Mike Murphy: House Budget Rightfully Recognizes Threat of Oversized Debt
Mike Murphy, the Chief of Staff and Director of Strategic Initiatives at the Committee for a Responsible Federal Budget, wrote an op-ed that is featured in The Hill. It is reposted here.
The House Budget Committee passed its long awaited budget resolution Wednesday — one that has more teeth than usual. Most notably, the budget unlocks the reconciliation process allowing the fast-tracking of both tax reform and deficit reduction with only 50 votes in the Senate.
A budget resolution is an important marker, allowing the party in power to lay out their governing vision for the nation and show where federal resources should be allocated to achieve it.
For years, Republicans in Congress railed against debt and deficits and put forward budgets that sought to balance, albeit with little chance of enactment. Now, with full control of Washington for the first time since 2006, this year’s budget represents a unique opportunity for Republicans to match their rhetoric with action.
Given this opportunity, how does the House budget stack up?
First, the budget deserves credit for rightfully emphasizing the serious threat our rising national debt poses to the nation’s economy and for putting forth the stated fiscal goal of balancing over the next decade.
To achieve its goals, the budget presumes 10-year total savings of $4.3 trillion, relying entirely on spending cuts for its savings. It also assumes $1.5 trillion in savings from economic growth due to the budget’s policies.
While it is praiseworthy to put forward a goal of balance and prioritize deficit reduction, the procedural elements in this budget are more important. They indicate where this Congress is actually headed.
It is a positive sign that this budget includes reconciliation instructions to achieve deficit reduction of at least $203 billion over 10 years. Not since 2006 has the budget reconciliation process been used for the intended purpose of actually achieving deficit reduction. While the target prompts action on only 5 percent of the budget’s presumed policy savings, including these instructions acknowledges the priority of addressing our nation’s debt challenges and shows an intent to take action.
I hope that Congress will follow through on the budget committee’s own words, in that the savings targets “are a floor, not a ceiling, and our committee expects the authorizing committees will achieve significantly larger budgetary savings.”
Importantly, the resolution also calls for deficit-neutral tax reform, closing the door on the idea of using “reform” as a facade for massive deficit-financed tax cuts, which would be incredibly irresponsible given our debt situation. Given prior whisperings of tax cuts, and the president’s promise for “the largest tax cut in history,” the resolution should be commended for embracing tax reform that at least doesn’t make the debt worse.
That being said, the budget resolution also raises several concerns.
The budget claims $1.5 trillion of savings through sustained 2.6-percent economic growth, which is more optimistic than Congressional Budget Office (CBO) projections. But it does not include details on how such growth would be achieved. Given the nation’s economic headwinds of an aging population, the resolution should not rely on such growth to meet its fiscal goals. Smart and responsible budgeting should assume what is likely to happen, not pinning the budget on future hopes.
Furthermore, while the budget calls for deficit-neutral tax reform, it assumes that $300 billion from dynamic growth effects will offset the cost, indicating tax reform would actually increase the deficit under conventional scoring. Given our fiscal situation, a much smarter approach would be to pass tax reform that is at least revenue-neutral under conventional scoring and devote any additional dynamic revenue to deficit reduction.
The budget also calls for increasing the Overseas Contingency Operations (OCO) fund by $10 billion above President Trump’s own budget request, a classic budget gimmick that uses what is supposed to be war-designated spending to get around caps on defense spending. It is also concerning that the budget presumes breaking sequester levels for defense without a specific plan to pay for the cost. Since the defense increases aren’t pegged to future deficit reduction, Congress may end up increasing defense spending without any offsets anywhere else.
Finally, the budget assumes large unspecified cuts, roughly a 25-percent reduction in non-defense discretionary spending, and $2.4 trillion of “other mandatory” savings, which would cut that category by more than half by 2027. These cuts are unrealistically steep, since the budget doesn’t show the changes that would be made to actually achieve them.
Overall, there are some things to like about this budget and certainly areas to be improved. As it heads toward consideration by the full House, fiscally-responsible lawmakers should build on this blueprint and cement their vision of a sustainable fiscal and economic future.
"My Views" are works published by members or staff of the Committee for a Responsible Federal Budget, but they do not necessarily reflect the views of all members of the committee.