Failing to Address the Debt is Not Sustainable

This post originally appeared at Institute to Reduce Spending.

President Trump has a golden opportunity to appeal to the fiscal hawks who were wary about how he would address the $20 trillion national debt. With large cuts to the EPA, Dept. of State, and Dept. of Labor—among other things—things look optimistic for fiscal conservatives. However, the largest portion of the budget, mandatory spending, remains untouched. Mandatory spending accounts for nearly two-thirds of the entire budget, so drastic cuts to other departments are encouraging but ultimately miss the root of the debt problem.

Don’t get us wrong: It’s great that President Trump is recommending these cuts as well as reorganizing agencies within the executive branch to increase efficiency, but refusing to even discuss reforms to Social Security, Medicaid, and Medicare means turning a blind eye to the biggest part of the iceberg that sits just under the surface. Even more troubling, increasing Pentagon spending goes to offset the other cuts, leaving taxpayers in the same position as before. After you add in expected tax cuts, the case for spending reform continues to grow. Even ignoring the possibility of economic unrest or fiscal crises down the road, rising deficits and a debt so large come with real concerns today.

Just last week the Federal Reserve decided to raise interest rates, which is a reminder that holding on to a massive debt and large interest payments is a real risk that could be closer than many like to think. The Congressional Budget Office estimates that the federal government’s net interest costs will go from 1.4 percent of GDP in 2016 to 3.0 percent of GDP in 2026 and to 5.8 percent of GDP by 2046—and if interest rates continue to rise, so could this percentage.

This is extremely detrimental to our fiscal security and becomes an even bigger problem when paired with ignoring mandatory spending. With another debt limit hike coming soon, Representatives should look for meaningful ways to restrain government spending. It is imperative that the spending problem in Washington gets addressed, and small cuts are worth celebrating but will not fix the problem. With a united government, there is a real opportunity for meaningful spending reform – which Representatives ought to seek now more than ever, if we want to ensure America’s continued prosperity.

Special Election Candidates Pledge to Reject the Debt

Georgia’s 6th Congressional district and South Carolina’s 5th contain a myriad of qualified candidates, but so far, two candidates have been willing to put their fiscally conservative promises onto paper.

Mrs. Sheri Few will be competing in the May 2nd special primary for OMB Director Mick Mulvaney’s old seat (SC-5). Ms. Few signed the Reject-the-Debt pledge because of her concern for our growing $20 trillion national debt.

“We cannot sustain excuses and promises while the debt ceiling continues to be raised,” said Few, while discussing how Congress should handle the debt ceiling deadline we reached this week.

David Abroms, the first signer from Georgia’s 6th district previously held by HHS Secretary Tom Price, conveyed conviction while discussing how “Washington’s irresponsible spending” is not just a threat to our present, but to our future. “My generation will be faced with a budget crisis unparalleled in our history if we continue on our current path of reckless regulation, borrowing, and spending,” he said.

Mr. Abroms said that by signing the pledge, he knows he has, “taken an important step towards restoring fiscal sanity in Washington.”

Come election day, constituents can have faith that Mr. Abroms and Mrs. Few have backed up their tough talk on reducing government spending by putting their promises on paper. Let’s hope their fellow candidates follow suit.

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Trump Releases “Skinny Budget” Outline

Today the Trump Administration released its latest policy outline, but failing to fully address the nation’s nearly half-trillion dollar budget deficit. The “skinny budget” includes only top-line proposals for departments and agencies, while fiscal conservatives must wait until May for the White House’s full proposal.

The most glaring omission from the budget is the lack of entitlement spending numbers. Not including cost estimates to programs which have objectively done more to increase the size of the federal government bucks decades of Presidential budget precedent.

The budget calls for a $54 billion increase in defense spending, which the administration claims will be paid for with “fairly dramatic” cuts across most federal agencies. The budget would force multiple departments to tighten their belts. For instance:

  • Cuts to the State Department have garnered significant attention around Capitol Hill – $27.1 billion – a 29% reduction.
  • The departments of Agriculture and Labor would both see their budgets slashed by 21% — Agriculture coming in at $17.9 billion and Labor at $9.6 billion.
  • The Department of Interior’s budget would shrink by 12%, while HUD’s budget would be cut by 13.2%.
  • HHS would face the largest nominal cuts, with Trump slashing $65.1 billion, a 20 percent reduction, while the EPA would receive the highest percentage cut – a 31% reduction.
  • School choice advocates will cheer The Education Department’s  $1.4 billion increase in public charter schools and private school investment, even as its overall budget is cut by 14%.

Office of Management and Budget Director Mick Mulvaney suggests that this budget should be no surprise, saying, if he said it in the campaign, it’s in this budget,” but it’s certain to test the Donald’s deal-making prowess. The budget will face a tough road in the House, and Senate Majority Leader Mitch McConnell has said the budget “probably” won’t get through the Senate citing concern to the large cuts in the diplomatic portion of the budget.

The deep cuts throughout this blueprint may give fiscal conservatives and limited government advocates some hope they’ve been yearning for after 8 years of big-government policies. Former Speaker of the House Newt Gingrich said that “This budget is the first step toward what will be, three or four years from now, a dramatically different federal government.”

But we must ask ourselves if the steps in the right direction can outweigh the very real costs of allowing total government spending and its bigger drivers to continue to grow.

If the President’s budget were to pass as is, we may drain a bog or two — but the swamp will not just live on, it will grow bigger than when President Trump was sworn into office.

Over the next decade, almost 65% of all federal spending will be on the mandatory side. Overall, the White House’s budget would dramatically increase the largest portion of discretionary spending (Pentagon spending), and allow the biggest portion of all spending to increase indefinitely without any reforms. The White House budget would partially – not entirely – pay for this plan with dramatic cuts to a very small part of federal outlays.

This plan may signal a change of direction for policymakers. Many fiscal conservatives push for budgets that balance in ten years or less, but now? “I want a balanced budget eventually,” said Trump, “But I want to have a strong military. To me that’s much more important than anything.”

President Trump is correct that protecting the nation is a constitutional imperative, but he would be well-served to remember that debt and runaway spending make doing so even more difficult. Our national well-being should not be framed in a mutually exclusive vacuum where we must choose between physical and financial security. Pushing for meaningful, lasting reforms that ensure both ought to be a top priority to members of both parties.

CBO: Obamacare repeal will reduce deficit by $337 billion

This post originally appeared at Institute to Reduce Spending.

The Congressional Budget Office has released their long-awaited score for the American Health Care Act—the ACA replacement legislation. The 37-page cost estimate details the spending implications of enacting this legislation, a report many members of Congress had wanted to see before the expected vote takes place.

CBO has determined that the new legislation would reduce outlays by $1.2 trillion and reduce revenues by $0.9 trillion. This would have a net reduction in the federal deficit of $337 billion over the next 10 years. Over the next five years, the deficit would grow about $9 billion, before dropping off by $337 billion over the 2017-2026 time frame.

One caveat is that this estimate is solely taking direct spending into account—CBO has yet to score the discretionary implications. These savings would largely come from a reduction in Medicaid outlays and the elimination of nongroup health insurance subsidies. The largest costs of the legislation would be from the elimination of much of the taxes and fees that were in the Affordable Care Act and a new tax-credit for health insurance.

This report is not immune to some important criticism, and CBO admits that there is uncertainty with the accuracy of the scoring because of the various factors that contribute to the costs. Between the insurance companies, states, individuals, federal agencies, employers, and so on, it’s difficult to get every prediction entirely accurate.

There are several reasons that fiscal conservatives should be cautious about this legislation — and it’s well worth noting that a full repeal would save more and insure more individuals. But finding meaningful ways to decrease the deficit over the long-term is undoubtedly something to celebrate.

Here’s hoping Congress continues to improve the legislation and pushes through a full repeal and free-market healthcare once and for all.

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