Budget Committee RSS Articles

CBO Shows the President’s Budget Doesn’t Solve the Problem

Fri, 17 May 2013 04:00:00 GMT

WASHINGTON—This afternoon, the Congressional Budget Office (CBO) released an analysis of the President’s fiscal year 2014 budget. CBO found that the President’s budget would add $115 billion more to the deficit in 2014 than if we just did nothing. The CBO estimates that the President’s budget increases taxes by $974 billion. As a result of spending $46.5 trillion over the next decade, the budget ends with a $542 billion deficit in FY2023. By contrast, the House-passed budget balances by 2023.

House Budget Committee Chairman Paul Ryan of Wisconsin released the following statement:

“This new report shows that the President’s budget doesn’t come close to solving the problem. The federal government will take in a record haul over the next ten years. And the President wants yet another massive tax hike. But under his plan, we’ll keep adding to the debt—at an alarming rate. The government is taking more from hardworking taxpayers only to spend more in Washington.”

Contrast in visions:

Change in spending over the next decade

Without the gimmicks, the President’s budget increases spending by $853 billion.

House-passed budget decreases spending by $4.6 trillion.

Change in revenue over the next decade

President’s budget increases taxes by $974 billion.

House-passed budget advances revenue-neutral tax reform.

Balance date:

President’s budget: Never

House-passed budget: 2023

The re-estimate of the President’s budget follows a CBO report released earlier this week, which you can read here.

You can read the full CBO analysis of the President’s FY2014 budget here.

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CBO: Spending Is Still the Problem

Tue, 14 May 2013 04:00:00 GMT

Moments ago, the Congressional Budget Office (CBO) provided a fresh reminder of Washington’s out-of-control spending. CBO updated its budget outlook with the following deficit and debt estimates:

This year’s budget deficit = $642 billion
FY2023 budget deficit = $895 billion
Total deficits over the next decade = $6.34 trillion
Gross federal debt in 2023 = $25.2 trillion

What Drives the Debt?
According to CBO’s outlook, revenue is projected to grow each and every year. In 2023, CBO predicts the federal government will collect nearly $5 trillion in tax revenue. The problem is out-of-control spending. By 2023, the federal government will spend at an annual rate of nearly $6 trillion. Washington is expected to spend close to $47 trillion over the next decade. Health-care-entitlement spending consumes nearly one-third of total government spending over the next decade.

The Consequences of Inaction
In testimony delivered earlier this year to the House Budget Committee, CBO Director Doug Elmendorf said the following:

“Federal debt held by the public is projected to remain historically high relative to the size of the economy for the next decade. . . . Such high and rising debt would have serious negative consequences: When interest rates rose to more normal levels, federal spending on interest payments would increase substantially. Moreover, because federal borrowing reduces national saving, the capital stock would be smaller and total wages would be lower than they would be if the debt was reduced. In addition, lawmakers would have less flexibility than they might ordinarily to use tax and spending policies to respond to unexpected challenges. Finally, such a large debt would increase the risk of a fiscal crisis, during which investors would lose so much confidence in the government’s ability to manage its budget that the government would be unable to borrow at affordable rates."

CBO’s update can be read in full here.

House Budget GOP: Increasing Accountability for Hardworking Taxpayers

Wed, 08 May 2013 04:00:00 GMT

WASHINGTON—Today, members of the House Budget Committee introduced a package of seven legislative reforms to help repair the broken budget process. Committee members introduced similar legislation during the last Congress, and they brought several of these reforms to the House floor.

House Budget Committee Chairman Paul Ryan issued the following statement upon release of these reforms:

“I commend my colleagues at the House Budget Committee for advancing common-sense solutions to bring accountability to the federal budget process. These reforms are an important step toward restoring fiscal discipline in Washington.

“I look forward to working with my colleagues on these solutions in the year ahead. By improving the budget process, we can get a better handle on our spending problem. But there is no substitute for the political will necessary to pay down the debt and to expand opportunity for all Americans. That’s why the House passed a budget earlier this year that would put in place a plan to balance the budget in ten years to foster a healthier economy and help create jobs.”

The budget-process-reform package includes the following bills:

The Legally Binding Budget Act
(Lead sponsor: Rep. Diane Black of Tennessee)

Gives the budget the force of law by converting it from a concurrent to a joint resolution, which requires the President’s signature. Upon a presidential veto, the joint resolution automatically reverts to a concurrent resolution.

The Expedited Line-Item Veto and Rescissions Act
(Lead sponsors: Chairman Paul Ryan of Wisconsin, Ranking Member Chris Van Hollen of Maryland)

Provides for the expedited consideration by Congress of specific requests by the President to reduce discretionary spending in appropriations legislation.

The Biennial Budgeting and Enhanced Oversight Act
(Lead sponsor: Rep. Reid Ribble of Wisconsin)

Establishes a biennial budgeting cycle where Congress adopts a budget resolution in the first session of Congress (i.e., odd-numbered years) and considers authorization legislation in the second session, providing greater opportunities for review of government spending.

The Baseline Reform Act
(Lead sponsor: Rep. Rob Woodall of Georgia)

Reforms the budget “baseline” to remove automatic inflation increases in discretionary accounts, and to require a comparison to the previous year’s spending levels.

The Review Every Dollar Act
(Lead sponsor: Rep. Jason Chaffetz of Utah)

Requires periodic sunset reviews and reauthorization of all federal programs to ensure the programs perform an appropriate role and are operating effectively.
Requires all transfers from the general fund to the Highway Trust Fund to be offset or counted as new spending.
Requires any new rule or regulation promulgated by the administration that includes new spending to be explicitly funded by Congress before such regulations take effect.
Provides a mechanism through which Members can devote savings from spending bills to deficit reduction.

The Budget and Accounting Transparency Act
(Lead sponsor: Rep. Scott Garrett of New Jersey)

Reforms the Credit Reform Act to incorporate Fair Value accounting principles.
Recognizes the budgetary impact of the GSEs by formally bringing the entities on-budget.
Requires a CBO & OMB study on offsetting receipts/collections/revenues.
Requires all federal agencies make public the budgetary justification materials prepared in support of their requests for taxpayer dollars.

The Pro-Growth Budgeting Act
(Lead sponsor: Rep. Tom Price of Georgia)

Requires CBO to provide an assessment of the macroeconomic impact of major legislation.

House Budget Committee Hearing: State of the Highway Trust Fund: Long-Term Solutions for Solvency

Wed, 24 Apr 2013 04:00:00 GMT

"Welcome, everybody. I want to thank our witnesses for agreeing to testify. We appreciate your taking the time to share your expertise.

"Infrastructure is an important part of our economy. Government plays a role in our public infrastructure—our highways, our roads, our bridges. But the federal government is neglecting this responsibility. It’s spending record levels of taxpayer dollars. And it’s not spending them wisely. In fact, it recently abandoned a key principle: that we limit highway spending to what people pay to drive on them.

"The Highway Trust Fund is broke. This problem has been building for years. In the 90s, Congress set a floor on spending. But it didn’t set a ceiling. So the gap between spending and revenue continued to grow—on average, by $1 billion a year over the last decade—while gas-tax receipts stalled. In the next decade, the CBO anticipates the gap to widen. It expects the Highway Trust Fund to run annual cash deficits of $13 to $14 billion.

"Under current law, the trust fund can’t incur a negative balance. So if funds get too low, spending will automatically decrease, and the Department of Transportation will ration money to states. If we continue what we’ve done until last year, we’ll bail the highway fund out with borrowed money.

"And it wouldn’t be the first time. We’ve bailed out the trust fund multiple times over the years—to the tune of $41 billion since 2008—in addition to $27.5 billion in the stimulus. Though it included some needed reforms, the most recent surface-transportation reauthorization bill, MAP-21, included $19 billion in general-fund transfers. Now, to its credit, for the first time, the cost of the general-fund transfers were offset in MAP-21. Despite these large infusions, however, CBO estimates the trust fund will go bankrupt sometime in fiscal year 2015 under current law.

"I want to thank Mr. Blumenauer for requesting this hearing. On our side of the aisle, we have three members of the Transportation and Infrastructure Committee. I hope we can learn more today about the financial problems the highway trust fund faces and solutions to ensure this program’s solvency.

"Unfortunately, I have a mark-up at the Ways and Means Committee, so I’m going to turn the gavel over to Congressman Garrett for the remainder of the hearing. I know I speak for the entire Committee when I say we look forward to your insights on how to solve this problem. I ask unanimous consent that all members have seven days to submit statements for the record. Thank you very much for coming, and we look forward to your suggestions.

"With that, I yield to the ranking member, Mr. Van Hollen."

Ryan Opening Statement: House Budget Committee Hearing with Treasury Secretary Lew

Tue, 16 Apr 2013 04:00:00 GMT

"Welcome, everybody. To start, I want to thank Secretary Lew. Mr. Secretary, I want you to know that despite our disagreements, we appreciate your taking the time to join us today.

"Well, yesterday was Tax Day. And tax season was a lot more stressful than it should have been. Our tax code is a Rubik’s Cube that Americans spend 6 billion hours each year trying to crack. Today, the code is about 4 million words long—enough to fill 70,000 pages. In fact, it’s so long that roughly 90 percent of Americans pay for professional help to file their returns. That costs them $160 billion each year. And after all that trouble, the process leaves them—as my colleague Todd Young put it—feeling like either a crook or a sucker.

"We also have the highest corporate tax rate in the industrialized world—which hurts workers most of all. A high corporate tax means they will take home less pay than they otherwise would. So I’m glad this budget calls for corporate tax reform. We agree on the problem. A complex code doesn’t help anyone but the well-connected. Now, we need to work on a solution—because we can’t stop at the corporate rate. Under the President’s budget, the big companies would pay no more than 28 percent of their income in taxes. But small businesses would pay up to 39.6 percent. That’s unfair. That hurts jobs. We need to reform the individual code too.

"The administration wants to limit deductions at the individual level. But they don’t want to use that money to lower rates and spur economic growth. Instead, they want to use it to pay for more spending. Their budget calls for a $1.1 trillion tax hike to pay for nearly $1 trillion in new spending. In short, the President’s plan is to take more from families to spend more in Washington.

"We’ve seen this movie before. Under this budget, we will have run deficits at or close to $1 trillion for five years straight. Yet millions of Americans are out of work or living in poverty. This administration’s response is more of the same: more spending, higher taxes, record debt. We can’t keep spending money we don’t have. We need a new approach—one that encourages economic growth. The longer we delay fundamental reform, the longer we delay a real recovery—because our national debt is weighing down our economy like an anchor.

"The administration claims that if we approve this budget, we will have reduced the deficit by $4.3 trillion. But that’s not true. Let’s break this number down:

The administration says we’ve reduced the deficit by $2.6 trillion since Republicans took control of the House. They start the clock a little late. The President is responsible for all the policies he enacted before then. Add back the money for the stimulus, for the payroll-tax holidays, for the extensions of unemployment benefits, for the 24 percent increase in discretionary spending, and total deficit reduction comes to only about $500 billion.
And all those savings have already been signed into law. So that $500 billion is irrelevant to this new budget.
So the President then claims that this budget reduces the deficit by $1.8 trillion. But once you take out all the baseline games and add in the nearly $1 trillion spending increase in this budget, the total deficit reduction comes to a paltry $119 billion.

"So the President’s budget is a disappointment—because it’s a missed opportunity. We need a new approach in Washington to meet our country’s most pressing challenges. That’s what our side is offering. Our plan balances the budget in ten years to foster a healthier economy and to help create jobs. Our plan expands opportunity for the young. It guarantees a secure retirement for seniors. And it repairs the safety net for the most vulnerable.

"We can’t simply dwell on our differences. We’ve got to move forward. We’ve got to find common ground. Even if we can’t agree on everything, we need to make a down payment on our debt—now. So I want to learn more about the President’s proposal today—and see where we can find common ground.

"With that, I yield to the ranking member."

Ryan Discusses Budget Debate on NPR

Fri, 12 Apr 2013 04:00:00 GMT

House Budget Committee Chairman Paul Ryan of Wisconsin talked with NPR’s David Green about this spring’s budget debate and possible areas of agreement to get a down payment on the debt. Highlights are below and the full interview can be found here.

The President’s budget fails to act on our spending problem:
“With a net spending increase of about $1 trillion, resulting in only $119 billion of deficit reduction to begin in year 2020 -- four years after he has left office -- I hardly see this as compromise or moving in a direction of fiscal responsibility. He proposes that we raise the deficit next year. We should be lowering the deficit. The deficit and debt are harming our economy. If we want to restore opportunity, if we want to go after the root cause of poverty, if we want to get out of this new normal of slow growth and shrinking paychecks, we have to break the failed policies of the past. Unfortunately this budget is more of the status quo.

“[This budget] takes more from families to spend more in Washington. Higher taxes accompanied with higher spending and higher spending. The budget never balances. We want a different direction. We think that we need to reform our entitlement programs now to prevent them from going bankrupt. Doing it this way will prevent people in and near retirement from experiencing any changes. We think that we should balance the budget because we think that it is necessary to get the debt under control so that we can grow the economy. We think that we can do pro-growth tax reforms so that we can plug loopholes and lower rates for families and businesses to grow the economy.”

For the first time in four years, Congress moves forward with the budget process:
“What I see this year that is different from the last four years is that the President put out a budget with some olive-branch proposals. The Senate actually passed a budget. They have not done that in four years. What that does is it keeps the budget process continuing. It keeps the process that we have had in Congress since 1974, called the 1974 Budget Act, moving. It keeps us talking and moving towards common ground on getting a budget agreement. This is the first time in this presidency that I have seen a chance at a bipartisan budget agreement. I am cautiously optimistic about that.”

Assessing the prospects of getting a down payment on our debt:
“Do I believe that there is going to be a grand bargain where we fix all of our fiscal problems? I do not necessarily see that. Do I see an opportunity to get a down payment on the debt and deficit? I hope so. The President is adding a few proposals that get us toward that kind of compromise. That is where I am cautiously optimistic.

“We know that we are not going to get everything that we propose in our budget. We achieve $5 trillion dollars in spending savings in our budget. The President raises net spending by about a trillion dollars. There is a pretty big difference between the two. Do I believe that he is going to come all the way and agree with every one of our $5 trillion dollars in savings? No I do not. I think that is unrealistic. Do I believe that somewhere in between us we can find a common ground to meet? That is my goal and I hope that we can get there.”

The President’s Budget: Bad for Economic Growth and Bad for Jobs

Fri, 12 Apr 2013 04:00:00 GMT

In 2010, economists Ken Rogoff and Carmen Reinhart completed a widely cited study that looked at the historical relationship between public debt and GDP growth and inflation in a variety of advanced and developing countries. The study used data from 44 countries and spanned roughly 200 years. It found conclusive empirical evidence that when gross public debt exceeds 90 percent of GDP in these countries, economic growth declines materially. Among the 20 advanced countries in the study, for instance, average annual GDP growth came in at 3 to 4 percent when debt was relatively moderate or low (i.e. under 60 percent of GDP). But annual growth dipped to just 1.6 percent when debt was high (i.e. above 90 percent of GDP).[1] This academic study focused on gross central government debt, which is most akin to the concept of total public debt in the U.S.[2]

The implication is that the U.S. economy may be growing at half the rate it should be if not for the burden of excessive government debt. This slower growth translates into higher unemployment and about 620,000 fewer jobs this year.

At a Senate Budget Committee hearing on February 17, 2011, then-Treasury Secretary Tim Geithner responded to a related study by Reinhart and Rogoff by noting that “It's an excellent study. And you could say in some ways what you summarize from it, understates the risks, because it's not just that governments or countries that live with very high debt-to-GDP ratios are consigned to weaker growth. They're consigned to the damage that comes from periodic financial crises as well.” But instead of taking steps to reduce the excessive burden of debt, the President’s budget, even if fully implemented, never reduces gross federal debt below the important 90 percent threshold.

[1] Carmen M. Reinhart and Kenneth S. Rogoff, “Growth in a Time of Debt,” January 2010, http://www.nber.org/papers/w15639, p. 25.

[2] Total public debt in the U.S. includes the debt recorded in intra-governmental accounts like the Social Security Trust Fund. By contrast, debt held by the public, a net concept, measures the debt held by entities in the private economy and excludes the debt in these intra-governmental accounts.

The Facts About the President’s Budget

Thu, 11 Apr 2013 16:17:00 GMT

While there is no dispute that the President’s budget request never achieves balance, the President is making a variety of claims about the amount of deficit reduction that would be achieved if Congress adopted his budget request. As the House Budget Committee has explained before, claims about deficit reduction are always highly dependent on reduction from what starting point (called a baseline in budget parlance).

In his Budget Message to Congress, the President claims his “Budget will cut the deficit by another $1.8 trillion over the next 10 years.”[1] Unfortunately this claim doesn’t survive minimal scrutiny. The summary tables in the President’s own budget show this claim is false, even using his preferred assumptions. Table S-2 shows the “Effect of Budget Proposals on Projected Deficits” using the President’s assumptions.[2] The projected deficit under the President’s adjusted baseline is $6.678 trillion over 10 years, and the projected deficit if his budget were adopted is $5.271 trillion, which means that even under the President’s accounting his budget only reduces the deficit over 10 years by a total of $1.407 trillion.

But even this reduced deficit reduction claim vastly overstates the progress the President’s budget makes in addressing the looming deficit and debt crisis. That’s because the President’s “adjusted baseline” has an inflated deficit. Instead of simply projecting current law, his “adjusted baseline” incorporates a variety of his policy proposals and assumes that we never end the war in Afghanistan. A policy neutral baseline shows that in fact, the President’s deficit reduction is a mere $119 billion over 10 years, with the net deficit reduction not beginning until four years after the President leaves office.

House Budget Committee Hearing on the President’s FY2014 Budget

Thu, 11 Apr 2013 04:00:00 GMT

Welcome, everybody. Well, this budget may be two months late, but I want to thank Mr. Zients for coming to testify.

That said, I’m disappointed by the President’s proposal—because it’s a status quo budget. It doesn’t break any new ground; it just goes over old ground. It raises taxes by $1.1 trillion. It increases spending by nearly $1 trillion. And it adds $8.2 trillion to our debt. In short, it takes more from families to spend more in Washington.

The President says his policies would cut the deficit by $4.3 trillion over ten years. But that’s not true. The budget itself claims $1.4 trillion of deficit reduction over ten years. And nearly all those savings are from well-worn gimmicks. In fact, if you remove the gimmicks, this budget cuts the deficit by just $119 billion.

Oh, and by the way, the President’s budget proposes that this paltry deficit reduction begin in 2020—four years after the President has left office.

The President does deserve credit for challenging his party on entitlements. For instance, he’s proposed increased means-testing for Medicare Part B and D. Unfortunately, the President’s budget doesn’t include the structural reforms we need to protect and strengthen critical health and retirement-security programs. The policy changes in this budget won’t save these programs.

So the President’s budget is a disappointment—because it’s a missed opportunity. We need a new approach in Washington to meet our country’s most pressing challenges. That’s what our side is offering. Our plan balances the budget in ten years to foster a healthier economy and to help create jobs. Our plan expands opportunity for the young. It guarantees a secure retirement for seniors. And it repairs the safety net for those in need.

But I’ll say this. At least everyone has put a plan on the table—House Republicans, Senate Democrats, and the President. There are many differences between these plans. The President and Senate Democrats believe Washington knows better, so their plans put more power in its hands. They never balance the budget. They raise taxes. By defending the status quo, they’re letting critical programs like Medicare wither on their watch. And their policies will cement record poverty and high unemployment into place.

But we can’t simply dwell on our differences. We’ve got to move forward. We’ve got to find common ground. Even if we can’t agree on everything, we need to make a down payment on our debt—now.

As difficult as the challenges are, I believe we can make progress. And I’m hopeful we will.

With that, I yield to the ranking member.

Joint Statement from Chairman Patty Murray and Chairman Paul Ryan

Wed, 10 Apr 2013 22:00:00 GMT

Following their meeting earlier today, Senate Budget Committee Chairman Patty Murray and House Budget Committee Chairman Paul Ryan released the following joint statement:

“We had a constructive discussion about moving forward under regular order. We recognized the many differences between the House and Senate budget resolutions and the challenge we face in reaching an agreement. We are committed to working to find common ground. We look forward to continuing the conversation as we move toward a conference committee.”

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