The nonpartisan Concord Coalition on the absent relief package

The Concord Coalition is a nonpartisan group that researches and educates on the US deficit and debt problems. The following was in my inbox from that group and it speaks for itself.

“The following is written from the perspective of Concord Coalition Policy Director, Tori Gorman.

Avid readers of The Lookout will notice that my missive today is unlike any of my previous entries. If you are accustomed to the colorful charts and technical policy analyses that usually accompany my posts, my sincerest apologies. Those features will return, but today’s post is from the heart.

Last week I fully anticipated that I would be spending my waking hours prior to publication of this newsletter buried in legislative text, frantically distilling the latest coronavirus relief package from Congress for our readers. Instead, I find myself staring at an empty desk while federal officials jet home for their sacrosanct August recess. Why? Because despite over 160,000 Americans dead from COVID-19, a record-setting decline in economic activity, over 31 million people collecting some form of unemployment, and millions of children unable to return to school, lawmakers refused to compromise.

Unconscionable.

Each side has expressed support for another pandemic relief bill and each side has tendered their initial offer. The House-passed HEROES Act would spend another $3.4 trillion whereas the Senate Republican package of proposals would spend closer to $1.2 trillion. Clearly there is plenty of playing field in between to reach agreement.

On what planet is an acceptable outcome ZERO?

To add insult, on August 8, President Trump announced with great flourish a series of toothless executive memoranda from the ballroom of his eponymous Bedminster golf club – actions that will have virtually no effect except to make any further negotiations more difficult: A payroll tax proposal that neither side in Congress supports, a pseudo-unemployment insurance scheme virtually no state can navigate nor afford, an eviction ‘moratorium’ that isn’t, and student loan action that could have been, and should have been, more robust.

At some point in our political history ‘compromise’ became a dirty word. Somewhere it became acceptable in an election year for Congress to punt the people’s work until the November results were known. In today’s environment, however, where twin crises are leaving a trail of death and destruction, it is imperative that lawmakers rise above the low expectations they champion, return to Washington, and do the work they were elected to do.

Americans deserve no less.”

What the president has fashioned with executive orders is beyond his authority. Congress has the purse strings given to them by the Constitution. What the president has proposed is unworkable in parts and unwieldy in others. But, again we are not an autocracy and Congress needs to do its job.

What I also find interesting is the president’s executive order did not include a price tag on debt impact. I have done some back of the envelope calculations and it is likely nearer the $1.2 trillion GOP figure, if it is not extended, but we just do not know. I also feel that cutting FICA taxes will be harmful to Social Security and Medicare, at a time when they need more funding not less.

Yet, what no one has done is calculate what we need to do, including all three parties, the Senate, the House and White House. The House at least passed a bill on May 15, but the Senate could not bring themselves to debate and vote until the bewitching hour. Frankly, that is poor leadership by Senator Mitch McConnell and the president. Crisis planning is often not the best of planning.

You would think our so-called leaders could take the time to do some homework. But, what do I know?

Annual US Deficit projected to pass $1.5 trillion on 2028

One of two nonpartisan organizations that have been ringing alarm bells about US debt and deficits is The Concord Coalition (TCC). The other is the Committee for a Responsible Federal Budget. We should be listening to these folks and urging politicians to do the same.

In a press release, Bob Bixby of the TCC notes the Congressional Budget Office (CBO) projects the US deficit will pass $1 trillion this fiscal year ending 9/30/2020. In eight years, the CBO projects the deficit to pass $1.5 trillion. My guess is it will be sooner, given politicians being too infatuated with adding expenses and cutting taxes.

It should be noted we are now passed $23 trillion in US debt. Sans change we look to soar passed $35 trillion by the end of the decade. This means our annual interest cost will be a much larger chunk of our budgeted annual revenue which is around $3.65 trillion.

Two key points need to be made. With our pretty good economy going on 128 consecutive months of economic growth, we should be decreasing our deficit, not increasing it. Sadly, we were sold a tax break that helped a pretty good economy get a little better for a little while, but will add over $1.5 trillion to the debt.

The other key point needs to be said loudly. Our debt cannot be solved by only expense cuts or tax increases. The math will not work. It will need both. Do not let politicians tell you otherwise. It matters not how fervent or well they speak, the math will not work. We need politicians with thick skins and lots of courage.

We cannot solve US debt by charging more on our national VISA

The math problem is large. We have $23 trillion plus in US debt today, per the US debt clock. It is projected to increase by $10 trillion by 2027 FYE (September 30, 2027) before the tax cut in December, 2017. The tax cut added $1.5 trillion to the debt projection over ten years. A later budget change added $500 billion over ten years.

The budget bill just signed last week will add $500 billion over ten years per the Committee for a Responsible Federal Budget, yet they note all laws passed in 2019 have added $2.2 trillion over ten years. That would make it at least $37 trillion. So, a good working number is $37 trillion sans any action by the end of 2029 FYE.

Tax increases will not solve this problem, nor will spending cuts. Both are needed. Once the interest cost approaches the defense cost, we have a serious problem. At $37 trillion in debt, the interest cost to maintain it inches closer. So, it truly matters not what Democrats or Republicans like, some poor souls in charge will take the heat for trying to solve a problem passed along by poor financial stewards. It will be akin to the Greek people not liking the EU or responsible Greek leaders when they said Greece was in debt trouble.

What frustrates me is the GOP Freedom Caucus who got elected on debt reduction is the biggest bunch of hypocrites. They screamed bloody murder when the debt was $8 trillion, then $13 trillion, but are passing debt increases misleading the public that the tax reduction would pay for itself – no tax bill has ever done that and this one did not. But, Dems are not without fault. What should scare us all, we should be reducing the deficit with a pretty good economy, yet the deficit is growing and will exceed $1 trillion next FYE. What happens when the economic growth softens even more than it has over the past year.

So, my plea to all is dust off the Simpson-Bowles Deficit Reduction Plan and do even more. I am trying to tell folks what they need to hear, not what they want to hear. If I was a young person, I would be screaming bloody murder at inaction on climate change, guns and debt. Debt is not as frightening as guns and climate change, but it is a huge problem.

The (nonpartisan) Concord Coalition projects debt to be over 100% of US economy

Followers of my blog know I am a broken record on doing something about the US debt and deficit. Below is a copy of a piece entitled “New CBO Report Projects Much Larger Debt Under Plausible Assumptions” by Joshua Gordon that was forwarded by The Concord Coalition.

“In a follow-up to the new Congressional Budget Office (CBO) baseline projections, the CBO released a report last week analyzing the effect that select policy alternatives would have on budget deficits and federal debt. CBO also produced an ‘alternative scenario’ that combines some of these different policy assumptions to create what we view as a more plausible budget baseline because it better reflects current policy rather than a strict application of current law.

The alternative scenario makes two major changes to the official baseline; one on the spending side and the other on the revenue side.

On spending, the main difference is that in making their baseline the CBO convention is to assume that discretionary spending — the spending on defense and non-defense programs controlled by the annual appropriations process — will increase only to keep pace with inflation when there are no existing spending caps in place (the caps were eliminated in the August budget deal). The alternative scenario assumes higher discretionary spending over the next ten years such that it remains constant as a share of the economy (6.3 percent of GDP) compared to the baseline’s assumption where spending drops to 5.6 percent of GDP by 2029. It’s a plausible assumption given the August budget deal and the fact that discretionary spending has never dropped below 6 percent of GDP.

The revenue difference between the alternative scenario and the baseline is the assumption that a future Congress and President will extend a number of different tax policies that are currently scheduled to expire. For example, the alternative scenario assumes that the major individual income tax provisions of the 2017 Tax Cut and Jobs Act that are currently scheduled to expire after 2025, will be extended. In addition, the alternative assumes further delays in taxes created by the Affordable Care Act that have been extended over-and-over again by Congress. Assuming that this behavior with regard to tax policy continues creates a more plausible revenue scenario.

The differences in assumptions leads to outlays being about $1 trillion higher and revenues $1.7 trillion lower over the 2020-2029 period. As a result, debt would grow from 79 percent of GDP to 104 percent in 2029, surpassing 100 percent of GDP in 2028 for the first time since immediately after World War II (1946). The debt in 2029 would be 8.8 percentage points of GDP higher than in the baseline. Deficits over the 10-year period would average 1 percent of GDP higher than in the baseline (5.7 percent instead of 4.7 percent).

While the numbers are sobering, nothing in the CBO’s report is groundbreaking. Instead, it should serve as a reminder that under current law the budget situation is getting worse and is unsustainable over the long term. And that even assumptions made about current law are likely too optimistic — because policymakers’ current policy preferences will tend to make things worse.”

We are at over $22 trillion in debt with the annual deficit for the fiscal year ending this month to be just beneath $1 trillion on an annual revenue base of about $3.4 trillion. In other words, we will be spending about $4.4 trillion this year.

This problem cannot be solved with just spending cuts nor can it be solved with just tax increases. The math will not work. We must have both. Please ask politicians what they plan to do about this ticking time bomb. If they give poor answers, do not vote for them. We must have a plan and the plan cannot be making the debt worse as has been done with the 2017 tax cut and recent spending bills.

Boom, boom, boom, boom – the US deficit and debt continue to explode

In honor of John Lee Hooker’s famous lyric, which is played at the beginning of “NCIS – New Orleans” and in the movie “Blues Brothers,” a good wake-up call for our US deficit and debt is “boom, boom, boom, boom.” Please note, this is not the trade deficit, which is overblown as a problem as we are more of a consumer nation. This is due to our government spending far more than they take in revenue.

Per the following introduction in a Bloomberg News article, “U.S. Budget Gap Balloons to $739 Billion Despite Tariff Revenue,” we have an escalating problem.

“The U.S. budget deficit widened to $738.6 billion in the first eight months of the fiscal year, a $206 billion increase from a year earlier, despite a revenue boost from President Donald Trump’s tariffs on imported merchandise.

The shortfall was 38.8% more than the same period a year ago, the Treasury Department said in its monthly budget review released on Wednesday. So far in the fiscal year that began Oct. 1, a revenue increase of 2.3% hasn’t kept pace with a 9.3% rise in spending.”

Right now, our US debt tallies more than $22 trillion and was expected to increase by $10 trillion over the next ten years, before the tax cuts in December, 2017. Our fiscal year runs October through September, so this is the first fiscal year with full benefit of the tax cuts. The Congressional Budget Office forewarned the tax cuts would increase the debt by $1.5 trillion over the next ten years over the already projected $10 trillion. That will put us closer to $34 trillion at that time.

Yet, Americans were told by the president and favorable politicians that the CBO was wrong and growth would accelerate enough to pay for the debt using the assertion “the tax cuts will pay for themselves.” Per the Committee for a Responsible Federal Budget, tax cuts do not pay for themselves, with the best historical result being in the neighborhood of 30%, but usually much less. That leaves 70% of the revenue reduction adding to the deficit in the best of times.

The reasons for the increase in deficit are increases in military, healthcare and interest cost spending, which have overshadowed the revenue increases due to the longest running economic growth period in the US. Even the worst budgeter amongst us knows, we should be paying down debt when times are good, not increasing it. Sadly, the economy has begun to slow some, so the tax cutter’s rosy projections of 4% and above growth have not materialized (except in an isloated quarter) and economists are expected  lower growth rates than the current 3% per annum the rest of the year.

Per The Concord Coalition, the above Committee for a Responsible Federal Budget and the Simpson-Bowles Deficit Reduction plan from December, 2010, we must solve our deficit and debt problem through spending cuts and revenue increases (tax increases) both. The math will not otherwise work. If any politician, no matter how smugly, tells you otherwise, they are not be honest with you or are misinformed themselves.

To be brutally frank, I said so then, but the tax cuts passed in December, 2017 were malfeasance in my mind. We borrowed from our future to make a pretty good economy a little better. It was also hypocritical. Former Freedom Caucus members got elected saying the previous $5 trillion, then $8 trillion, then $13 trillion debts were abhorrent. Now, when it is just below $22 trillion, they pass a bill that increases it even more.

When I raised this with a Freedom Caucus staff member, he curtly told me the CBO is often wrong and they are wrong on this. My push back was simple. These folks do their homework to try and get it right. And, what I have found in my 40 years of adult life, is politicians hail the CBO when their number agree with their decision and call them on the carpet, when they don’t. Yes, it is a projection, but these folks try to be apolitical.

Folks, we have a problem that is not getting talked about enough. We must cut spending and raise revenue. My GOP friends have ceded their fiscal stewardship mantra – that is highly unfortunate. My Democrat friends need to question every candidate on how they plan to pay for their ideas and what they plan to do about the debt. We cannot have Medicare for all if we cannot pay for it.

So, let’s get real and ask politicians some pointed questions. If we don’t, John Lee Hooker will sing even more loudly. “Boom, boom, boom, boom.”

 

A specific deficit problem – Social Security and Medicare

While we have an annual US deficit approaching $1 trillion on budgeted revenue around $3.4 trillion, nothing much is being done about it or our current debt of $22 trillion. A tangible subset of this problem includes Social Security and Medicare, which were reported yesterday by trustees to run out of money in the near future – Medicare by 2026 and Social Security by 2035.

A nonpartisan group called The Concord Coalition, who tracks and reports on our debt and deficit issues, offered the following statement.

“Today the trustees once again warn that Medicare and Social Security are not on sound financial ground,” said Robert L. Bixby, Concord’s executive director. “Sudden and substantial benefit cuts await beneficiaries in less than 20 years — well within the lifetimes of many current beneficiaries — if lawmakers fail to act. Any ‘political leader’ worthy of that title, including those out on the 2020 campaign trial, should make it a priority to find solutions that are both fiscally and generationally responsible.”

Bixby added: “The trustees’ warnings seem all the more alarming because the country is not in a position of current or projected fiscal strength. Delaying reforms, however, would simply exaggerate the generational inequities of reform. For example, the trustees say it would now take an immediate and permanent benefit cut of 17 percent to keep the Social Security trust fund solvent for 75 years. Waiting until 2035 to take action would increase that benefit cut to 23 percent.”

As a retired actuary, I have written before about a few ideas, not limited to the following:

– increase the Social Security taxable wage base to above $180,000 drawing more FICA taxes from employees and employers;

– reduce Medicare retirement age to 62 and use ACA funding for that group to shore up (it will help the risk pools of both groups);

– limit cost of living increases on Social Security benefits along with measured changes to select Medicare benefits;

– increase judiciously FICA taxes to shore up shortfalls (Medicare Part A is currently 1.45% and Social Security is 6.2% up to the taxable wage base of roughly $128,000). Medicare Part B premiums change annually.

Please encourage your legislators to act now on these issues. Bixby’s caution is a good one. As we age as a country, it will only add pressure. Also ask candidates what they propose. Do not let them off the hook with a non-answer. Deferring action has been the norm.

That nagging math problem

Dwarfed by other news yesterday, the Congressional Budget Office (CBO) updated their budget projections reflecting the new tax law and spending plan. Over the next ten years, the just over $21 trillion debt is expected to increase by $11.7 trillion bringing it to about $33 trillion. Before these two changes, it was expected to increase to about $31 trillion.

The CBO also said the deficit should rise to $804 billion by 2018 fiscal year end. Last year it was $665 billion. Further, the annual deficit should pass $1 trillion by 2020 and stay there.

There are many in Congress today who have screamed bloody murder in the past over rising debt and got elected under the banner of the Tea Party. I have seen footage of members who called this a crisis when it was only $8 trillion and then $13 trillion. They were right then, but now debt and deficit don’t seem to matter as many voted for a law to increase it.

I have seen some recent discussion about the need for a balanced budget amendment. To be frank, that won’t do. We need more revenue than expenses. The tax law passed in December is projected to increase the debt by $1.5 trillion, but Congress knew that then and still passed it, even many of these Tea Partiers.

I said this before, but I believe the tax law passing is extremely poor stewardship, even malfeasance. We are borrowing from our future to try to make an economy, that was in a 103 consecutive month growth period with seven consecutive years of 2 million plus job growth, even better.

To be frank, we cannot cut our way out of this problem. The math will not work. We must also have more revenue than we had before the tax cut. At some point, a future Congress and President will get all the flak for abruptly addressing this problem. Yet, they will be the better stewards, far better than the current President, Congress and their predecessors have been.

Bill Clinton takes a lot of heat for his womanizing, rightfully so, but he handed a surplus budget and smaller debt to George W. Bush. Bush went against the advice of his Treasury Secretary and passed a tax cut and then we invaded two countries draining our budget. And, my biggest criticism of Barack Obama is he shelved the Simpson-Bowles Deficit Reduction Committee report failing to use it as very good starting point for change.

Folks, like climate change, this math problem is not going away. We must address our debt now or it will be much more severe later. And, if people think it does not matter, that country we are imposing tariffs on owns a lot of our treasury bonds, bills and notes. They have floated the idea of stop buying them even before the tariff war. That also makes it a security risk as well.

Tick, tick, tick – young folks please raise some holy hell on this

Tick, tick tick…the US debt of $20.7 trillion is expected to increase by $10 trillion by 2027 even before the December Tax Bill and last night’s Budget Bill were passed.

Tick, tick, tick…per the nonpartisan Congressional Budget Office and Committee for a Responsible Federal Budget, the Tax Bill is projected to increase the US debt by $1.5 trillion or so by 2027.

Tick, tick, tick…last night’s Budget Bill which has now been signed into law is expected to increase the debt by $400 billion over the next two years.

Tick, tick, tick…unless something is done about it, the debt will be close to $33 trillion in 2027. The scarier thought is that might be low.

Tick, tick, tick…the added dilemma we are facing is the interest rates are increasing, since we may have overheated a good economy. That will add further to the annual interest cost on the debt.

If I were in my twenties, I would be raising holy hell about this. I just called several members of the Freedom Caucus, telling them I am an Independent and former Republican voter. While they were right to raise issue with the $400 billion, I said it was hypocritical to vote for a Tax Bill that increases the debt by $1.5 trillion.

Invariably when I called I spoke with a nice young staffer in their twenties, because I asked them if they were. During our conversations I asked them “you do realize we are leaving this problem for you?”

In December, 2010, the US debt was over $13 trillion. The reason this date is important is the bipartisan Simpson-Bowles Deficit Reduction Committee presented their findings and recommendations in that month. In essence, they recommended a series of changes that followed a ratio of $2 of spending cuts to every $1 of revenue increases. Since Democrats did not like the former and Republicans the latter, the Committee’s good work was shelved.

Fast forward to today and not only have we not done much about it, we have made the problem worse with these two bills. In Congress, it is both parties’ fault. It is President Obama’s fault for shelving the Simpson-Bowles study and it is President Trump’s fault for not making this an issue and promoting tax cuts. It is President Bush’s fault for passing tax cuts against the advice of his Secretary of the Treasury after being handed the baton on a balanced budget.

Our deficit was $666 billion in the last fiscal year. It will be over $1 trillion at the end of this one. This is not good. Please let your Congressional representatives, Senators and the President know we need to do something about this. We need revenue increases and spending cuts. The math will not work otherwise. Please check out the websites for the nonpartisan Committee for a Responsible Federal Budget, Fix the Debt and The Concord Coalition for more information.

 

 

Congress – Please listen to the nonpartisan economic groups

Early this morning the Senate passed their Tax Bill, complete with hand written amendments and no public hearings. Senator McConnell declared it a victory for the American people. But, which people? From my reading the people doing a touchdown dance already have an awful lot of money. 52% of Americans disapprove of this bill, but only the opinion of the privileged few matters.

On NPR yesterday, I heard Congressman Kevin Brady, the Chair of the House Ways and Means Committee, smugly say we do not believe the projections of Congress nonpartisan Joint Committee on Taxation who measured the Senate bill as increasing the debt by $1 trillion and saying this bill is not as kind as portrayed to people in poverty and middle class. But, Congressman, why do the nonpartisan Committee for a Responsible Federal Budget, Fix the Debt and The Concord Coalition say pretty much the same thing?

Without public hearings, Republicans did not take the time to know this. What should be surprising is the two Senators from Kansas voted for this bill after a similar state bill had to be unwound last year after it decimated Kansas’ economy and budget.

Outside of Senator Corker, my former party seems to have forgotten what fiscal stewardship means. We are projected to have a debt of $31.5 trillion in 2027. I want to hear what Congress plans to do about that.

As a former Republican, this continues to support why I left the party. Passing a bill to get a win is no way to pass good legislation.

Please feel free to use a variation of this to let your Senators and Congressperson know of your concern. I added that they call me with a response to my concern and not send me a form letter.

Increasing the Debt is Malfeasance

If I may be permitted to be crass, let me offer a quote from an unknown source, “any dumb ass can get elected saying they will reduce taxes.” I will let you be the judge at how successful this campaign approach is.

In the United States, we have about $20.5 trillion in debt, which is roughly $63,000 per person and $170,000 per taxpayer. With an annual budget of about $4 trillion, we had a deficit in our most recent fiscal year ending September 30, of roughly $650 billion. The deficit is predicted to only go up, if we do nothing which will in turn increase the debt by an estimated $10 trillion.

With the President’s encouragement, Congress has proposed doing something. But, it is in the wrong direction. The Republican majority has passed a budget that will allow for net tax reductions in the Tax Bill being considered that will increase the debt by an additional $1.5 trillion over the next ten years.

Again, that is on top of an estimated $10 trillion increase. By my math, that puts us at $32 trillion of debt in ten years. There is no other way to say this. This is malfeasance. It certainly is not good stewardship.

The bipartisan Simpson-Bowles Deficit Reduction Committee completed their findings and recommendations in the fall of 2010. That earnest and diligent effort recommended $2 worth of expense cuts for every $1 of tax increases. We simply cannot cut our way out of the problem. But, this well done report was shelved.

I have heard several members of Congress over the years tout a balanced budget, but that is not enough. We actually need more revenue than expenses. That must include tax increases along with spending cuts. It is that simple. We cannot make the math work otherwise.

If we continue to hide from this problem, like climate change, it will become a major obstacle. We must act now and we certainly do not need to cut taxes and revenue. People will not like this answer, but someone needs to shoot straight with our citizens. We all need to pitch in before it is too late and we leave ourselves, kids and grandkids a mountain of debt.

There are several groups that have been raising this alarm for some time now. “Fix the Debt” and “The Concord Coalition” are just two. Please check them out and let your Congress representative and senators know this is too important a problem to make worse. If they say the taxes will pay for themselves, tell them it does not work that way and they should know that. Let’s fix the debt, not make it worse.