The Challenges of Balanced Budget Talk in Washington
Policy + Politics

The Challenges of Balanced Budget Talk in Washington

Flickr/C.M. Keiner

Senate Budget Committee Chair Mike Enzi (R-WY) offered a homily on fiscal rectitude Wednesday as Senate and House Republican leaders prepared to negotiate a compromise fiscal 2016 budget blueprint. It’s designed to steer the government toward a balanced budget in 10 years.

“A balanced budget approved by Congress will help make the government live within its means and set spending limits for our nation,” Enzi said in a floor speech. “Hard-working families are fed up with [President Obama’s] spend-now, pay-later policies and are closely following our effort [on] a balanced budget.”

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But deficit-reduction politics are hardly so straightforward. Enzi made his speech, ironically, the day after the Senate overwhelmingly approved sweeping changes to Medicare’s system of reimbursing doctors that will add $141 billion to the deficit in the next decade.

The popular bipartisan measure originated in the House and was crafted by two political rivals, Speaker John Boehner (R-OH) and Minority Leader Nancy Pelosi (D-CA). It scraps a “Sustainable Growth Rate” (SGR) formula implemented in 1997. It was designed to limit Medicare’s growth but ended up imposing such draconian cuts to doctors’ reimbursements that Congress began passing annual patches waiving SGR compliance.

Lawmakers of both parties said the legislation was a solution to a long-standing controversy that had discouraged many doctors from treating Medicare patients. “I’ve always said if you can’t see a doctor, you don’t have insurance at all,” Enzi said in defending the legislation. “With the way we have been setting up Medicare payments for doctors, we’ve been driving them out of the profession.”

Yet if it was so important to change the program – why not pay for it? New spending under the “Doc Fix” legislation will total $211 billion over the coming 10 years, the Congressional Budget Office said. Yet only a third of that total will be offset by spending cuts in other areas or by policy changes – such as higher premiums for wealthier Medicare beneficiaries.

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The remaining $141 billion of the cost will go onto the government’s credit card. “This bill is not paid for,” Sen. Jeff Sessions (R-AL) said Tuesday as the Senate was voting 92 to 8 on final passage.

“Certainly a lot of people talk about the need to get to a balanced budget in the abstract – and both the budget resolutions in the House and the Senate project in future years a balanced budget,” noted Steve Ellis, vice president of Taxpayers for Common Sense, a watchdog group. “But it’s all about how you get there.” 

“You can make aggressive assumptions about what you’re going to do and how you’re going to change things, and on whose budgetary back you’re going to enact balance,” he added. “It’s a lot harder to make that happen.”

Enzi and House Budget Committee Chair Tom Price (R-GA) have begun informal  talks to iron out differences between the House- and Senate-passed versions of a new budget for the fiscal year beginning Sept. 1. The GOP blueprints would spend a lot more on defense, preserve caps on domestic programs and try to put the government on track to wipe out the deficit in 10 years.

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The long-term budget plan calls for spending reductions totaling $5.5 trillion over the coming decade by overhauling Medicare and Medicaid. But Republicans so far have shown little discipline on defense spending – a big-ticket item that constitutes over half of the $1.16 trillion in annual discretionary spending.

Rather than adhering to the tight defense spending caps called for in the 2011 Budget Control Act for general Pentagon operations, House and Senate GOP leaders bulked up on a special Overseas Contingency Operations (OCO) account used to pay for wars in the Middle East. The net effect was to increase the OCO account for the coming year from an already generous $58 billion to $96 billion.

The extra $38 billion is considered “emergency spending” that’s automatically added to the deficit.

Defense hawks including Armed Services Committee Chair John McCain (R-AZ), Sen. Lindsey Graham (R-SC) and House Armed Services Committee Chair Mac Thornberry (R-TX) say the added money is desperately needed to beef up military readiness and wage war against ISIS and other Middle East terror groups.

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Yet a wide array of budget watchdogs, anti-tax groups and conservative activists want budget leaders to reconsider before adopting a final budget plan. “OCO has already gained a reputation as a slush fund as more and more base budget items are being funded through this ‘off budget’ account,” eight organizations wrote in a letter to Price. “This boost will only serve to burnish that reputation.” The letter came from Campaign for Liberty, Coalition to Reduce Spending, Council for Citizens Against Government Waste and other groups.

This year GOP leaders may face other sticky challenges on deficit spending. The Federal Highway Trust Fund is once again low on cash. Congress and the White House will have to renew federal highway and transportation programs, but the source of any new funding is unclear.

“It will be interesting to see what they come up with in offsets or if they just try to dip into the general fund again,” Ellis said.

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Finally, it’s unlikely the new budget will be the final word on how much is spent next year on domestic programs, including for education, social services, food stamps and other programs important to Democrats and President Obama.

The GOP budgets embrace a tight domestic spending cap, but Republican leaders may have to find additional funds as part of  a final deal late this year if they expect the president to sign it. Obama submitted a fiscal 2016 budget request earlier that proposed raising the caps on both defense and domestic spending.

Some lawmakers and experts predict there will be more money for domestic programs in any final bipartisan agreement – likely to mean more deficit spending. “I look at the budget as only the first gate to move through,” Sen. Bob Corker (R-TN), told Politico this week. “What comes after that is the policy that has to be bipartisan… The only way we solve the problems we have is on a bipartisan basis.”

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