Concord Coalition Releases ‘Key Questions’ for Candidates on Federal Budget

With the federal budget deficit on the rise again and the nation’s debt still on an unsustainable long-term path, The Concord Coalition today released this year’s version of its “Key Questions” that voters should ask candidates for federal office.

“Voters should expect candidates in this year’s elections to explain how they intend to deal with the huge challenges ahead,” Concord says in the introduction to the Key Questions. “This is no time for vague rhetoric and petty partisan jabs; voters should insist on credible solutions — the more specific, the better.”

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Topics covered by the questions include deficit-reduction plans, health care costs, candidates’ budget priorities, defense spending, the tax code, Social Security, other domestic spending and opportunities for bipartisan cooperation on fiscal reform. Candidates should also explain the relationship they see between getting our fiscal house in order and a strong economy.

“Key Questions Voters Should Ask Candidates About Our Fiscal Future” includes background information to help voters assess campaign rhetoric on all of these topics and evaluate whether individual politicians’ promises are responsible and their financial estimates reasonable.

Concord warns that some solutions won’t be easy because the problems go far beyond the simple “waste, fraud and abuse” that campaign speeches often dwell upon. Nor should voters expect strong economic growth alone to put the federal budget on a sustainable path.

The Key Questions are part of Concord’s “Lookout Campaign,” which encourages elected officials, candidates and the public to focus on the dangers posed by the growing pressures on the federal budget in the years ahead.  

“Doing nothing would be the height of fiscal irresponsibility, could jeopardize our economy and undermine our position of global leadership,” Concord says. “It would also burden our children and future generations with massive government debt. So what do the candidates propose? Voters have a right — and a responsibility — to find out.”

The document can be found here.

Concord Coalition Releases Eight Key Questions About Social Security for Its 80th Birthday

As Social Security approaches its 80th anniversary,  this is a good time to note the program’s accomplishments while taking a hard look at its future — including the need to put Social Security on a sustainable, long-term path.

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With that in mind, The Concord Coalition is releasing a paper today that discusses eight key questions about Social Security that elected officials, the media and American public should focus on.

“Today a majority of seniors receive over half of their retirement income from Social Security,” the paper notes. “It provides 90 percent or more of retirement income for almost one-third of retired beneficiaries.”

But there are major challenges: “Social Security has been running annual cash deficits since 2010. Absent congressional action, Social Security disability benefits will be cut across the board by 19 percent in 2016 and retirement benefits will be cut by 23 percent in 2035. Meanwhile, the expanding gap between Social Security’s dedicated revenues and benefit payments will contribute to future federal budget deficits.”

Concord emphasizes that it will be easier — and more fair to younger Americans — to enact Social Security reforms sooner rather than later. On an encouraging note, the paper points out that various bipartisan groups have offered an array of thoughtful proposals for elected officials to consider.

The eight specific questions addressed in Concord’s paper:

1. Is Social Security on sound footing for the next 80 years?

2. What are the budgetary consequences of doing nothing?

3. What is the most immediate concern?

4. What’s driving the problem?

5. Did Congress “steal” from the trust fund?

6. Why take action now?

7. What reforms could solve the problem?

8. Is bipartisan cooperation possible?

The full paper, “Social Security: Eight Questions for Its 80th Birthday,” can be found here.

New CBO Projections Show Need to Address Growing Debt

The Concord Coalition said today that updated projections on the federal budget reinforce the need for presidential candidates in both parties to explain how they would curb the growth of the national debt over the next decade and beyond.

“Even with declining short-term deficits and slowing health care costs, Washington clearly remains on an unsustainable fiscal path,” says Robert L. Bixby, Concord’s executive director. “The federal debt is already quite high by historical standards, and the new projections confirm that Washington must make fundamental policy changes to avoid adding $7 trillion — and perhaps much more — to the federal debt over the next 10 years. The presidential candidates need to let voters know what they intend to do about that if elected.”

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In its report today, the Congressional Budget Office (CBO) offers new 10-year baseline projections for the nation’s spending programs and revenue collection, along with an updated economic outlook. Stronger-than-expected revenues will help reduce this year’s deficit to $426 billion (2.4 percent of GDP), an improvement of $59 billion (0.4 percent of GDP).

Overall, however, the report says the budget outlook for this period “does not differ substantially” from what CBO projected in March. Baseline projections are based on current law and do not take into account deficit-increasing policies that tend to get passed on a yearly basis — like the extension of numerous targeted tax breaks.

The latest report again highlights the growing pressures on the federal budget, largely as the result of an aging population, rising health care costs, and soaring interest payments on the debt in the years ahead. Social Security, the major health care programs and interest payments are all projected to grow as a share of the economy while all other programs are projected to shrink.

In total, CBO projects that federal spending will rise from 20.6 percent of GDP in 2015 to 22.0 percent of GDP by 2025 while revenues tick up just slightly, from 18.2 percent of GDP to 18.3 percent.

Under current law, CBO says, deficits over the next decade could push federal debt held by the public to 77 percent of GDP — up from 74 percent now, and roughly twice the average level over the past five decades.

“The structural mismatch between the federal government’s spending and tax policies is made abundantly clear in CBO’s report,” Bixby says. “There are no mysteries here for anyone who is open to looking at the basic facts.”

There were earlier red flags this summer when the CBO released its Long-Term Budget Outlook and the trustees of Medicare and Social Security issued their annual reports on those two troubled programs.

The Long-Term Outlook warned of even greater fiscal difficulties beyond 2025 unless Washington pursues extensive changes well before then. The trustees reiterated that Medicare and Social Security should be repaired soon, with particularly urgent concerns about the Disability Insurance Trust Fund running dry next year.

The updated CBO projections come as President Obama and Congress prepare to square off over a number of pressing fiscal deadlines.

Government agency funding will run out on Oct. 1, forcing a disruptive shutdown absent agreement on appropriations for Fiscal Year 2016. By the end of October, lawmakers will need to tackle the long-term shortfall facing the Highway Trust Fund. Soon after that, the statutory debt limit will need to be raised. Before the end of the year lawmakers will also have to decide whether to extend a number of expired tax breaks and how to make up the lost revenue, if at all.

Today CBO also released a report on the debt limit, saying that the special measures being used by the Treasury to avoid breaching the limit would be exhausted sometime between mid-November and early December. The Concord Coalition has long urged Congress to avoid unnecessary brinksmanship by raising the debt limit sooner rather than later.
“What used to be ‘regular order’ in the congressional budget process has turned into ‘regular chaos.’ Meanwhile, the broad picture remains one in which entitlement programs and interest payments will continue rising while other spending — in other domestic as well as defense programs — shrinks substantially as a share of the economy,” Bixby said. “Moreover, government revenue from our inefficient tax system would fall farther and farther behind federal spending. That’s not the path to national strength, growth and prosperity. And it certainly isn’t fair to our children and future generations.”

A copy of this release can be found here.

Concord Coalition Says Trustees’ Warnings Should Be Heeded

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The Concord Coalition said today that new reports from the trustees for Social Security and Medicare show the rising pressure the programs will put on the entire federal budget in the years ahead, a problem that deserves close attention from the presidential candidates and others seeking federal office next year.

“While there have been some encouraging signs that at least some presidential candidates are prepared to discuss entitlement reforms, voters need to hear in clear and fairly specific terms what the candidates have in mind,” said Robert L. Bixby, Concord’s executive director. “This is unquestionably one of the most important problems the next president will face, and voters should expect any serious candidate to understand that.”

“After another year of procrastination in Washington, repairs to Social Security’s Disability Insurance are particularly urgent,” he added. “But with an aging population and rising health care costs, both Social Security as a whole and Medicare remain unsustainable. The trustees note once again that the longer we delay, the more difficult that task will be. Elected officials and candidates should heed that warning.”

The reports show that Social Security and Medicare Part A (Hospital Insurance) continue to pay out more than they take in from their designated payroll taxes. Their reliance on general government revenues will grow.

In addition, still more general revenues are required to subsidize Medicare Part B, which provides various medical services, and Part D, which pays for medication. While many older Americans mistakenly believe they fully pay for these parts of Medicare with their premiums, those premiums are designed to cover only a fourth of their costs.

The combined general-revenue subsidies for Medicare and Social Security will total $364 billion in Fiscal 2015, according to the trustees. Of that total, $280 billion will go to Medicare and $84 billion to Social Security.

Each year the trustees’ reports receive considerable attention for their projections on how long the Social Security and Medicare trust funds will remain solvent. Those projections, however, do not provide meaningful information about sustainability or how entitlement program growth squeezes other government priorities and pushes up federal deficits.

For the Disability Insurance Trust Fund within Social Security, even the solvency analysis provides little comfort. The trustees project that this fund will run dry by late 2016, which would trigger sharp automatic cuts in benefits for millions of disabled Americans and their dependents.

To avoid such a debacle with Disability Insurance, Congress must soon pass legislation to make at least some changes in Social Security.

“Ideally, Congress will use the need to fix the Disability Insurance shortfall as an opportunity to make broader repairs to the entire Social Security system to enable it to meet the needs of an aging population with more and more retirees,” Bixby said.

The two public trustees, who are not administration officials, are particularly emphatic about the risks of delaying broad changes to Social Security. Pointing to a projection that Social Security costs will be more than 25 percent higher than income by 2034, they warn that there is “no historical precedent for closing annual gaps of this size within the space of just a few years.”

The public trustees also draw attention to the projection that “even the total elimination of Social Security benefits for those newly eligible in 2034 would be insufficient to restore short-term financial balance. Similarly, a payroll tax increase of the magnitude needed to maintain scheduled benefits would have a profound adverse impact on the economy and employment.”

The trustees’ Medicare report shows cost projections for the next 20 years that are similar to those in last year’s report. However, the projections for the longer range are substantially lower. As the public trustees stress, this improvement depends on the continued effort among all stakeholders in the nation’s health care system to follow through on cost containment and the many strands of reforms currently being examined and undertaken across the country.

“Using Medicare policy as a prod for cost containment efforts is crucial for maintaining progress,” said Joshua Gordon, Concord’s policy director. “That is why it would be problematic to repeal the Independent Payment Advisory Board — a mechanism for automatically furthering payment reform if health care costs were to resume rapidly increasing. The trustees suggest this mechanism might be triggered in 2017.”

“Even worse,” he added, “would be repeal of the ACA’s ‘Cadillac tax’ on high-cost health insurance, which has likely already reduced costs and is a step on the road towards limiting the inefficient and regressive tax deduction for employer-provided health insurance. Setting back the small progress we have made against health care inflation while facing a still unsustainable future makes no sense.”

A copy of this release can be found here on our website.

Concord Coalition’s Analysis of House Budget Plan

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The Concord Coalition today welcomed the proposed House budget resolution for its goal of reining in future deficits but cautioned against assumptions of reduced spending that are vague and unrealistic, and against revenue projections that are at odds with recent tax-cut legislation in the House.

“Balancing the budget by a specific date provides a clear, understandable goal to guide legislation,” said Robert L. Bixby, Concord’s executive director. “As an economic matter, however, the more relevant concern is not whether balance is achieved in a targeted year but whether the policies enacted pursuant to this budget reduce the debt as a share of the economy and make sure that it remains on a responsible downward path.”  

The House budget plan achieves much of its proposed $5.6 trillion in deficit reduction over 10 years from a number of policy assumptions that would be very difficult to achieve. It assumes $2 trillion in savings from repeal of the Affordable Care Act (ACA), $913 billion from block granting Medicaid, $1 trillion in unspecified other cuts in mandatory spending, and $759 billion in domestic discretionary cuts below the caps set by the Budget Control Act. Only $148 billion would come from Medicare, while hardly anything would be done on Social Security and there would be no new revenues. Meanwhile, defense spending would increase by almost $400 billion above current-law spending caps.

The budget resolution also raises defense spending in Fiscal 2016 by increasing funding for Overseas Contingency Operations (OCO) well above the administration’s request. This raises the prospect that OCO funding might be improperly used to bolster parts of the defense budget not directly related to war efforts — as has occurred in the past.

Given the political realities in Washington, it is highly unlikely that substantial increases in defense spending can be financed by even deeper cuts in domestic discretionary spending. This domestic spending is already projected to drop below its historic low. The fact that the proposed House resolution would postpone these deeper cuts until next year is one indication that such cuts are polarizing and likely not feasible.

The revenue assumptions in the budget present still more questions. House Republicans have recently passed legislation to make a number of costly tax breaks permanent, without offsetting the lost revenue. Yet the revenue number assumed in the budget plan does not account for the revenue that would be lost by extending these and other tax breaks.

Similarly, repeal of the ACA would reduce revenues relative to current law, but the budget assumes that the same amount of revenues will be collected.

“To be credible, a budget resolution should take into account legislative proposals that are at or near the top of the priority list for its authors,” Bixby said. “They can’t have it both ways; they shouldn’t be counting on revenue from taxes they say the government shouldn’t be receiving.”

He also expressed skepticism about the resolution’s call for a bipartisan Social Security commission to study the system’s problems and report back with proposals.

“One more commission might not do any harm, but studies and proposals of this nature already fill many agency and think-tank shelves in Washington,” Bixby said. “The impending insolvency of Social Security’s Disability Insurance trust fund and the longer-term structural challenges really require legislation, not another commission.”

A copy of this press release can be found here on our website.

President’s Budget Sets Stage for Tax and Spending Debate

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With the release of President Obama’s proposed budget today, The Concord Coalition again urged Washington to focus on policies that would put the federal government on a sustainable track.

“The President’s budget sets the stage for a vigorous debate on the right mix of spending and tax policies needed to put the nation’s finances on a sustainable path,” said Concord Coalition Executive Director Robert L. Bixby. “Its heavy reliance on higher revenues to pay for new spending demonstrates one way to keep the debt from rising as a share of the economy, but it is certain to be rejected by the new Republican Congress. Moreover, the budget, even if fully enacted, would do little more than hold the debt near its currently high level because policies that could be used for sustained deficit reduction, particularly in the out years, are used to pay for new initiatives instead.”

Under the President’s budget, spending would rise from 21.3 percent of GDP in 2016 to 22.2 percent in 2025. Revenues would rise from 18.7 percent of GDP in 2016 to 19.7 percent in 2025. Debt held by the public would slightly decline from 75 percent of GDP in 2016 to 73.3 percent of GDP in 2025.

“A good case can be made for moving away from the current spending caps on defense and domestic appropriations, as the President suggests and as many Republicans would also like to do,” Bixby said. “These caps were never intended to go into effect and their wisdom is increasingly suspect. However, they were put in place as a substitute for a more rational plan to reduce projected deficits through mandatory spending cuts and tax reform. The President and lawmakers should only move away from these caps if they can agree on a way to make up for the new spending elsewhere. That could be done through cuts in other spending, increases in government revenue, or both. President Obama is offering some suggestions, and Republicans will have a chance to offer their own. What should not happen is a deal to simply approve higher spending in one party’s favorite programs in exchange for higher spending in the other party’s favorite.”

The key factors driving the growth of the federal debt over the coming decade are more beneficiaries for the large entitlement programs (due primarily from the aging population), an inefficient tax system, and snowballing interest payments.

“Washington must not spend all its time haggling over discretionary defense and domestic spending in the coming year,” Bixby said. “We are facing larger, longer-term fiscal challenges that will only worsen if they continue to be ignored.”

One immediate concern is Social Security’s Disability Insurance (DI) program. The program’s trustees project the DI trust fund to be exhausted before the end of Obama’s administration; absent a legislative solution, beneficiaries would face a 19 percent across-the-board cut.

Unfortunately, the President’s budget fails to offer any specific proposals for strengthening either the retirement or disability programs in Social Security. It simply calls for Congress to reallocate some payroll tax revenue to the disability program, leaving the larger financial and demographic challenges to be addressed at a later date.

The budget also lacks a responsible plan to shore up the Highway Trust Fund, which should have a reliable stream of dedicated revenue consistent with the country’s transportation needs and the trust fund’s historical “user pays” principle.

Instead, the President proposes using a one-time surge of revenue from a new tax on overseas earnings of businesses to fund transportation spending for the next six years. This is hardly an appropriate long-term solution.

The President’s budget proposal is largely a marker, meant to contrast with what congressional Republicans have suggested or are likely to put forth. But there may be some areas where significant agreement could be reached.

For example, the budget proposes a number of health care reform policies designed to build on the already changing system of payments for doctors, hospitals and other providers.

In just a few months, Congress will have an opportunity to act on some of them as it turns to its annual “fix” of doctor payments in Medicare. The administration supports the permanent reform of the flawed Sustainable Growth Rate (SGR) formula — a reform already written by a bipartisan coalition of members of Congress. The reason that bill hasn’t passed yet is that lawmakers have been unwilling to discuss paying for the $157 billion cost of the fix.

In its proposed budget, the administration offers a menu of health care savings proposals totaling about $500 billion, of which Congress would only need to choose some to pay for the fix.

Furthermore, the fix, when combined with its pay-fors, would help move Medicare towards the new goals the administration has set for adoption of “alternative payment models,” moving such payments from 20 percent of all payments today to 50 percent by 2018.

“The administration’s goal-setting is important because with health inflation currently low, many policy-makers ignore the need for further reforms. We should actually be doubling down on payment reform now, before providers see it in their financial interest to lobby for a return to fee-for-service — as they might if inflation and service demand start picking up again,” said Joshua Gordon, Concord’s policy director.

Concord Coalition Announces Launch of ‘First Budget’ Campaign

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The Concord Coalition is pleased to announce a new initiative called “First Budget” that will build grassroots efforts in Iowa and New Hampshire to encourage the 2016 presidential candidates to address the growing federal debt and alarming budget projections.

For this project we are partnering with the Campaign to Fix the Debt, an organization with a shared history of pushing for fiscal responsibility.

Our supporters — volunteers, business leaders, students and others — will deliver to the candidates an emphatic message: The first budget that the next president submits to Congress must chart a more sustainable course that strengthens the nation, encourages growth and protects coming generations from excessive government debt.

First Budget’s efforts in Iowa and New Hampshire will be led by Sara Imhof, Concord’s education and grassroots advocacy director, and Chase Hagaman, Concords New England regional director, respectively.

“A sustainable budget is not just an economic imperative; it is a matter of generational responsibility,” says Robert L. Bixby, Concord’s executive director. “The next opportunity for major legislation to put the debt on a more sustainable path will likely come with the first budget of the next president. It is therefore critical for the 2016 presidential candidates to present a vision for the nation’s future that is not dependent on mounting debt. We will work across party lines with concerned voters in Iowa and New Hampshire to look out for the best interests of future generations by demanding responsible budget proposals from the candidates.”

For more information go to firstbudget.org.