Other CRFB Papers

Five Steps to Cut the National Debt

Sphere | Dec. 10, 2009

 

Earlier this week, lawmakers confirmed that they will increase the national debt ceiling by as much as $1.8 trillion – raising it to more than $13 trillion – so the federal government can keep borrowing to cover its huge deficit.

As daunting as those numbers are, Congress has no choice. Fail to raise the debt limit and the government would default on its debt, sparking an immediate financial and economic crisis far worse than the one we just experienced.

But raising the debt ceiling only postpones that crisis. And if lawmakers want to avoid it, they have to get serious about bringing the nation's debt under control.

In the last year alone, the total government debt grew from almost $10 billion to nearly $12 trillion. The total government debt is on course to reach 100% of GDP by the early 2020s. Such high debt levels are likely to slow economic growth, dampen wages and harm jobs. Choosing this path is a sure-fire recipe for lower standards of living in this country.

It is true that much of our recent debt accumulation is either a direct or indirect result of the economic crisis, and acting to cut the debt too soon could damage the precarious economy. But the cost of waiting too long to change course would also be dire.

So, how does the U.S. gets its debt under control? The hard truth is that spending has to be cut and taxes have to go up.

I know, I know, that is exactly the opposite of what politicians like to promise, but there is no getting around it. Here are five ideas we should consider:

1) Raise the retirement age. Over the past 50 years or so, life expectancy has increased from 70 years to 78. Yet the average retirement age has fallen from 65 to 62. Raising the retirement age for Social Security would not only reduce the program's obligations, but would likely encourage people to work longer. And a larger work force means more taxable income and stronger overall economic growth.

2) Cap discretionary spending. Over the past decade or so, discretionary spending has grown far faster than the economy, even excluding defense spending. To ensure that politicians make tough decisions in this area of the budget, we must have strong enforceable spending caps in place. Even just limiting growth rates to levels of inflation could save $1 trillion or more relative to what would otherwise happen.

3) Require well-off seniors to pay more of their share of Medicare. To be affordable, there is no question that Medicare needs a major overhaul. But the chances of us getting there with health care cost control alone are extremely low – some benefits will need to be cut. To protect low-income seniors, we need to boost premiums and cost-sharing for wealthier seniors. That's already started in Medicare Part B, but we have to be more aggressive.

4) Don't extend so many of the Bush tax cuts. By the end of next year, nearly all the tax cuts passed over the past decade will expire. Renewing them all will cost around $2.3 trillion. Renewing them for everyone making less than $250,000 annually – with President Obama proposes – would still cost $1.8 trillion. We should go through the tax cuts one by one to decide which ones are worth keeping and which we simply can't afford.

5) Enact an energy tax. We are unlikely to stabilize our debt with spending cuts alone, and the current tax system is too inefficient to raise all needed revenue. An energy tax can make up some of the difference. By taxing carbon emissions or gasoline, as opposed to work and investment, we can reduce deficits and address climate change without hurting the economy too much.

I recognize that few of these options are easy, and frankly none are popular. Getting our fiscal house in order will be an exercise in hard choices. But our fiscal future depends on it.

Copyright 2009, Sphere

Troubled Asset Relief Program: Year-End Review

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On December 9, Secretary Geithner requested that TARP be renewed through October 3, 2010. Having spent a net of $386 billion, the $700 billion program is generally considered to have helped stabilize financial markets and the real economy. However, problems and risks remain.  

CRFB Supports Fiscal Task Force

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 Supports Fiscal Task Force
December 9, 2009


The Committee for a Responsible Federal Budget commends Senators Kent Conrad (D-ND) and Judd Gregg (R-NH) on their proposal - released today - to create a Bipartisan Fiscal Task Force.

With the public debt above 50 percent of GDP and rising steadily, and Americans increasingly frustrated with the inability of Washington to deal with the dire situation, some type of commission, task force, or budget summit would be a sensible approach to break through the partisan deadlock to foster fiscal responsibility.


“A bipartisan commission would greatly help politicians address the nation’s long-term fiscal challenges,” stated Maya MacGuineas, President of the Committee for a Responsible Federal Budget. “Establishing a budget commission could send an important signal to creditors that the U.S. is serious about fixing the budget situation, create a bipartisan forum where lawmakers can hash out the compromises that will be necessary, and lend political cover for making the tough choices ahead.”

Another important benefit of a fiscal commission is that it could create a shared fiscal goal as a focal point for achieving real solutions. The bipartisan Peterson-Pew Commission on Budget Reform, a joint venture of CRFB, the Peter G. Peterson Foundation, and The Pew Charitable Trusts, has been working to develop an appropriate goal for dealing with the growing debt and will release a report, Red Ink Rising: A Call to Action to Stem the Mounting Federal Debt, on December 14 at the National Press Club with a six-step plan.

“Unfortunately, the gridlocked and dysfunctional legislative process has proven unable to deal with the coming fiscal crisis, and time is quickly running out,” said MacGuineas. “Establishing a bipartisan task force that promotes collaboration and honest discourse with an expedited process for considering its recommendations can overcome the polarization and disorder in Washington to effectively fix the budget situation and place the U.S. on a sustainable fiscal path. It is less important to us the specifics of any commission or task force than the reflection that Congress and the White House are finally willing to turn their attention to this pressing problem.”



Click here for a pdf version of this release.

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

 

Where Are Those Appropriations Bills?

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


Where Are Those Appropriations Bills?
December 7, 2009


More than two months after the start of Fiscal Year 2010, only five of the twelve appropriations bills necessary to continue government functions have been enacted. Congress’s continued poor track record in fulfilling its fundamental obligation to fund the operations of government in an efficient manner exposes the need for budget process reform.


“If we can’t do something as simple as passing the appropriations bills we review every year, how are we supposed to do any of the heavy lifting on the budget?” asked Maya MacGuineas, President of the Committee for a Responsible Federal Budget.

Although the House has passed all twelve of its appropriations bills, three have not been passed in the Senate, and another four are still being negotiated in Conference committee.  Since October 1, these government functions have been sustained by stopgap continuing resolutions (CR), the latest of which is set to expire on December 18th.

“With the health care debate set to take up much of the floor time in the Senate, it’s looking likely that Congress will either pass another CR or  again rely on an end-of-year omnibus to wrap up all of its unfinished business just before leaving town,” said MacGuineas. “Budgeting is one of the most basic functions of governing—there really is no excuse for failing to pass these bills.”

“How can federal agencies develop realistic 2011 budgets if they don’t even know what funds they’ll have in 2010? We need to have a serious discussion of how to improve our country’s budget process so that spending bills can receive the attention they deserve.”


Click here for a pdf version of this release.

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

 

Paying for Afghanistan Should Move Beyond Playing Politics

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
 



Paying for Afghanistan Should Move
Beyond Playing Politics
December 2, 2009

Last night, President Obama announced a plan to increase troop levels in Afghanistan by 30,000 - a change which would cost tens of billions of dollars per year. A number of Democrats opposed to this troop build up have called for a surtax to fund those operations. While politics, as opposed to fiscal responsibility, may be the impetus for the proposal, the idea of paying for the plan should not be dismissed.
 
"Asking policymakers to actually pay for their policy actions should not be such a radical concept," said Maya MacGuineas, President of the Committee for a Responsible Federal Budget. "An essential aspect of budgeting is deciding how to pay for things."
 
The 2010 budget deficit is expected to top $1 trillion. Meanwhile, $944 billion has already been appropriated for military operations in Iraq and Afghanistan, and other war-related activities, including $154 billion in FY2009. The troop increase is likely to cost around $30 billion this year.
 
Deficit financing the wars thus far has not only broken practice with past wars, which have been paid for in part with new taxes, it has added tremendously to the national debt - now over $12 trillion. Responsible leadership requires offsetting the new costs through spending cuts, tax increases, or a combination of the two.
 
"Deeming a particular initiative as vital to the national interest should not exempt it from being paid for," said MacGuineas. "The purpose of having a federal budget is to induce the President and Congress to make difficult choices and prioritize their objectives. That discipline has been lost in recent years and must be regained. Perhaps requiring the Afghanistan troop build up to be paid for will encourage leaders to find excesses elsewhere in the budget that can be curbed or eliminated."

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

 

Senate Health Bill Needs Stronger Focus on Cost Control

 

Senate Health Bill Needs Stronger Focus on Cost Control

 November 19, 2009

Late yesterday, Senate Majority Leader Harry Reid introduced the Patient Protection and Affordable Care Act. The $848 billion bill would reduce the deficit by $130 billion over the next decade, although $72 billion comes from the CLASS Act, which most experts do not consider an authentic offset. In the next decade, the bill would reduce the deficit by around one quarter of one percent of GDP.

Although this deficit reduction represents an important step in controlling the debt, this bill does not go far enough in controlling long-term health care costs or bringing Medicare and Medicaid under control.

"The original Senate Finance bill was projected to save half a percent of GDP in the second decade, the next version a quarter to a half, and this version only a quarter,” said Maya MacGuineas, President of the Committee for a Responsible Federal Budget. “Considering the dismal state of our budget, we need to do better.”

The Senate bill includes two important offsets which that are not in the House bill, which are likely to slow health care cost growth: a tax on high cost health insurance plans and a commission to reform and reduce Medicare payments. Unfortunately, the scope of both provisions has been narrowed in this bill. It reduces the strength of the commission by increasing the cost threshold the commission has before it can cut costs, and it amends the tax to apply to plans of $8,500 ($23,000 for families), as opposed to $8,000 ($21,000 for families). Replacing these pay-fors is an increase in the Medicare payroll tax for high earners. Additionally, some of the deficit reduction to meet the $900 billion threshold comes from timing delays that push back the start date for most of the coverage provisions.

“While this bill does a better job than the House version at reducing the deficit and controlling costs, it still doesn’t do enough,” MacGuineas concluded. “Given the political system’s aversion to tax increases and spending cuts, I worry about what the final bill will look like; politicians need to refocus their energy on the critical priority of controlling costs.”

In the coming days and weeks, the Senate will debate the current bill, and if it is passed, will need to reconcile it with the House bill. CRFB has put together several charts comparing these two bills.

 

Comparison of Senate Bill to Finance and HELP Committee Bills Comparison of House and Senate Health Reform Bills

Click to enlarge       


Click to enlarge

Click here for a PDF version of this release. 

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