President Obama submitted his fiscal year 2014 budget on April 10. Some have criticized the President on the ground that the budget was more than two months late. (The statutory deadline is the first Monday in February.) That criticism is fair enough – with the footnote that budget decisions for the preceding, ongoing fiscal year were well behind schedule as well, and in fact were not completed at the turn of the calendar year, when the ink of a President’s budget always has been both figuratively and literally drying. The budget law was written under the presumption that a President would know the budget outcomes for one fiscal year before he was required to prepare and submit the budget for the next.
There was a throwaway comment in the early press that “the President’s budget has virtually no chance of being adopted.” Well, no President’s budget ever is adopted; the Congress always makes changes (if it adopts meaningful budget legislation at all). A much more important test today is whether the President’s budget moves the current fiscal stalemate off of dead center (with the accent on the “dead”).
We will have a deeper account of the prospects for the politics and policymaking of the budget season next week. But the big-picture takeaway from the release of the budget is that this is the biggest and best opportunity to move the ball that anyone in Washington could have had a right to expect. It’s time, guys.
Is this the perfect budget? No. Could it be the total solution to our fiscal problems? No again. It has its downs, as well as its ups. But in its entirety and in context, it is at least enough to justify a pizza, a few beers, and a serious conversation.
Let’s start with the ups. Here is the bottom line – the size of the nation’s accumulated debt as a percentage of the GDP, under this year’s budget in comparison with last year’s:
To a budget geek, these two lines represent roughly the difference between night and day. Last year’s budget left the debt – already in danger, far too high – at a constant share of the economy. That is the equivalent of walking along a precipice with three toes and one heel hanging over the edge. This year’s budget has the debt shrinking consistently – like walking away from the fatal drop. Fast and far enough? Certain, in a shaky economy? Arguably neither, but equally arguably in the ball park.
Interestingly, there has been little or no challenge of the President’s numbers as being the product of “phony savings.” There has been mention that the routine Congressional Budget Office (CBO) re-pricing of the budget is expected to show smaller savings. But the CBO re-estimates always show smaller savings than any President’s budget, so that is not news. (Footnote: You may have read allegations that the President has booked “phony savings” from ending the wars in Iraq and Afghanistan, which has been expected for years. But the President’s accounting approach also increases in equal measure the baseline – the outcome that is assumed without the President’s policies – and so does not at all affect the bottom line.)
A second up is that the President has made tangible gestures to the other side. Given that any solution must be bipartisan, it might be a good idea to get the two sides together. In this respect, the President puts both Social Security and Medicare policy on the table, including the adoption of the so-called “chained CPI” (for inflation indexation of all indexed federal programs, including but not limited to Social Security). In recent months, both House Speaker John Boehner (R-OH) and Senate Minority Leader Mitch McConnell (R-KY) have cited the chained CPI as the key to a budget compromise (see here), so one might say that the President has offered not an olive branch, but rather the whole tree.
OK – So what are the downs in the President’s budget? Well, he did not propose a comprehensive market-based reform of Medicare (or Medicaid). CED has been clear about our preference for a system of incentive-based beneficiary choice among competing plans. Still, that seems to be a point of difference that is worth discussing, rather than a reason to refuse to discuss.
But the key sticking point is that the President demands some new revenues as a part of a deal, whereas congressional Republicans insist that revenue talk is over. Both sides have a story. Republicans say that the President got his revenue in the “fiscal cliff” deal – the American Taxpayer Relief Act (ATRA) – at the turn of the year. The President points out that ATRA increased revenues by $600 billion over 10 years, and that Speaker Boehner, in their nearly successful negotiations back in 2011, offered $800 billion – suggesting that there should be more room to go.
Everyone has the right to pick a side in this difference of opinion. But there is one indisputable fact: Neither side can solve this problem all its own way until at least 2015 (assuming Democrats hold the Senate and take the House in the 2014 elections) or 2017 (assuming Republicans take the White House and the Senate and hold the House in 2016). Many economists would argue that the impact of actual deficit reduction should be postponed to protect the economic recovery in the near term. But even so, it arguably would be risky to delay putting longer-term deficit-reduction policies into place until 2015. It almost certainly would be dangerous to procrastinate until 2017. Having policymakers holding their breath until they turn blue or get exactly what they want, whichever occurs first, is not a prudent course of action with the welfare of the Republic at stake.
In sum, and to capitulate to the inevitable football analogy (can’t come up with a baseball simile), the President’s budget is as close as Washington ever will come to an offer of a combined huddle while the two cheerleading squads perform jointly in the center of the field. If this is not enough to get a serious conversation going, I am not sure for what cosmic event we are waiting.