Opinion

The Great Debate

To help end budget gimmicks, pass this bill

By David M. Walker
July 24, 2013

When it comes to addressing our growing national debt, there is no shortage of disagreement between the political parties in Washington. But there is one thing they should both agree on: to tell the truth about our nation’s growing fiscal imbalance.

That’s hardly the case today. Fiscal reporting by the federal government — whether through the Congressional Budget Office or the Office of Management and Budget — vastly underestimates the size of the problem we face and the inter-generational consequences of remaining on our current path.

For example, trillions of dollars in unfunded promises to current and future retirees through programs like Social Security and Medicare are not captured in either the reporting of this year’s deficit or our total national debt. In addition, cost projections on pending legislation only look 10 years into the future — hardly far enough to gauge their long-term budgetary impact.

As a result, the real financial burdens being placed on young people and future generations are not adequately disclosed and action to fix this problem is being delayed.

Our elected officials have been hiding behind myopic budgeting and accounting practices for too long. But now some genuine leaders in Congress are taking steps to increase transparency and accountability in our federal budget system. Wednesday, Senators John Thune (R-S.D.) and Tim Kaine (D-Va.) are introducing the INFORM (Intergenerational Financial Obligations Reform) Act, with co-sponsors Senators Rob Portman (R-Ohio) and Chris Coons (D-De.). This bill, also championed by the youth-led “The Can Kicks Back” campaign, would make it more difficult for Washington politicians to kick the can down the road by providing information about the long-term impact of today’s unsustainable fiscal policy.

Specifically, the INFORM Act would expose both public and political leaders to two important but often ignored realities.

First, our real fiscal challenge lies ahead of us. With an aging population, rising healthcare costs and mounting interest expense, federal spending is set to automatically and dramatically increase the “mandatory” part of our budget — which includes Medicare, Medicaid, Social Security and interest on the mounting federal debt. Without social insurance program reforms to slow the spending increase, and comprehensive tax reform to encourage economic growth and generate more revenue, our debt will inevitably reach a perilous level.

Second, young people and future generations will disproportionately shoulder the burden of our fiscal imbalance. The bill will eventually come due — not to those responsible, but to their children and grandchildren.

Consider, for example, that the average Medicare beneficiary will likely receive $3 in lifetime benefits for every dollar he or she paid into the program. The difference must be borrowed and, eventually, be paid for by a future tax hike or spending cut. Current budget analyses, however, do very little to show these intergenerational tradeoffs.

The new legislation would shine a light on these budget realities by closing key gaps in current fiscal reporting. It would require that the CBO, the Government Accountability Office and OMB incorporate fiscal gap and generational accounting analyses in their annual budget projections and, in the case of the CBO, its analysis of pending legislation. As the former Comptroller General and head of the Government Accountability Office, I know this would be a worthwhile exercise in painting a more vivid fiscal picture for the public.

The fiscal gap disclosure would show the difference between total future projected spending and total future projected revenue. The usual budget gimmicks will have no place to hide. In addition, the generational accounting disclosure would show the distribution of net lifetime taxes (the difference between taxes paid and transfers received) by age group — assuming the fiscal gap is left to future generations to close.

These proven analyses have been used by dozens of countries, the International Monetary Fund and even the Social Security Trustees in their annual report. Moving forward, they can be used to more effectively judge proposed policy changes by asking: To what extent does the policy widen or narrow our long-term fiscal imbalance? And to what extent does the policy increase or decrease the financial burden being placed on future generations?

Under current budgeting practices, lawmakers are not able to adequately answer either question.

To make better decisions for tomorrow’s Americans, today’s elected leaders need to have better information — and the integrity to honestly share that information with the rest of us. Passing the INFORM Act would be a meaningful step in that direction.

 

PHOTO (Top): A cashier holds copies of the 2013 Federal Budget at the Government Printing Office in Washington. Feb. 13, 2012. REUTERS/Joshua Roberts

PHOTO (Insert): Senators Tim Kaine (L) and John Thune.  REUTERS/File

Comments
11 comments so far | RSS Comments RSS

It is interesting that the inter-generational wealth transfer mechanisms in place for the past half century are only now coming into question. Why is that? Is it perhaps a generational bias?

Another interesting point is the blatant lying built into the US budgeting process. Untold billions, perhaps a trillion dollars, are spent and allocated each year from secret, so-called “black” budget, expenditures, almost exclusively spent on aggressive activities aimed at foreign “enemies” and in domestic secret police funding. There is simply no way to know what percent of spending is of this sort. It is “hidden” and “secret” and a matter of “national security”. But the revenues are very, very public, are they not?

There is no doubt that a very significant percentage of FICA tax revenues, perhaps all of it, is used to fund the “black budget”. Now, there is a “crisis”.

There is no reason not to unify “employment” taxes and “income” taxes. Income is income is income. The only reason to keep them separate is to burden lower income citizens with a higher tax rate than the rich pay. Unify Federal taxes on income to a single tax, undifferentiated by dependence on laboring or capital activities. That will solve the funding crisis and should also stop those who pay the smallest percentage in tax from starting almost all of these ruinous wars.

Posted by usagadfly | Report as abusive
 

Funny how the actuaries in the Social Security Administration have been reporting for decades since the initial few years of kickoff of Social Security that it is ENTIRELY self-funding. Then, Congress has been writing IOUs against the phony Social Security “Trust” Fund (and Highway Fund) for decades – never to be repaid. In the private sector, this would be considered embezzlement and subject to criminal prosecution.

Maybe it’s all these folks in the SSA who are liars. They still keep sending out annual statements to potential SS beneficiaries indicating their contributions and concomitant future benefits based on those contributions. Is this just a monumental scam perpetrated by an evil bureaucracy?

Then, proponents of killing “entitlement” programs like using taxpayer funds to bail out the “entitled” gamblers in the Wall Street Casinos at full value for their losses, always ignore the fact that Social Security is self-funding and Medicare is paid by wage-earners with the discrepancy between contributions and real costs PAID AFTER RETIREMENT. Even the Medicare that is covered is not free. Check your parent’s Medicare monthly fees.

Who’s lying here?

Posted by ptiffany | Report as abusive
 

So for our government to “do the math” that is pertinent they need to pass a bill? Please.

Do they have to pass a bill to eat or go home? No! What ever happened to their common sense, and their responsibility to actually “do the work of the nation” in an honest and timely?

Oh, I forgot. They’re politicians. And most of them are lawyers. Now I understand.

Posted by OneOfTheSheep | Report as abusive
 

Term limits, campaign finance reform….

Posted by tmc | Report as abusive
 

I get very tired of hearing our deficit woes blamed on an aging population. It’s CONGRESS who mismanaged funds, not us!

We(the inconveniences who are simply RUINING life for our next generations), paid into Social Security from our first paycheck to our last. I didn’t mismanage those funds, Congress did. Over and over. For decades. Every time they had to plan a budget. Once a year.

Lots of campaign promises were made by Dems and Reps alike and according to their accusations, the other party f’d it all up. I simply see a colossal, unethical, criminal failure of our Congress in its entirety over the last 30 years.

The “fiscal problems” are always blamed on spending and NEVER COLLECTING. It’s a tired argument, so change the record. Address how we can not only spend more intelligently, but collect more intelligently.

The U.S. government promised me a bargain and that was to deduct SS taxes from me for each and every dime I’ve earned in 42 years – without my consent.

Now, pay me, and shut the hell up.

Posted by JL4 | Report as abusive
 

@JL4 Here, here. And we were raised that you only deserved what you earned (and sometimes not even that).

But, just the other day HUD announced a new social program to integrate non-whites into neighborhoods where they are “under-represented”. That is, the government (in its infinite wisdom) is going to somehow offer access into communities for members of “protected classes not based (on the traditional) on ones ability to pay, but another disguised form of affirmative action.

So again, I paid for my home, as did all of my neighbors, a number of whom are members of these same protected groups. Right now, the government does not tell you how a member of this “class” who has no ability to afford a home in my area is going to secure access. But you can bet your last dollar of SS that at some point in the future HUD will find a way to fund the purchase of a home for someone who cannot get there based on their income, let alone the down payment.

Even more interesting, is that a white person of the same income level is not eligible for the program. So we have a POTUS and Eric Holder screaming about profiling and institutionalized racism, while promoting a program that does exactly that.

As for the young people who will have to fund our SS benefits (because the Repubs AND Dems spent every dollar we paid into it for thirty years), you’re spot on. You voted for more handouts in the last elections; but the POTUS did not tell you that you are not eligible for what he has in mind.

How’s that income redistribution working for you now? (And, as your income increases, you get to pay even more!) Love that progressive income tax model.

Posted by COindependent | Report as abusive
 

@COindedpendent, While I appreciate your agreement on this SS topic, I have to ask if you think mismanagement of the fund is only a Democratic thing, instituted by Obama and Eric Holder? Of course you don’t. I could list 10 issues (and a few wars)I don’t like about Republicans just off the top of my head – more if you give me 20 minutes.

That said, I’m genuinely interested in what you mentioned. Please cite your source so I can look it up. (no sarcasm).

Posted by JL4 | Report as abusive
 

JL4, here’s the link. Nothing has been done yet. It’s still in the proposal stage and the public has 54 more days to comment on the proposal. It looks to me that it is to strengthen the laws already on the books by providing data and more guidance.
https://www.federalregister.gov/articles  /2013/07/19/2013-16751/affirmatively-fu rthering-fair-housing

Posted by MargaD | Report as abusive
 

If anyone calculated and posted the entire government debt …Federal, State and Local including all unfunded liabilities ….and add a provision for “unexpected natural disasters” (you know they are going to happen with regularity) but not including wars ….the numbers would be so staggering it might be counterproductive.

i.e. Everybody would realize that we will never dig out of the hole and they would likely give up….. go out and get drunk …and just keep on borrowing, taxing and spending ….

We could call it the Sequel ….Roman Empire II

Posted by Jake987 | Report as abusive
 

@MargaD, Thanks for the reference. I did try the link but it says “Page Not Found”. It would have been interesting and informative.

Posted by JL4 | Report as abusive
 

Correction: I got a “404 Not Found” error message.

Posted by JL4 | Report as abusive
 

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