6/3/2015

Congress's Budget Game GetsUglier - Bloomberg View

C ON GR E S S

Congress'sBudgetGame
GetsUglier

MAY4,20158:00AMEDT

ByPeterR.Orszag

aA

ThebudgetresolutionbeforetheSenatethisweekiseitherdishonestordeeplyproblematic.
Consider,asjustoneexample,thewayittreatsnondefensediscretionaryspending.
Constraintsondiscretionaryspendingarebeingused,onceagain,tomakethedeficitnumberslook
betteroverthemediumterm.Unfortunately,bothRepublicansandDemocratshaveboughtinto
thisBeltwaygame:Slapdownsomeunrealisticallylownumbersfordiscretionaryspendinginthe
future,andpresto!Youvemadethedeficitmagicallysmallerandyoudon'tevenhavetosay
howyou'llhitthetarget.
Thisgamewasonceplayedmodestlynipsandtucksaroundtheedgesmadetheprojectionsappear
abitbetter.Thegamegotmoreseriousinthe2011budgetdeal,whenthediscretionarynumbers
wereknockeddownfurtherandthenlockedinwithspendingcaps.Thatdealcontinuestobea
problem,becausethediscretionarylevelsweresettoolow.
Thisweek'sbudgetresolution,however,takesthegametonewextreme,brazenlyputtingnon
defensediscretionaryspendingonapathsounrealistic,noseriouspersoncoulddefenditwitha
straightface.Thespendingiskeptatalevelonlyslightlyabovewhatitwasin2008alltheway
through2025.From2018to2025,itisstraightlinedatabout$550billionayearinnominalterms.
Inotherwords,it'sassumedtonotevenkeeppacewithinflation,populationgrowthoreconomic
activity.
Keepinmind,thisisthepartofthebudgetthatfundstheFederalBureauofInvestigation,the
NationalInstitutesofHealth,theFoodandDrugAdministration,theTransportationSecurity
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6/3/2015

Congress's Budget Game GetsUglier - Bloomberg View

Administrationandmostothergovernmentagencieswhoseresponsibilitiestypicallyexpand
withthesizeoftheeconomy.Attheveryleast,theirworkincreaseswithinflationandpopulation.
It'sjustnotcredibletoassumetheU.S.willexperiencenonominalgrowthovereightyears,let
alone18thatsneverhappenedsincethedatabeganbeingcollectedinthe1960s.
Forperspective,ithelpstoexaminesuchspendingasashareoftheeconomy.Overthepast50
years,nondefensediscretionaryspendinghasaveragedjustunder4percentofgrossdomestic
product.Itreacheditslowestlevel,3.1percentofGDP,inthelate1990s,andlastyearitwas3.4
percent.
Undertheproposedbudgetresolution,by2025,nondefensespendingwouldfallto2percentof
GDPabouthalfitshistoricalaverageandathirdlessthanitslowestshareinthepastfive
decades.Toputitanotherway,theresolutionassumesaspendingcutofalmost$500billionin
2025comparedwiththehistoricalshareofGDP.Evenrelativetothemuchmoreconservative
officialbaselinefromtheCongressionalBudgetOffice(which,becauseofthe2011dealandother
technicalities,alsoassumeswewindupwellbelowthehistoricalaverageby2025),thebudget
resolutionmakesadditionalcutsof$126billionin2025,accordingtocalculationsbyRichard
KoganoftheCenteronBudgetandPolicyPriorities.
ThatbringsmebacktotheBeltwaygame.IdoubtverymuchthatCongresswillsticktothese
numbersthere'snoplausiblepoliticalpathtoachievethem.Overthepastseveralyears,Congress
hasadoptedminidealstoloosenitsowndiscretionarycapsandpreviouscapshavebeenmuch
lessaggressive.
Tosticktothenewthresholdswouldinvolveslashinginvestmentsinportsecurity,medical
research,education,environmentalprotectionandotheressentialactivities.Bynotshowingthe
detailsonhowmucheachprogramwouldbeaffected,theresolutionmakesiteasier,fornow,to
pretendthecutbacksareharmless.Infact,theywouldbedisastrousfortheeconomy.
Theironyinallofthisisthatthefederalgovernment'sprojectedlongtermdeficithascomedown
substantiallyinrecentyears.Thisisinnosmallpartbecauseofthedecelerationinhealthcare
costs.Onanapplestoapplesbasis,projecteddebtin2040asashareofGDPhasfalleninhalf
since2010,accordingtoKogan.Giventhattherearesomeearlysignsthattheslowdownin
Medicaremaybepartiallyreversing,thebestthingCongresscoulddotoimprovetheU.S.'slong
termfiscaloutlookwouldbetodoubledownonreforms,includingshiftingawayfromfeefor
servicemedicalpayments,thathaverecentlyhelpedslowthegrowthinMedicarecosts.
Thebudgetresolutiondoublesdowninsteadongimmicks,especiallycutsinfuturediscretionary
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Congress's Budget Game GetsUglier - Bloomberg View

spending.Sowhichisit?IsCongressputtingfakenumbersonpaperaspartofacynicalgame,or
doesitmeantocutwellbeyondbudgetaryfatintocrucialmuscle?
Tocontacttheauthoronthisstory:
PeterOrszagatporszag3@bloomberg.net
Tocontacttheeditoronthisstory:
MaryDuenwaldatmduenwald@bloomberg.net

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