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.
Follow the House's Lead: Pay for the Extenders
December 10, 2009
Yesterday, the House passed a $31 billion “tax extenders” bill to renew a number of tax rates for another year. The last minute passage of this legislation is part of an all too regular end of year crunch, since a number of expiring tax and spending provisions have not yet been renewed.
Often in the past, in the rush to leave town for the holidays, the House and Senate have simply extended the programs for a year without regard for cost. We commend the House for fully offsetting the costs of their tax extenders bill, but worry that other changes may be deficit-financed. This year, given the fiscal crisis facing the nation, we urge Congress to avoid the easy solution and find ways to offset the full cost of their actions.
“Ideally, policymakers would sit down and make rational decisions about what provisions are worth keeping in the first place,” said Maya MacGuineas, President of the Committee for a Responsible Federal Budget. “But if they are going to insist on a band-aid solution, the least they could do is pay for it.”
Among the other major items likely to be extended are:
Including the tax extenders bill, renewing these measures could cost more than $225 billion, mostly spent over one year. Fortunately, the tax extenders legislation was passed with offsetting revenue raisers.
“Kudos to the House for paying for this policy” said MacGuineas.
But Congress may use gimmicks to pay for some of these other measures (for example, using TARP money), and might not offset other changes at all. Congress should avoid such tactics and simply pay for whatever legislation they pass.
“Two hundred and twenty-five billion dollars? It seems like every year is worse than the last,” MacGuineas said. “When the Bush tax cuts expire next year, we’ll be talking about trillions. We’re in fiscal trouble here, and I don’t see things getting any better without a major change of course. Let’s at least make sure we aren’t making things worse.”
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The CBO recently projected a ten-year deficit of $7.1 trillion using a "current law" baseline. But these numbers may prove to be optimistic. CRFB argues that four major assumptions in the baseline are unlikely to materialize, leading to a ten-year deficit of $12.6 trillion. This paper discusses US Budget Watch's own "current policy" baseline, which assumes particular policies do not conform to current law.