Budget

Op-Ed: President's Budget Is a Start, at Least

AOL News | Feb. 1, 2010

 

The president's budget elevates the issue of fiscal responsibility (good), but fails to achieve it (not good).

President Obama proposes spending $3.8 trillion next year and borrowing $1.3 trillion of that. The massive deficits the nation now faces would gradually fall to $706 billion in 2014, before rising back to just over $1 trillion by 2020.

Among the larger deficit-reducing proposals in the budget are a three-year nonsecurity discretionary spending freeze, which would save $250 billion over 10 years; a fee on large financial institutions designed to pay back the TARP money, which would generate $90 billion; a limit on itemized deductions, saving $290 billion; and the elimination of a large number of tax preferences, which would raise about $350 billion.

All good stuff (OK, not good, but necessary). But when you're dealing with cumulative deficits of $8.5 trillion over the next decade, not good enough.

I'm sympathetic to the situation the president is in. He is for the most part cleaning up a fiscal mess not of his own making. The massive fiscal challenges we face are primarily the result of the borrowing of past years, even when the economy was strong; the deterioration in the budget caused by the recession; and the major spending challenges going forward because of aging and growing health care costs.

And if the president were to actually come out with a budget that would put the country on a sustainable path – say, by bringing the debt down to 60 percent of gross domestic product by the end of the decade and keeping it there – the policies he'd have to propose to get us there would leave Congress apoplectic.

They might include new taxes, perhaps an energy or consumption tax; raising the retirement age; dramatically restructuring major entitlement programs such as Social Security and Medicare; and a freeze on discretionary spending more aggressive than the one the president has proposed. Not exactly the agenda any politician wants to run on.

But it's not as though the need to submit a budget came as a surprise to the White House. Administration officials should have been doing much more in the weeks and months building up to the release of this budget to prepare the country for the difficult choices ahead.

The president should have made clear that no area of the budget is off limits, and that major structural reforms, not small spending freezes or cutting earmarks, will do the trick. And instead of bragging about providing tax cuts for 95 percent of the public in his State of the Union speech, the president should have explained that even his promise not to tax families making less than $250,000 a year is probably impossible to keep.

At the very least, he shouldn't be making the situation worse by extending a number of expiring policies – from the Bush tax cuts to the Alternative Minimum Tax patch – all without paying for the costs.

This budget will have to be the start – not the extent of – the president's push to implement a strategy to pull us out of this fiscal hole. Even though it is an election year, we cannot continue to delay.

Copyright 2010, AOL News

 

What CRFB Would Like to See in the FY 2011 Budget

CHAIRMAN
Bill Frenzel
Tim Penny
Charlie Stenholm

 
PRESIDENT
Maya MacGuineas
­­­
 
DIRECTORS
Barry Anderson
Roy Ash
Charles Bowsher
Steve Coll
Dan Crippen
Vic Fazio
Willis Gradison
William Gray, III
William Hoagland
Douglas Holtz-Eakin
Jim Jones
Lou Kerr
Jim Kolbe
James Lynn
James McIntrye, Jr.
David Minge
Jim Nussle
Marne Obernauer, Jr.
June O'Neill
Rudolph Penner
Peter Peterson
Robert Reischauer
Alice Rivlin
Martin Sabo
Gene Steuerle
David Stockman
Paul Volcker
Carol Cox Wait
David M. Walker
Joseph Wright, Jr.
 

SENIOR ADVISORS
Elmer Staats
Robert Strauss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


What CRFB Would Like to See in the FY 2011 Budget
January 28, 2010



On Monday, February 1, President Obama will unveil his FY 2011 budget. Although the President offered a preview of some portions of the budget last night, many questions remain. Given the United States’ mounting debt, the budget must begin the process of closing our fiscal gap. In particular, CRFB hopes that the administration’s FY 2011 budget request:

1) Commits to an ambitious, yet attainable, fiscal goal. Given the nation’s current fiscal picture, U.S. creditors need to be reassured that the country intends to take control of our future debt path; to do this, the country needs an aggressive, yet realistic, fiscal goal. The Peterson-Pew Commission on Budget Reform has recommended stabilizing the debt at 60% of GDP by 2018, but this is by no means the only option. The important thing is that a goal be ambitious enough to avert a fiscal crisis, but realistic enough that it is viewed as credible. It is also important that a fiscal goal capture the need to deal with both the medium- and long-term fiscal imbalances – such as the case with a goal of stabilizing the debt so it does not grow as a share of the economy once the target is hit.

2) Details specific actions for meeting fiscal goals. It isn’t enough to set a fiscal target; the President must also provide specific policy proposals to achieve the goal. The partial discretionary spending freeze President Obama discussed last night is a good start, but stabilizing the debt likely will require changes to Social Security, Medicare, Medicaid, defense, and tax policy as well.

3)Avoids using gimmicks. The President’s budget must be able to meet his fiscal targets without relying on any budget gimmicks. For example, assuming that certain policies will expire when they are unlikely to can make it seem easier to stabilize the debt. Relying on unspecified savings (sometimes called “magic asterisks”), such as those suggested by a fiscal commission, also would be problematic – unless some type of “trigger” were put in place to implement tangible policies if an agreement could not be reached.

4) Enforces fiscal targets through budget rules and process reform. To codify his proposed targets, we encourage the President to insist on fiscal rules – such as an exemption-free PAYGO, statutory budget caps, and a debt trigger – to help maintain the fiscal path Congress chooses. Other reforms designed to bring transparency, order, and a focus on the long-term to the budget process also would be helpful.

“This is a critical year for the budget,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. “As the White House pivots from focusing on economic recovery to reducing the deficit, it needs to start the discussion by presenting an aggressive and credible budget. But the story doesn’t end there. It is an election year and President Obama will have to use a good deal of his political capital to get Congress to work with him on enacting any of the tough measures he is willing to put forth.”

 


Click here for a pdf version of this release.

For press inquiries, please contact Kate Brown at (202) 596-3365 or brown@newamerica.net.

 

CRFB Reacts to the State of the Union Address

CHAIRMAN
Bill Frenzel
Tim Penny
Charlie Stenholm

 
PRESIDENT
Maya MacGuineas
­­­
 
DIRECTORS
Barry Anderson
Roy Ash
Charles Bowsher
Steve Coll
Dan Crippen
Vic Fazio
Willis Gradison
William Gray, III
William Hoagland
Douglas Holtz-Eakin
Jim Jones
Lou Kerr
Jim Kolbe
James Lynn
James McIntrye, Jr.
David Minge
Jim Nussle
Marne Obernauer, Jr.
June O'Neill
Rudolph Penner
Peter Peterson
Robert Reischauer
Alice Rivlin
Martin Sabo
Gene Steuerle
David Stockman
Paul Volcker
Carol Cox Wait
David M. Walker
Joseph Wright, Jr.
 

SENIOR ADVISORS
Elmer Staats
Robert Strauss


CRFB Reacts to the State of the Union Address
January 27, 2010



The Committee for a Responsible Federal Budget commends President Obama for his focus on deficit reduction in his State of the Union address, and hopes that he will follow through by pressing Congress to enact medium- and long-term deficit reduction policies over the next year.

As the President remarked tonight, we find ourselves in a “massive fiscal hole… a challenge that makes all others that much harder to solve.” And he argued, rightly so, that “if we do not take meaningful steps to rein in our debt, it could damage our markets, increase the cost of borrowing, and jeopardize our recovery.”

The President offered three proposals, in particular, which would be promising steps in the right direction:

  • A three-year non-security discretionary spending freeze, beginning in fiscal year 2011, and enforced by a veto, if necessary;
  • A bipartisan fiscal commission – created by executive order and fashioned after the Conrad-Gregg proposal – to provide a specific set of solutions to our fiscal problems;
  • The reinstatement of statutory pay-as-you-go laws (although as we’ve mentioned before, we are concerned about the large number of exemptions).

“We are thrilled that President Obama understands the threat of ever-rising debt, and is making some concrete proposals to begin to address it,” said Maya MacGuineas, President of the Committee for a Responsible Budget. “But actions speak louder than words. In the coming weeks and months, we urge the President to bring together members of both parties and begin taking concrete actions to stabilize the debt once the economy recovers.” 

 


Click here for a pdf version of this release.

For press inquiries, please contact Kate Brown at (202) 596-3365 or brown@newamerica.net.

 

Op-Ed: Obama's Freeze Is a Good First Step

CNN | Jan. 27, 2010

 

When the president unveils his 2011 budget next week, he will propose capping "non-security" discretionary spending at its current level of about $450 billion for three years, saving roughly $250 billion over ten years.

The freeze does not include defense, veterans' affairs, homeland security and some international programs.

Let's start by putting these numbers in context. The Congressional Budget Office's new baseline numbers show that deficits will be $6 trillion over the next decade -- under highly unlikely assumptions that Congress will stay true to current law, where the tax cuts and other popular policies expire -- or more than $12 trillion under more likely assumptions.

So $250 billion, while obviously a large number, is a very small share of the amount Congress is poised to borrow -- and add to the debt -- in the coming decade.

It would be fair, then, to say that this is a baby step -- OK, it's a teeny-weeny tiptoe of a step -- in the right direction. But there have been so many steps in the wrong direction in recent years, such as extending tax cuts, that anything that it can legitimately be argued would help bring down future deficits should be heralded as an important move.

And frankly, it is a courageous one too for this administration; there are going to be an awful lot of members of the president's own party who are none too happy with the plan.

But remember, the president's budget for the fiscal year that begins in October isn't actually a law. It is more like a polite suggestion to Congress. Given that Democrats run the House and Senate, they won't declare the budget dead on arrival, as so often happens when the budget season begins with a president of one party delivering his budget to a Congress run by the other.

But in this highly charged election year, where legislators will talk about being tough on spending but not necessarily back that claim with real spending cuts, it will be extremely difficult to get them to stick to this freeze.

Therefore, the president is going to have to back up his promise with more than words for it to be seen as credible. What it needs is teeth.

First, he should promise to veto any appropriations bills that exceed the limits he has put forward for spending. Otherwise, there's little question that appropriators will find all sorts of ways to bump up spending beyond what he has proposed -- everything from budget gimmicks to simply ignoring his proposal.

If he chooses to look the other way, the spending freeze will prove to be little more than a cynical political talking point at a time when real action is needed. Shepherding the budget from blueprint to law is part of the heavy lifting the president will have to lead on.

Second, he should support statutory spending caps that enforce his limits. This is an idea that is gaining momentum in the Senate and House, and it is the ideal companion piece to his suggested freeze. From Sen. Jeff Sessions, R-Alabama, to Sen. Evan Bayh, D-Indiana, to Sen. John McCain, R-Arizona, he need not look far to find a host of good ideas.

Finally, there is the issue of the rest of the budget. Non-security is only a small sliver of discretionary spending, and discretionary is only a small sliver of total spending. All told, we are talking about less than one-sixth of the budget. It would be more sensible to cap all discretionary spending and force policymakers to make tradeoffs between defense and other security parts of the budget as well, not just within the relatively small non-security category.

And then there are still the big enchiladas -- Social Security, health spending, and taxes -- to be dealt with. When this fight gets going, remember, it will only be working its way down from the tip of the iceberg. Nonetheless, a discretionary freeze is a sensible first step. Let's hope when the rest of the budget is released on Monday, it will take that first tiny sensible step much further.

Copyright 2009, CNN

CRFB Welcomes New Budget Proposals

CHAIRMAN
Bill Frenzel
Tim Penny
Charlie Stenholm

 
PRESIDENT
Maya MacGuineas
­­­
 
DIRECTORS
Barry Anderson
Roy Ash
Charles Bowsher
Steve Coll
Dan Crippen
Vic Fazio
Willis Gradison
William Gray, III
William Hoagland
Douglas Holtz-Eakin
Jim Jones
Lou Kerr
Jim Kolbe
James Lynn
James McIntrye, Jr.
David Minge
Jim Nussle
Marne Obernauer, Jr.
June O'Neill
Rudolph Penner
Peter Peterson
Robert Reischauer
Alice Rivlin
Martin Sabo
Gene Steuerle
David Stockman
Paul Volcker
Carol Cox Wait
David M. Walker
Joseph Wright, Jr.
 

SENIOR ADVISORS
Elmer Staats
Robert Strauss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


CRFB Welcomes New Budget Proposals
January 27, 2010
 

The Committee for a Responsible Federal Budget is encouraged by recent proposals to address the nation’s large budget imbalances. Constructive plans from the Blue Dog Democrats in the House, Senators John McCain and Evan Bayh, and Congressman Paul Ryan—in addition to President Obama’s expected budget proposals in tonight’s State of the Union address—are all helpful in jumpstarting a much-needed national discussion about our fiscal future.

“It is no longer sufficient for policymakers to acknowledge that we have a problem” said Maya MacGuineas, President of the Committee for a Responsible Federal Budget. “You’d have to be blind not to know that. Now is the time to start proposing real solutions—and it is gratifying to see that a number of policymakers are taking that responsibility seriously.”

The “Blue Dog Blueprint for Fiscal Reform” unveiled yesterday puts forward the goal of stabilizing the debt level at 60 percent of GDP—a key recommendation of the Peterson-Pew Commission on Budget Reform. In order to achieve that goal, the plan lays out 15 steps including: restoring paygo rules, capping discretionary spending, instituting a “budget reconciliation trigger” to enforce budget discipline, and establishing a fiscal commission to recommend to Congress spending and revenue changes to ensure long-term fiscal sustainability.

The Bayh-McCain “Fiscal Freeze Act” would limit non-security discretionary spending growth to inflation, place a moratorium on earmarks, and implement a number of other reforms to stay in place until the federal budget is balanced. It also calls for long-term spending and deficit reduction targets, along with mechanisms to enforce those targets.

Congressman Ryan’s detailed “A Roadmap for America’s Future 2.0” announced today includes a comprehensive set of reforms for healthcare, Medicare, Medicaid, Social Security, the budget process and the tax system. The debt would still reach 100 percent of GDP by mid-century—a level we worry is far too high, but it is nonetheless a significant improvement compared to current policy, and a far more detailed offering than we have seen from any other politician.

President Obama will reportedly announce a three year freeze on “non-security” discretionary spending, as well as a presidential fiscal commission, in his State of the Union address tonight.

CRFB does not support every element of each proposal, but we commend those offering them for exhibiting leadership and political courage in putting forward a plan. We hope others will follow their leads.

 

Click here for a pdf version of this release.

For press inquiries, please contact Kate Brown at (202) 596-3365 or brown@newamerica.net.

 

CRFB Analysis of CBO’s January 2010 Baseline

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From CBO's January 2010 Budget and Economic Outlook, baseline estimates now show that public debt will increase from 53 percent of GDP in 2009 to 67 percent in 2020. Yet as troubling as this scenario is, it is almost certainly optimistic. If we assumed current policies were to continue as they have in the past, the debt would reach nearly 100 percent of GDP in 2020.

Controlling Discretionary Spending

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Over the past decade, discretionary spending has grown faster than mandatory. Between 1999 and 2008 discretionary spending grew annually, on average, by 7.5 percent – from less than $570 billion to over $1.1 trillion. Although the CBO baseline makes it appear as if discretionary spending will grow only modestly, more realistic assumptions tell a different story. Just holding discretionary spending growth to inflation would be a positive step. In the 1990s, it was these types of caps, along with pay-as-you-go rules, strong economic growth, slower-than-usual health care cost growth, and a commitment to deficit reduction that led to budget surpluses.

Red Ink Rising

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In Red Ink Rising: A Call to Action to Stem the Mounting Federal Debt, The Peterson-Pew Commission on Budget Reform calls on policy makers to stabilize the national debt through a six-step plan. Crafted over the past year by former heads of the CBO, OMB, GAO, and the congressional budget committees, the plan reflects a bipartisan approach to avoiding the tremendous global risks of America's expanding debt, without destabilizing the economic recovery. Red Ink Rising is the first of two major reports to be released by the commission.

Budget Blueprint: Paths to 60 Percent

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In Red Ink Rising: A Call to Action to Stem the Mounting Federal Debt, The Peterson-Pew Commission on Budget Reform calls on policy makers to stabilize debt held by the public at 60 percent of GDP. Given our current fiscal path, reaching this debt goal will not be easy. While the Peterson-Pew Commission does not endorse specific tax and spending policies to meet this goal, Budget Blueprint: Paths to 60% aims to demonstrate the types and magnitude of necessary policy changes.

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