Happy Halloween From CRFB
Happy Halloween! For the spookiest day of the year (though some might argue that's April 15th), CRFB is thinking about scary costumes and wondering what budget polices they represent.
Frankenstein—What could be more fitting than comparing our nation’s tax code to a monster cobbled together by a mad scientist? Comprehensive tax reform should be an essential part of the next Congress' agenda. Its spark of life is just what this country and the economy needs.
Zombies—The undead rising from the grave is just like one of the more pressing issues in the upcoming lame duck Congress. More than 50 tax cuts known as "tax extenders" lapsed at the end of 2013, yet Congress is considering retroactively bringing them back from the dead for 2014. If a two-year extension (2014 and 2015) passes Congress after the election, the impact is a trick, not a treat, of about $85 billion added to the national debt over ten years. But of course there could be an even scarier deal…
Vampires—Interest on our national debt will suck the life out of our budget, leaving little room for important spending. Right now, interest rates are low and we pay relatively little. But Dracula is hovering above us: Interest payments are projected to nearly quadruple in nominal dollars by the end of the decade (increasing as a share of the economy from 1.3 percent in 2014 to 3.0 percent in 2024). At the same time, discretionary outlays will shrink from 6.8 percent to 5.2 percent of GDP in 2024. The essential roles of government are being bled dry by interest on our national debt.
Ghosts—The haunting nature of our unsustainably high national debt is certainly a ghost -- the ghost of deficits past. Year after year, deficits add to the stock of our national debt, which at the end of FY2014 was 74.1 percent of GDP. While the deficit in 2014 fell quite rapidly to $483 billion, policymakers must not forget that it is the specter of future long-term deficits that will keep our debt on an unsustainable path haunting this country.
Witches—Magic and hocus pocus have seen their fair share of time in budget policy in 2014. CRFB has routinely called on Congress not to engage in budget witchcraft by using a cauldron of budget gimmicks or "magic" asterisks. Pension smoothing showed its wart-filled face this summer to “fund” the deal to extend the Highway Trust fund into next year.
After tonight, CRFB will continue unmasking budget trickery. Happy Halloween.