Have we forgotten about the national debt? Congressional Republican leaders and the Obama administration have begun private talks about a new two-year spending plan that would keep the government operating beyond the 2016 election but would do little to address more fundamental structural problems, including entitlement and health care spending for an aging population.
Even before Congress completed work on a short-term spending measure to avert a government shutdown at least until early December, Senate Majority Leader Mitch McConnell (R-KY), outgoing House Speaker John Boehner (R-OH) and President Obama held preliminary talks on a possible multi-year budget agreement to increase spending for both defense and domestic programs by lifting fiscal 2016 discretionary spending caps imposed by the 2011 Budget Control Act.
The agreement would be similar in scope to a two-year mini-budget agreement that was struck by Sen. Patty Murray (D-WA) and Rep. Paul Ryan (R-WI) following a 16-day government shutdown in late 2013 that temporarily put an end to inter-party budget warfare. That agreement allowed for $45 billion more in spending above the caps in 2014 and $20 billion more in 2015, as well as $20 billion of deficit reduction.
While the agreement required increases in some government fees, including airline taxes, there was no increase in federal taxes. And while some mandated cuts in Medicare were allowed to take effect, the Republicans failed to get any major changes to Medicare and Social Security – two major engines of federal spending that add to the debt.
The Government Accountability Office and the Congressional Budget Office both have issued gloomy long-term projections of deficit and debt problems absent fundamental changes in federal entitlement spending for the nation’s growing senior population and low and moderate income Americans. The non-partisan CBO said in June that without policy changes, the federal debt would surge to over 100 percent of Gross Domestic Product by 2040 or go a lot higher if current optimistic economic assumptions prove wrong.
The administration and many Democrats and liberal analysts have touted the government’s success in reducing the annual gap between spending and revenues after a prolonged period of recession and huge annual deficits that once exceeded $1 trillion. But CBO and other budget experts warn that the good news will last for only a few more years before the deficit and debt begin to rise again and pose serious economic and budget challenges.
Joseph Minarik, a former Clinton administration budget expert and the director of research at the Committee for Economic Development, said on Wednesday that the administration and congressional leaders for now appear far more concerned about negotiating their way out of a political morass than addressing the long- term debt.
“Everybody understands that at some point in the future we’re going to have to sit down and negotiate the entire budget outlook, including mandatory spending and revenues, but we’re not willing to do that now.”
“Everybody understands that at some point in the future we’re going to have to sit down and negotiate the entire budget outlook, including mandatory spending and revenues, but we’re not willing to do that now,” he said in an interview. “We’re really kidding ourselves and at some point – not too far in the future – we’re going to have to look at the entire budget much outlook more realistically.”
“We’re rather in a position where the long term debt outlook is not sustainable, and if we don’t turn it down we’re running enormous risks – almost existential risk with our economic outlook,” he added.
On Tuesday, McConnell roughly outlined the new round of talks in a meeting with reporters, saying that the two sides would once again try to find a way around the budget caps and automatic across the board spending cuts mandated by the Budget Control Act. He said that the goal would be to reach agreement on new “top-line” budget numbers for appropriations spending in fiscal 2016 and 2017, to remove the possibility of another government crisis well beyond next year’s election.
“We’d like to settle on a top line for both years so that next year we can have a regular appropriations process,” McConnell said at a news conference. “The president and Speaker Boehner and I spoke about getting started at our discussion last week, and I would expect them to start very soon.”
McConnell reportedly suggested that Senate Minority Leader Harry Reid (D-NV) and House Minority Leader Nancy Pelosi (D-CA) be excluded from the talks, at least in the early going, to expedite negotiations, but Obama and Boehner raised objections, according to Politico.
Precisely how all the parties will proceed in the talks for now is something of a mystery, because of the upheaval within the House GOP leadership following Boehner’s surprise announcement last Friday that he was resigning the Speakership and leaving Congress by the end of October.
Boehner had hoped to stick around long enough to negotiate a deal on spending, a new debt ceiling, reauthorization of the Export-Import Bank and other thorny issues, but his office announced today that House Republicans are pushing up a vote on his successor to next Thursday – with formal ratification of the choice by the full House delayed until near the end of the month. But assuming that Majority Leader Kevin McCarthy (R-CA), the presumptive replacement, is chosen Speaker by the GOP membership next week, there is certain to be some confusion about whether Boehner still speaks for the majority in negotiating a two-year budget agreement with the White House.
Murray, the former Senate Budget Committee Chair, said this week that once the short-term bill to prevent another government shutdown is signed into law by President Obama late Wednesday, “I am hopeful that Republicans will finally join us at the table to negotiate another bipartisan budget before we lurch to the next deadline just a few short months away.”
“I was proud to break through the gridlock in 2013 and work with Republicans on a two-year budget that restored investments in education, health care, defense jobs, and more—and there’s no reason we can’t build on that deal now and continue investing in middle class priorities in Washington state and across the country,” she said.
Central to the new talks will be the question of whether to raise the discretionary spending caps for another two years. Discretionary spending constitutes less than a third of the $3.9 trillion overall annual federal budget, with the rest going for Medicare, Medicaid, Social Security and other entitlement programs and for interest on the national debt – which currently stands $18.4 trillion.
During the fiscal year about to end, the government spent $521.3 billion on defense and $492.4 billion on domestic programs and agencies. If the spending caps are left in place for the coming year, then defense spending would climb only slightly, to $523.1 billion in fiscal 2016 and domestic spending would rise to $493.5 billion, according to government figures.
Obama, like the Republicans, favors opening the spending spigot even more in fiscal 2016, by increasing defense spending by $38 billion above the cap. But the GOP does not want to increase domestic spending by $36.5 billion above the cap, which Obama’s budget calls for.
Many GOP conservatives want to preserve the strict spending caps as a way of insuring fiscal discipline. The GOP controlled House and Senate earlier this year approved a long-term budget plan that would totally wipe out the deficit – currently projected at $564 billion this year -- within ten years with deep cuts in domestic programs and entitlements but no increases in taxes.
In exchange for some concessions on increased spending, McConnell will insist on offsetting those costs with cuts in other areas while strongly opposing any increases taxes, according to Politico.
Richard Kogan, a senior fellow on fiscal policy at the Center on Budget and Policy Priorities said that one of the biggest challenges would be reconciling two very different views on how to offset or pay for the increased spending that both sides favor.
“There’s obviously disagreement between Republicans who want a deal and Democrats who want a deal on how much of this gets paid for with revenues and user fees as opposed to entitlement cuts,” Kogan said in an interview. “And I assume the Republicans’ starting position is all entitlement cuts and the administration’s starting position is not that – probably half and half.”
“The difficulty occurs, as always, about how acceptable any given offset is,” he said. “There’s always someone who thinks the offsetting spending cut or revenue increase hurts his interests, his philosophy, more than the extra defense and non-defense spending helps.”