1974 this past Saturday, the paper details many problems facing the current budget process.
The paper focuses on three main issues -- each with many aspects to them -- with the modern budget process: lack of transparency, lack of accountability, and lack of a long-term focus. These issues have resulted in poor planning and policy around the debt, with the process increasingly becoming ad hoc, ineffective, and short-sighted in practice.
Over the past few years, lawmakers have engaged in a series of budget showdowns trying to avoid fiscal speed bumps and reduce deficits. However, debt projections continue to show an unsustainable outlook, and there appears to be little appetite for the kind of deal that would be necessary to put it on a downward path as a percent of GDP. That's where you come in.