Whatever the final outcome of the ongoing fiscal year 2019 budget battle, one thing is unlikely to change much. Annual deficits are projected to average $1.2 trillion over the next ten years. That piles on top of the already nearly $22 trillion national debt. Unless a course correction is made, deficits and debt are projected to accelerate and then skyrocket as Baby Boomers continue to retire, lawmakers seek further investment in infrastructure, and the military, or other priorities, and the economy eventually slows down. All of this assumes no major economic dives, like the 2008 economic crash, large scale wars, or other financial shocks.
That is sobering. Or at least it should be. And it should guide lawmakers in the newly sworn in 116th Congress as they consider their priorities and spending decisions.
Off To A Bumpy PAYGO Start
Unfortunately, the 116th Congress’ foray into fiscal responsibility is off to a bumpy start. Several new House majority Democrats fought against inclusion of pay-as-you-go (PAYGO) rules for legislation that may come up this Congress. Under PAYGO, legislation affecting revenues and “mandatory” spending programs is not supposed to increase the already staggering and unsustainable national debt. That is, any bill that creates new programs or changes existing programs where spending is mandated by law and not subject to annual appropriations – such as Medicare, farm business subsidies, or pensions for government workers – and any tax cut must be offset with corresponding spending reductions or revenue increases somewhere else. It’s basic budgeting and basic math that people and businesses outside of Washington do every day.
The PAYGO rule would improve upon the cut-as-you-go (CUTGO) rule House Republicans adopted the last few Congresses. Here’s why that was a problem: CUTGO only applied the principle of balance to mandatory spending. So any bill that increased spending had to be offset. But lawmakers could go ahead and cut revenue without having to also cut spending. Which helped give us the huge Treasury hole from the end of 2017 tax cut.
It’s understandable that many new members of Congress see the huge tax cut jammed through by the last Congress and are frustrated by the limits created by PAYGO. They don’t want their hands tied before delivering what they see as important policy changes, say in healthcare or infrastructure, that were central to their campaigns. But their hands are already tied by the deficit and debt.
Our nation’s fiscal predicament may not be the fault of the 116th Congress, but it is their problem.
Budget Caps and Fiscal Guardrails
Replacing a rule that allows lawmakers to have their tax cut cake while consuming billions of additional dollars in spending, with a common sense rule that treats all deficits equally is an improvement. But it’s by no means perfect because it’s a “rule” that can rather easily be waived. The previous House Democratic majority waived PAYGO for extending (part) of the President George W. Bush era tax cuts, patching the Alternative Minimum Tax (AMT), adopting the 2008 Farm Bill, and the 2009 stimulus. PAYGO certainly doesn’t have the teeth that we would like. But it at least puts some guardrails on trying to bring balance between spending and revenue.
How to handle (or ignore) expanding deficits on the mandatory side of the ledger isn’t the only budget issue facing lawmakers. The 2018 budget deal increasing spending levels on annual discretionary spending only applied to FY2018 and 2019. That means that FY2020 and 2021 are facing steep reductions in allowed spending under the budget caps established by the 2011 Budget Control Act. Unlike previous budget deals, lawmakers did not even attempt to offset the spending increase which coupled with the tax cut drove the huge deficit that makes no sense with a (still) growing economy.
One of the big sticking points in the last Congress was the intransigence of Members who wanted to exempt the Pentagon from any type of budget controls. With a DoD appropriations bill topping out at $674.4 billion, they had to pull some shenanigans to keep from busting the BCA budget caps. They did this by putting “only” $606.5 billion in the base budget and topping off the tank with $67.9 billion in the Overseas Contingency Operations account. This may be “off budget” but it certainly adds to the deficit. And considering the Pentagon just flunked its first audit, we think a little budget discipline is in order – at least until the department can tell us for sure how they’ve spent all that money.
Make The Tough Choices, We Can’t Afford Less
Our nation’s fiscal house is in disarray. Sticking our head in the sand in response to the fiscal challenges ahead won’t change that. Ridiculing deficits caused by legislation you oppose while ignoring the deficits caused by programs you like, isn’t going to change that. The time for avoiding tough decisions between competing priorities is long past. It’s a new Congress and a new opportunity to right the government’s fiscal ship.