Opinion

The Great Debate

To help end budget gimmicks, pass this bill

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.

Seeking a smarter approach to the budget

Capitol Building in Washington, February 27, 2013. REUTERS/Jason Reed

Sequestration grew out of a political impasse: Republicans refused to raise the government’s borrowing limit in 2011 without starting to bring spending under control, but Democrats refused to make choices about where to cut spending.

So the president devised sequestration, on the theory that cutting spending in such a painful and dumb way would force Republicans to raise taxes. Spending on entitlement programs like Social Security and Medicare was mostly spared, but other programs, particularly defense, got across-the-board cuts.

As a result, thousands of federal workers, including border security and FBI agents, are being told to expect unpaid furloughs in the coming weeks and months. And that is only the beginning. If there is one thing Democrats and Republicans in Washington can now agree on, it is this: The sequester must be replaced.

Obama’s budget bid for a ‘grand bargain’

President Barack Obama’s budget, released Wednesday, is getting a lot of criticism from ideologues on the right and left. That is one of the most encouraging things about it.

Though the president’s budget falls short in several important ways, it demonstrates his willingness to compromise — something most Democratic and Republican legislators have resisted. Now comes the critical stage in any real effort to achieve a “grand bargain,” when the president can show true leadership by bridging the divide between the parties and using the bully pulpit to address the American people in a constructive fashion that can lead to a deal.

The most helpful thing about the Obama budget is that, for the first time, the president has publicly proposed reforms to two key social insurance programs. By adopting a GOP-backed change in the inflation calculator — the so-called chained CPI — the president is accepting adjustments in the cost of living payments for those receiving Social Security.

Political strategy in the Budget Control Act era

By Keith Hennessey
The opinions expressed are his own.

I cover three topics in this post: what important players won in this deal, the core concepts and tradeoffs within the deal, and what the different strategies might be this Fall under this bill when it becomes law. The President’s priorities

The President knows he will get debt limit increases through early 2013 no matter what House conservatives/Tea Party members do. Those Members can no longer “hold a debt limit increase hostage” before the 2012 election.

We could also describe this as eliminating liquidity risk through 2012.

Assuming someone doesn’t find a way out of the enforcement mechanisms in the bill (1 in 3 chance), there will be at least $2.1 T in deficit reduction over the next 10 years as a result. While I think that’s a big policy benefit, I’m not sure how important that is substantively to the President. (Is he for stimulus? Austerity? Who knows at this point.)

Sticky and very high

The following is a guest post by Russ Roberts taken from his co-authored blog, Cafe Hayek. The opinions expressed are his own.

Both Arnold Kling and I (and probably a few million other people) have wondered why it was necessary for Federal money to be given to the states and cities to prevent job losses. For states that have been irresponsible or unlucky and find themselves short of revenue, why not reduce salaries some, say 10% and save that money?

One answer is that state and city employees are under union contracts that are not easily adjusted on short notice.

from Commentaries:

Deficit hypocrisy

There's something scary about big numbers. It's one reason we in the media often like to put the biggest number we can find into a headline.

So it was no surprise that most media outlets went gaga over the Obama administration's projection that the nation's debt will grow by $9 trillion over the next decade. And sure enough, critics of the administration's efforts to reform healthcare were quick to seize on that scary number as another reason to advocate doing nothing.

But without wading into the muck of the current debate over healthcare reform, it's worth taking stock of just how much hypocrisy there is when it comes to the subject of government spending and those big bad deficits.

  •