Still Crazy After All These Years: Understanding the Budget Outlook
Authors: William G. Gale, Jason Furman, Alan J. Auerbach
Despite the tax cuts enacted early in the decade and the increased spending enacted since then, the Congressional Budget Office (CBO, 2007b) currently projects a baseline surplus of $586 billion in the unified budget over the next 10 years. Under the baseline, the deficit will decline over the next few years, and turn to a surplus by 2012 that will continue to grow through 2017.
Balance the Budget
Authors: Isabel V. Sawhill
The Democratic leadership of the Congress is trying to instill some fiscal discipline into the budget process. Although there's no guarantee that they will succeed, both houses have been working on a budget plan for fiscal 2008 that balances the budget by 2012.
Why Deficits Matter - Testimony Before the U.S. House Budget Committee
Authors: Edward Gramlich
With rapid increases in entitlement spending just over the horizon, now is the time to get deficits down and national saving up.
Options to Close the Long-run Fiscal Gap
Author: Jason Furman
The deficit represents a major economic challenge. It drives down national savings, leading to less investment or more foreign borrowing. Restoring fiscal balance will require three steps: to stem the flow of red ink, restore the PAYGO rules, take simpler steps to reduce the deficit today, address Social Security, Medicare, Medicaid and tax reform to bring the government's books into balance over the longer term.
Taming the Deficit
Author: Bill Frenzel, Charles Stenholm, William Hoagland and Isabel Sawhill
Currently projected deficits are unsustainable and pose serious risks to the economy, make us dangerously dependent on the rest of the world, impose an extra "debt tax" on every taxpayer, send the bill for current spending to future generations, and weaken the ability of the federal government to invest in the future or respond to unforeseen emergencies.
Taming the Deficit, Together (New York Times Op-ed)
Author: Bill Frenzel, Charles Stenholm, William Hoagland and Isabel Sawhill
With the new Democratic majority in Congress, President Bush finally talking about fiscal responsibility and the 2008 primary season about to begin, finding common ground between Democrats and Republicans on budget issues could not be more important. The four of us propose a balanced package of spending cuts and revenue increases that could eliminate the deficit in five years and set the nation on a sustainable course for the long term.
Restraining Federal Domestic Spending
Author: James C. Capretta
Spending restraint has never been more important as a policy objective. Several critical national priorities (the Global War on Terror, emergency preparedness) must be addressed simultaneously and will require substantial resources, even as the country is on the brink of unprecedented and expensive population aging.
Pruning the Defense Budget
Author: Jeffrey M. Tebbs
This paper prunes superfluous expenditures from the defense budget by identifying cost-saving measures that trim defense spending without sacrificing essential capabilities. These measures include the elimination of programs no longer relevant to the current threat landscape, the termination of weapons programs with limited technical feasibility, the restructuring of overambitious acquisition strategies, and the curtailment of strategically provocative weapon systems.
Reducing the Deficit Through Better Tax Policy
Author: Diane Lim Rogers
Deficit reduction cannot all come on the spending side of the budget; some changes to tax policy are necessary to bring budget deficits under control. This paper discusses five broad areas of change to tax policy and recommends adjustments that will reduce the deficit in the next five years.
Cost-Effective Investments in Children
Author: Julia B. Isaacs
Based on a review of benefit-cost evidence, this paper identifies four areas of investment that merit expanded federal funding even in a time of fiscal austerity. America's future economic well-being will benefit from targeted investments to ensure that children have the skills to become tomorrow's adult workers, caregivers, taxpayers, and citizens.
Returning to Bipartisan Fiscal Responsibility
Author: Diane Lim Rogers
Deficit spending continues to add to the national debt, and the problem will only worsen over time. Members of both parties in the new Congress and the administration must work together and get past partisan politics to reduce the debt for the sake of our children and grandchildren.
Time for a Budget Summit
Authors: Bill Frenzel and Leon Panetta
The looming budget crisis demands that the president and both houses of Congress meet to decide on changes in spending and taxes to balance the budget. Only through a summit will participants dispel partisan distrust and obtain the political cover needed to make the difficult decisions on the budget.
Working for a Good Retirement
Authors: Barbara A. Butrica, Karen E. Smith, and C. Eugene Steuerle
Workers who delay retirement can save more and contribute more to the economy. Urban Institute simulations show that someone who works an extra five years could increase retirement spending by more than half. Also, work-inducing reforms―rather than reforms that simply reduce benefits―help close the Social Security funding gap.
New Estimates of the Budget Outlook: Plus Ça Change, Plus C'est la Même Chose
Authors: Alan J. Auerbach, William G. Gale, and Peter Orszag
Tax cuts, the Medicare prescription drug program, increased spending on defense and homeland security, and related economic developments have caused the federal nation’s fiscal status to deteriorate, leaving significant short- and medium-term deficits and massive long-term shortfalls. Effectively addressing those problems will require spending cuts or tax increases far beyond the scale of anything currently considered politically palatable.
Rules for Assessing Social Security Reform
Authors: Edward M. Gramlich
Six rules would improve the development of Social Security reform: (1) stick to standard assumptions; (2) conduct proper stochastic simulations; (3) conduct simulations for which the end point doesn’t matter; (4) integrate disability insurance; (5) require reform plans to be internally financed; and (6) do not incorporate an equity premium.
A First Step in Dealing with Growing Retirement Costs
Authors: Edward M. Gramlich
Two actions could constitute a first step - but only a first step - toward solving the looming financial problems of Social Security and Medicare: (1) levy Social Security taxes on all earnings rather than just on those below a cap; and (2) raise both early and normal ages of retirement and apply those higher ages equally to both programs.
Restoring Fiscal Sanity 2005: Meeting the Long-Run Challenge
Authors: Alice M. Rivlin and Isabel V. Sawhill
As baby boomers retire, costs for health care and pension programs will soar, leading to slower economic growth if nothing is done. This introduction to Restoring Fiscal Sanity discusses how to bring spending and revenues in line over the next decade, and, even more important, how to balance them over the longer term through reforms in the tax system, Social Security, and Medicare.
The Importance of Raising National Saving
Authors: Edward M. Gramlich
Raising national saving through a combination of fiscal tightening and measures to raise private saving, coupled with measures to increase demand throughout the world economy, could stabilize investment in the United States in the short run and increase profitability in the long run. That would lessen the risk of domestic investment falling precipitously if foreigners decide to cut their U.S. investments.
Reducing Budget Deficits
Authors: Edward M. Gramlich
Restoring fiscal discipline is essential to maintaining a healthy economy. Budget rules, supported by reliable information about baseline deficits and the effects of legislation, can help attain that goal. The rules must apply to appropriately long time periods and focus on reasonable targets, but they should maintain flexibility to adapt to changing circumstances.
How to Balance the Budget
Authors: Alice M. Rivlin and Isabel V. Sawhill
The retirement of the baby boom generation will lead to large and persistent deficits that are likely to lower standards of living, make us dangerously dependent on the rest of the world, and leave large fiscal burdens for future generations. After considering possible solutions to those problems, this paper concludes that (1) neither political party currently has a workable plan to reduce the long-term deficit; (2) both spending cuts and tax increases will be needed; and (3) stronger budget process rules would help members of Congress be more fiscally responsible.
Budget and Trade Deficits
Author: Edward M. Gramlich
Budget and trade deficits are linked but not always in the same way. Neither need be worrisome in the short run, but both can lead to significant long-run problems. But while trade deficits are generally self-correcting, explicit action is typically needed to reverse budget deficits.
Working to Fix Our Fiscal Woes
Author: C. Eugene Steuerle
Americans today can expect to have longer retirements than earlier generations, increasing their need for savings and imposing large demands on entitlement programs for the elderly. Working longer would not only raise the amount of private savings available to support retirement but also ease the nation’s fiscal problems.
“Death Tax” Repeal Unfair to Those Who Owe “Birth Tax”
Author: Diane Lim Rogers
Opponents of the estate tax complain that the “death tax” unfairly burdens people at death, even though few estates owe the tax. In contrast, every American baby inherits a share of the federal debt at birth, currently about $28,000 per person. Repealing the estate tax would raise that “birth tax” by $3,000 during the first decade alone, the cost of eliminating the estate tax on relatively few wealthy people.
Are Current Budget Deficits More Worrisome than Those of the 1980s?
Author: Rudolph G. Penner
Congress worked hard in the 1980s and early 1990s to restore fiscal responsibility, but that appears to be less true today, making current deficits more worrisome. Policy is unlikely to be reversed unless strong external pressure for deficit reduction is exerted or fiscal conservatives gain power in Congress.
Budget Crisis at the Door
Authors: Rudolph G. Penner and C. Eugene Steuerle
Impending rapid growth of the elderly population will inevitably increase the share of the federal budget going to programs that support the elderly. At historic tax rates, revenues cannot grow fast enough to cover growing costs. Without reforms of entitlement programs, the United States will experience a budget crisis with dire implications for the entire economy.
Options to Close the Long-run Fiscal Gap
Author: Jason Furman
The deficit represents a major economic challenge. It drives down national savings, leading to less investment or more foreign borrowing. Restoring fiscal balance will require three steps: to stem the flow of red ink, restore the PAYGO rules, take simpler steps to reduce the deficit today, address Social Security, Medicare, Medicaid and tax reform to bring the government's books into balance over the longer term.
Taming the Deficit
Author: Bill Frenzel, Charles Stenholm, William Hoagland and Isabel Sawhill
Currently projected deficits are unsustainable and pose serious risks to the economy, make us dangerously dependent on the rest of the world, impose an extra "debt tax" on every taxpayer, send the bill for current spending to future generations, and weaken the ability of the federal government to invest in the future or respond to unforeseen emergencies.
Taming the Deficit, Together (New York Times Op-ed)
Author: Bill Frenzel, Charles Stenholm, William Hoagland and Isabel Sawhill
With the new Democratic majority in Congress, President Bush finally talking about fiscal responsibility and the 2008 primary season about to begin, finding common ground between Democrats and Republicans on budget issues could not be more important. The four of us propose a balanced package of spending cuts and revenue increases that could eliminate the deficit in five years and set the nation on a sustainable course for the long term.
Restraining Federal Domestic Spending
Author: James C. Capretta
Spending restraint has never been more important as a policy objective. Several critical national priorities (the Global War on Terror, emergency preparedness) must be addressed simultaneously and will require substantial resources, even as the country is on the brink of unprecedented and expensive population aging.
Pruning the Defense Budget
Author: Jeffrey M. Tebbs
This paper prunes superfluous expenditures from the defense budget by identifying cost-saving measures that trim defense spending without sacrificing essential capabilities. These measures include the elimination of programs no longer relevant to the current threat landscape, the termination of weapons programs with limited technical feasibility, the restructuring of overambitious acquisition strategies, and the curtailment of strategically provocative weapon systems.
Reducing the Deficit Through Better Tax Policy
Author: Diane Lim Rogers
Deficit reduction cannot all come on the spending side of the budget; some changes to tax policy are necessary to bring budget deficits under control. This paper discusses five broad areas of change to tax policy and recommends adjustments that will reduce the deficit in the next five years.
Cost-Effective Investments in Children
Author: Julia B. Isaacs
Based on a review of benefit-cost evidence, this paper identifies four areas of investment that merit expanded federal funding even in a time of fiscal austerity. America's future economic well-being will benefit from targeted investments to ensure that children have the skills to become tomorrow's adult workers, caregivers, taxpayers, and citizens.
Can Congress Use Budget Rules to Improve Tax Policy?
Author: Rudolph G. Penner
PAYGO rules worked in the 1990s because they had bipartisan consensus and caused little political pain. Establishing new budget rules now would have neither of those assets and, because Congress can always circumvent its own rules, would be unlikely to succeed. Any new rules must be simple enough that people can see when they are broken because then there is some chance that Congress can be embarrassed into behaving better.
Dynamic Analysis and Scoring
Author: Leonard Burman
Although most analyses of public policies include behavioral responses, they omit resultant changes in the economy as a whole for three main reasons: how policies will be financed is generally unknown, parameters needed for analysis are uncertain, and current models are limited. Even so, economists generally agree that some policies have greater effects on the economy than others; that information could be useful as the Congress chooses among alternative policies.
Dynamic Scoring: Not So Fast!
Author: Rudolph G. Penner
Although dynamic scoring of policies may be possible in the future, it is logistically impossible given current technology. Not having such analysis may not be too bad, however, as studies suggest that dynamic effects are generally small.
Rules for Assessing Social Security Reform
Authors: Edward M. Gramlich
Six rules would improve the development of Social Security reform: (1) stick to standard assumptions; (2) conduct proper stochastic simulations; (3) conduct simulations for which the end point doesn’t matter; (4) integrate disability insurance; (5) require reform plans to be internally financed; and (6) do not incorporate an equity premium.
A Radical Proposal for Escaping the Budget Vise
Authors: Rudolph G. Penner and C. Eugene Steuerle
Current budget policy is unsustainable because automatic growth in entitlement spending will necessarily outstrip any growth in revenues. Provisions that automatically constrain spending growth or increase taxes could provide an effective remedy to this situation.
A First Step in Dealing with Growing Retirement Costs
Authors: Edward M. Gramlich
Two actions could constitute a first step - but only a first step - toward solving the looming financial problems of Social Security and Medicare: (1) levy Social Security taxes on all earnings rather than just on those below a cap; and (2) raise both early and normal ages of retirement and apply those higher ages equally to both programs.
The Role of the Congressional Budget Office
Author: Rudolph G. Penner
CBO has served an important role in policy analysis, but its ability to provide accurate estimates is limited by the inherent uncertainty of economic analysis. Requiring the CBO to provide dynamic policy analyses would place demands on the agency that cannot be met without adding much of value to Congress’s decision-making process.
Budget Deficits, National Saving, and Interest Rates
Authors: William G. Gale and Peter R. Orszag
Budget and trade deficits are linked, but not always in the same way. Neither need be worrisome in the short run, but both can lead to significant long-run problems. But while trade deficits are generally self-correcting, explicit action is typically needed to reverse budget deficits.
Reducing Budget Deficits
Authors: Edward M. Gramlich
Restoring fiscal discipline is essential to maintaining a healthy economy. Budget rules, supported by reliable information about baseline deficits and the effects of legislation, can help attain that goal. The rules must apply to appropriately long time periods and focus on reasonable targets, but they should maintain flexibility to adapt to changing circumstances.
The Financial Consequences of Fiscal Paralysis
Author: Rudolph G. Penner
Long-term budget projections all show deficits and debt rising to unsustainable levels as entitlement spending, particularly on the elderly, far outstrips revenues. If nothing is done, potentially disastrous economic crises are unavoidable.
Are Current Budget Deficits More Worrisome than Those of the 1980s?
Author: Rudolph G. Penner
Congress worked hard in the 1980s and early 1990s to restore fiscal responsibility, but that appears to be less true today, making current deficits more worrisome. Policy is unlikely to be reversed unless strong external pressure for deficit reduction is exerted or fiscal conservatives gain power in Congress.
Budget Crisis at the Door
Authors: Rudolph G. Penner and C. Eugene Steuerle
Impending rapid growth of the elderly population will inevitably increase the share of the federal budget going to programs that support the elderly. At historic tax rates, revenues cannot grow fast enough to cover growing costs. Without reforms of entitlement programs, the United States will experience a budget crisis with dire implications for the entire economy.
Still Crazy After All These Years: Understanding the Budget Outlook
Authors: William G. Gale, Jason Furman, Alan J. Auerbach
Despite the tax cuts enacted early in the decade and the increased spending enacted since then, the Congressional Budget Office (CBO, 2007b) currently projects a baseline surplus of $586 billion in the unified budget over the next 10 years. Under the baseline, the deficit will decline over the next few years, and turn to a surplus by 2012 that will continue to grow through 2017.
Options To Close the Long-run Fiscal Gap
Authors: Jason Furman
The United States can do a lot better than a $198 billion unified deficit and the United States needs to do much better than a $388 billion non-Social Security deficit. This is especially true in a year when macroeconomic performance is strong and when we face large risks including the private saving rate at its lowest level since 1939, a current account deficit approaching 7 percent of GDP, and major fiscal challenges just around the corner.
Defining Our Long-Term Fiscal Challenges (Reischauer) - Testimony Before the U.S. Senate Budget Committee
Authors: Robert D. Reischauer
The recent fiscal situation and the intermediate-term budget outlook may appear relatively benign, Urban Institute President Robert Reischauer told the Senate Budget Committee, but deficits and debt will gradually grow to unprecedented and unsustainable levels if current tax and spending policies are not altered significantly.
Defining Our Long-Term Fiscal Challenges (Steuerle) - Testimony Before the U.S. Senate Budget Committee
Authors: C. Eugene Steuerle
in recent decades, the government has wound a straightjacket around federal spending and tax subsidies. The main culprits have been in the broad areas of retirement, health, and taxation. Left alone, it leaves Congress with almost no control over its own budget. Only major systemic reform can restore a normal democratic process.
Why Deficits Matter - Testimony Before the U.S. House Budget Committee
Authors: Edward Gramlich
With rapid increases in entitlement spending just over the horizon, now is the time to get deficits down and national saving up.
New Estimates of the Budget Outlook: Plus Ça Change, Plus C'est la Même Chose
Authors: Alan J. Auerbach, William G. Gale, and Peter Orszag
Tax cuts, the Medicare prescription drug program, increased spending on defense and homeland security, and related economic developments have caused the federal nation’s fiscal status to deteriorate, leaving significant short- and medium-term deficits and massive long-term shortfalls. Effectively addressing those problems will require spending cuts or tax increases far beyond the scale of anything currently considered politically palatable.
Working to Fix Our Fiscal Woes
Author: C. Eugene Steuerle
Americans today can expect to have longer retirements than earlier generations, increasing their need for savings and imposing large demands on entitlement programs for the elderly. Working longer would not only raise the amount of private savings available to support retirement but also ease the nation’s fiscal problems.
A Radical Proposal for Escaping the Budget Vise
Authors: Rudolph G. Penner and C. Eugene Steuerle
Current budget policy is unsustainable because automatic growth in entitlement spending will necessarily outstrip any growth in revenues. Provisions that automatically constrain spending growth or increase taxes could provide an effective remedy to this situation.
Restoring Fiscal Sanity 2005: Meeting the Long-Run Challenge
Authors: Alice M. Rivlin and Isabel V. Sawhill
As baby boomers retire, costs for health care and pension programs will soar, leading to slower economic growth if nothing is done. This introduction to Restoring Fiscal Sanity discusses how to bring spending and revenues in line over the next decade, and, even more important, how to balance them over the longer term through reforms in the tax system, Social Security, and Medicare.
The Importance of Raising National Saving
Authors: Edward M. Gramlich
Raising national saving through a combination of fiscal tightening and measures to raise private saving, coupled with measures to increase demand throughout the world economy, could stabilize investment in the United States in the short run and increase profitability in the long run. That would lessen the risk of domestic investment falling precipitously if foreigners decide to cut their U.S. investments.
Domestic Entitlement Programs
Author: Ron Haskins
The nation faces a budget crisis in both the near term and the long term. One solution involves painful cuts in entitlement spending on income support programs. Delaying those cuts will only worsen the situation.
The Financial Consequences of Fiscal Paralysis
Author: Rudolph G. Penner
Long-term budget projections all show deficits and debt rising to unsustainable levels as entitlement spending, particularly on the elderly, far outstrips revenues. If nothing is done, potentially disastrous economic crises are unavoidable.
Sources of the Long-Term Fiscal Gap
Authors: Alan J. Auerbach, William G. Gale, and Peter Orszag
The United States has a large and growing fiscal gap—the shortfall of federal revenues relative to projected spending. This paper estimates the size of the gap and asks what the source of the gap is under alternative measures, looking not just at spending patterns but also at the role of tax policy.
How to Balance the Budget
Authors: Alice M. Rivlin and Isabel V. Sawhill
The retirement of the baby boom generation will lead to large and persistent deficits that are likely to lower standards of living, make us dangerously dependent on the rest of the world, and leave large fiscal burdens for future generations. After considering possible solutions to those problems, this paper concludes that (1) neither political party currently has a workable plan to reduce the long-term deficit; (2) both spending cuts and tax increases will be needed; and (3) stronger budget process rules would help members of Congress be more fiscally responsible.
Budget and Trade Deficits
Author: Edward M. Gramlich
Budget and trade deficits are linked, but not always in the same way. Neither need be worrisome in the short run, but both can lead to significant long-run problems. But while trade deficits are generally self-correcting, explicit action is typically needed to reverse budget deficits.
Budget Crisis at the Door
Authors: Rudolph G. Penner and C. Eugene Steuerle
Impending rapid growth of the elderly population will inevitably increase the share of the federal budget going to programs that support the elderly. At historic tax rates, revenues cannot grow fast enough to cover growing costs. Without reforms of entitlement programs, the United States will experience a budget crisis with dire implications for the entire economy.
Budget Blues: The Fiscal Outlook and Options for Reform
Authors: Alan J. Auerbach, William G. Gale, Peter Orszag, and Samara R. Potter
Because it is hard to understand how budget policies affect future resources and because current accounting practices are deficient, the federal budget does not provide the information required to establish a sustainable fiscal policy and thus protect the nation's long-term economic prospects. This paper reveals a bleak fiscal outlook that presents policymakers with difficult choices. Specific actions could restore fiscal sustainability directly and improve the budget process that governs fiscal decisions.
newsletter archive
