Whatever happened to the big, bad federal deficit? You know, the red ink menace that was supposed to devour America’s fiscal future?
We ask because the way Congress is acting the deficit must have gone into hiding. Look at how eager lawmakers were to whoop through the “doc fix,” the big bill averting (permanently) planned reductions in Medicare reimbursements for physicians. It passed the Senate today by a 92-to-8 vote, having squeaked through the House last month, 392-to-37.
Yes, the move is popular, obviously. It resolves an issue that’s been a problem for years. Yet the doc fix is expensive, and only about one-third of its cost is offset by budget cuts. It’ll add some $141 billion to the deficit over the next 10 years.
And that’s not the only up-spending in the works. Add in likely increases in military and domestic spending, and the deficit could go up $100 billion in the next year alone, calculates longtime federal budget expert Stan Collender.
That would be about a 21 percent increase.
“Virtually every policy change that has already or soon will be considered seriously in the House and Senate will make the deficit higher rather than lower,” writes Mr. Collender in Forbes this week.
Why the change in fiscal weather? Reason one is medium-term deficit reduction success. The Great Recession beginning in 2008 caused a huge increase in US red ink as the government struggled with lower tax receipts, higher social program expenses, and big bills for recovery measures. That flood has abated as the economy plods toward recovery. Sequestration budget cuts have also helped.
The annual US budget shortfall is now near its lowest level in six years.
Second, the D.C. influence of the political group most committed to deficit reduction – tea party Republicans – has ebbed. In the House, it’s clear that the tea party can only push Speaker John Boehner so far. They’re unable or unwilling to depose him if he strikes fiscal deals they don’t like. In the Senate, new majority leader Mitch McConnell has deftly isolated the most conservative members of his caucus as he consolidates his position. It’s notable that the eight votes against the doc fix included tea party stalwarts Sen. Mike Lee of Utah and Sen. Ted Cruz of Texas, as well as Sen. Marco Rubio of Florida.
“This round of kick the can on deficit spending had overwhelming support in both parties,” notes Ed Morrissey at the conservative Hot Air site.
Finally, look at the calendar. There’s an election coming up, in case you haven’t heard. Voters do think the budget deficit is important, but that rating is slipping, according to Pew Research polls. The percentage of respondents who mark it a top priority has fallen by eight points since 2013. Other economic issues rank higher, including the state of the economy in general, jobs, and Social Security.
Thus likely Democratic nominee Hillary Rodham Clinton is focusing on a semi-populist economic message, not fiscal hawkdom. Among declared or likely GOP candidates, only New Jersey Gov. Chris Christie has talked deficit reduction specifics, with his (bold) proposal to means-test Social Security benefits.
Like many chronic public policy problems, the deficit is something Washington deals with in cycles. When the alarms are flashing red, something gets done. When the pressure is off, solutions are put off. While it’s an issue whose importance now appears to be on the decline, that could well change as the Social Security and Medicare costs of retiring baby boomers increase. Congressional Budget Office forecasts have the deficit turning up in 2016, and hitting a trillion dollars in 2020, under some scenarios.
“In fact, CBO estimates that the debt will be well over 100 percent of GDP by 2039 under conservative assumptions about spending and revenue,” writes Ron Haskins, a senior fellow in economic studies at the Brookings Institution, in a recent analysis.