Blizzard Whiteout Buries Issue of Red Ink
One of the blizzard’s most important, if unintended, effects was keeping the federal budget deficit buried as a 2016 campaign issue.
The return of a rising tide of red ink has been almost entirely overlooked by both parties’ candidates in the presidential race and the relatively few competitive contests for Congress. There was a chance that would change this week, when the head of the Congressional Budget Office was supposed to describe his very sobering assessment of the fiscal future in appearances before both congressional budget committees. Instead, after the snowstorm, his Tuesday testimony in the Senate and then Wednesday’s in the House were postponed indefinitely.
The delays denied something of potentially vital importance to the electorate in the earliest caucus and primary states — a punchy and simplified audio-visual aid to understanding one of the most significant public policy challenges that will confront the next White House occupant — and everyone in the 115th Congress, as well.
Instead, the best that CBO Director Keith Hall could offer voters was a dense 165-page report detailing the agency’s budgetary forecast for the next 10 years.
The headline: Things are about to start going downhill pretty quickly.
And the relatively few things President Barack Obama and the Republicans in Congress have agreed to in this decade (particularly last fall) are no help to the nation’s fiscal health in the decade ahead.
The agency says the deficit is going up by 24 percent during the current fiscal year to $544 billion, or 2.9 percent the size of the national economy. That will end a six-year decline in the size of the annual shortfall, the trend that cooled the ardor of so many of the fiscal hawks who’d been arguing for dramatic changes on both the outlay and revenue sides of the federal ledger. (The deficit was triple its current size, and a record 9.8 percent of the gross domestic product, in fiscal 2009 after an enormous injection of federal spending to stimulate the economy out of the Great Recession.)
The main reason the red ink has stopped shrinking, and is now going to start spreading again for as far as the eye can see? The budget agreement Obama and the GOP Congress cut last fall, which boosted domestic and defense appropriations, indefinitely extended many popular tax breaks and suspended some unpopular taxes on medical insurance. The cumulative deficit over the next 10 years is now $1.5 trillion bigger than what CBO projected just five months ago, with half that amount attributable to a deal widely hailed as a rare triumph of bipartisanship.
The rest of the challenge is created by what the president and the Republicans tacitly decided to leave alone after the talks toward a budgetary “grand bargain” fell apart five years ago. Obama’s presidency will end without any meaningful steps to curb the growth of Social Security, Medicare, Medicaid and other entitlements, which will jump 7 percent this year and continue to grow at an average annual rate of 5.5 percent in the next decade.
Put all this together, and if nothing changes during the next administration, then the 45th president’s first term would conclude with these bottom line numbers:
Tax revenue will have gone up 16 percent. But mandatory spending, which runs on autopilot unless Congress steps in, will be 21 percent more than the estimate for this election year, or $2.98 trillion. That will be almost two-and-a-half times the size of the discretionary portion of the budget, the part the House and Senate haggles over every year. (In broad strokes, this will be true even if Congress continues its recent practice of edging away from its self-imposed sequester spending caps; if those are retained, the appropriations grand total will grow just 4 percent by decade’s end, to $1.25 trillion.)
The deficit will have increased every year and be $810 billion in 2020, or 3.7 percent of GDP.
And all the borrowing required to cover the increasing annual shortfall will boost the national debt to $16.89 trillion, which would be 20 percent larger than today and 78 percent the size of the economy forecast for 2020.
The growth in federal outlays is destined to outpace the growth of the economy, which CBO predicts will grow 2.5 percent in 2017 but just 2 percent in each of the three years thereafter. No matter what Congress does about appropriations, government spending will grow faster than GDP for three big reasons: The aging population will open the spigot even wider on entitlements, health costs will rise faster than overall inflation, and interest payments on the debt will more than double — to $498 billion by the 2020 election — as the deficit increases (requiring still more borrowing) and interest rates continue to rise from their record lows.
As the government’s official budgetary scorekeeper, charged with deciding how much every legislated decision would cost or save, CBO is bound to issue these reports every January that are based on the assumption that nothing changes in the coming years. It’s a particularly useful exercise at the start of a year filled with candidates promising all manner of change.
Yet reversing the worsening trajectory is mentioned hardly at all. The word “deficit” wasn’t uttered Monday night at the final joint forum in Iowa for the Democratic presidential aspirants, while Sen. Bernard Sanders of Vermont vowed to push tax increases to pay for his expanded social safety net — not to cover the ballooning costs of the system already in place. On the GOP side, Gov. John R. Kasich of Ohio is the only White House candidate who makes deficit reduction a central part of his stump speech.
Campaigns tend to reflect what the voters want to talk about, though. And the annual survey of Americans’ top federal policy priorities by the Pew Research Center, released last week, pegged “reducing the budget deficit” ninth among 18 issues. It was No. 2 after the last presidential election. And it will take something more dramatic than the latest CBO outlook downer to raise the issue to prominence in this election.
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