Tom Price: The fiscal crisis at hand
The Congressional Budget Office recently updated its fiscal and economic projections with the unsurprising result that the government is back in trillion-dollar deficit range: $960 billion this year, $1.008 trillion next year and then growing from there.
As a share of the economy, these budget gaps are smaller than those of former President Obama’s first term, but still much too large. Worse, the trend now seems self-perpetuating.
Congress’s repeated failures to take remedial action have put the nation at risk, at this moment, of serious and unpredictable economic consequences. Compounding these problems, lawmakers are unwilling, or possibly unable, to address the reckoning at hand.
In short, what some experts call a “looming” fiscal crisis is not looming any more. It has arrived.
If this view sounds alarmist, consider the following:
Federal spending is overwhelming revenues
Over the next decade, outlays for government programs (excluding interest payments) will exceed tax revenues by nearly $6.4 trillion, according to CBO’s figures.
That disparity persists even under CBO’s assumption that certain tax reductions enacted in 2017 will expire as scheduled in 2026, resulting in a substantial tax increase. After 2029, the cost overruns continue to grow.
To make up the difference between excess spending and tax revenue — the budget deficit — the government borrows by issuing Treasury bonds.
This borrowing will exceed $12 trillion over the next 10 years, and that is totally wasted money: It buys no ships or airplanes, finances no one’s medical care, does nothing to boost education or rebuild the nation’s roads and bridges.
Naturally, this constant borrowing adds to the government’s debt. Between 2007 and 2012 the government’s publicly held debt doubled as a share of the economy. That was partly due to the Great Recession, but even since then the debt has continued to mount.
It now stands at its highest level since the Truman administration and is on course to eclipse the size of the entire economy in about a decade. At some point investors will abandon Treasury notes or demand much higher returns.
This would further erode the government’s fiscal stability and the economy’s output. Few economists see an imminent threat, but no one can be sure. Remember, few predicted the 2007 financial crisis either.
Permanent spending demands
An important distinction is that today’s growing debt results not from a war or economic troubles but from ongoing entitlement spending, especially for Social Security, Medicare, Medicaid and other government benefits.
The demands on these programs will escalate as more of the baby-boom generation retires. Absent a firm and sustained commitment to control spending, these budgetary pressures are inexorable.
A course correction might be out of reach. The fiscal changes required just to stabilize the debt are far greater than Congress has ever considered. The challenge is even more daunting if lawmakers try to reduce the burden of government’s accumulated borrowing.
1. Just maintaining debt at today’s historically high 78 percent of gross domestic product (a customary measure of the economy’s output) would require $4.7 trillion in spending restraint and/or tax hikes over the next 10 years, according to calculations by the Committee for a Responsible Federal Budget.
If lawmakers wait a decade, it will take $7.1 trillion in savings over 10 years to stabilize the debt at its current level, CRFB said. The organization published these estimates in June, before the recent bipartisan agreement increasing annually appropriated spending, which worsened the outlook.
2. Bringing the debt down to 42 percent of GDP, its 50-year average, would require $7.6 trillion in budget adjustments if Congress started now, reported CRFB. That figure becomes $11.6 trillion if Congress delays another 10 years.
3. Balancing the budget in the foreseeable future is almost out of the question. The fiscal plan produced last year by the then Republican-controlled House Budget Committee called for $8.1 trillion in deficit reduction, including $5.4 trillion worth of changes to entitlement programs, to reach balance within nine years. The House leadership refused to bring the measure to the floor for a vote.
Congress has not even tried to budget comprehensively for at least a decade, under both Republican and Democratic control, and congressional leaders have decapitated the Budget Committees, which were created for that purpose.
Congressional leaders have largely excluded Budget Committee chairmen and ranking members from budget negotiations.
This year, the Democrat-controlled House Budget Committee failed to produce a budget resolution, abdicating its principal role.
Equally important is Congress’s simple lack of will to control spending. Even in the latest spending agreement, lawmakers claimed offsets for their profligacy by merely extending customs user fees and limits on overall Medicare spending.
These were not new savings provisions In the past decade Congress has demonstrated several times its inability to maintain previously-agreed-to spending disciplines. The recent agreement also shirks accountability by eliminating, for the next two years, any limits on how much the government can borrow. Washington can heap more debt on the taxpayers without so much as a vote in Congress.
Spending restraint does not necessarily mean spending reduction. Congressional estimators calculate spending changes relative not to the current year but to their estimates of future spending. Those estimates usually project spending to rise. Thus, what Washington budget-speak calls a spending “cut” is typically just a slower rate of spending growth.
Lawmakers have often blamed their fiscal malpractice on a “broken” budget process, but no process reforms can restore the plain lack of fiscal responsibility. In any case, a special bipartisan, bicameral committee last year considered numerous changes in budget procedures and failed to agree on a single one.
Because Congress refuses to meet these challenges willingly, the American public will have to force the issue. Voters should demand that every politician running for federal office explain how he or she would solve the government’s fiscal dilemma.
It should be a central topic in presidential debates. It should be a focus of cable TV news programs. The press should give it at least as much attention as it does climate change, immigration, health care, or any other issue. This crisis is happening now, not somewhere on the horizon and will swamp all the nation’s other concerns.
Tom Price M.D., is a former Health and Human Services secretary and a former member of Congress. Price is also a senior health care policy fellow at the Job Creators Network.
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