Last week was a big week for budget nerds in Washington.
First, the president released his first full budget, which in turn led to testimony and press conferences by Office of Management and Budget Director Mick Mulvaney. Days later, the Congressional Budget Office released the score of the revised American Health Care Act, or “Trumpcare,” the bill that reforms the Affordable Care Act, or “Obamacare.” And Treasury Secretary Steven Mnuchin urged Congress to raise the debt ceiling before its August recess, sooner than anticipated.
The connections between these three events are obvious in some ways since they are all major stories relating to the federal budget, but it is worth connecting the dots to fully understand the problems that these events highlight.
First, there’s President Donald Trump’s $4.1 trillion budget. The priorities identified in this budget are not surprising – significant increases in spending for border security and military operations, along with cuts to many programs then-candidate Trump vilified in the campaign.
The surprising, and troubling, things about this budget are its projections. The proposal supposedly balances the federal budget in 10 years, but this is based on the assumption of sustained 3 percent growth, which is 50 percent higher than the projections of 1.9 percent growth by the Congressional Budget Office, something few economists believe is likely. Moreover, the budget does not reflect the impact of the president’s proposed tax cuts, which, coincidentally, also depend on 3 percent growth to pay for revenue lost by lowering rates. Even without the double counting, the underlying assumptions of this budget are not even close to fiscally realistic.
Moving on to the Congressional Budget Office’s score of the health care bill: Speaker Paul Ryan declared the Budget’s Office analysis good news, because it confirmed that the bill would reduce the deficit by $119 billion. Politically, there were voices from all across the spectrum, from Freedom Caucus member Mark Meadows to Senate Minority Leader Charles Schumer raising concerns about the impact of the bill on people with pre-existing conditions seeking insurance coverage, as well as the number of people the office projects would lose coverage – 23 million. This is the second time this year that the Budget Office has been in the limelight, and once again critics are looking to undercut the accuracy of its projections about insurance coverage.
It makes sense that Ryan embraced the deficit savings projection, and not simply because he is a proud deficit hawk. While the Senate is unlikely to keep the health bill in its current form, deficit reduction will also be a goal, in part to pave the way for the tax reform agenda that both the president and the majority in Congress have prioritized. To pass a tax reform bill with only a simple majority using the reconciliation process, as Senate Majority Leader Mitch McConnell and others have said they plan to do, the reforms must be deficit neutral in the 10-year budget window. And while we have not seen details of the president’s tax reform proposal, we know that like the budget, it depends on rosy growth projections to be deficit neutral. So any deficit reduction achieved through health care reform creates more space for bigger, bolder tax cuts within a reform package.
Which leads us to the debt ceiling. The reason Mnuchin is urging Congress to lift the debt ceiling before the extended August recess is because tax revenues have fallen short of projections. The shortfall highlights the difficulty and seriousness of all the fiscal decisions before Congress. Reforming the tax code, changing major health care programs, allocating resources within the budget – all of these tasks require not just a commitment to an ideological perspective, but careful analysis, math and clear decision-making. This is no time to vote on bills without knowing the fiscal consequences, nor move ahead with a major policy shift without considering the views of the representatives of nearly half the country.
Our debt is nearing $20 trillion. It is time for Congress to look past partisan preferences and budget gimmicks and look for real solutions to our fiscal problems.