Did you get your money’s worth from Congress last week?

CBO projects growing deficits

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Federal spending increased by four percent in 2011, to $3.6 trillion. Spending is projected to increase by $3 billion in 2012.

Federal revenues increased by $140 billion, or six percent in 2011.

The cost of the stimulus has grown. CBO originally projected it would cost $787 billion. It is now projected to cost $831 billion.

Interest spending is expected to rise significantly – from $224 billion projected in 2012 to $624 billion projected in 2022.

The number of people age 65 or older will increase by about one-third between 2012 and 2022 (from 14 to 17 percent of the population). This will greatly impact Social Security and health care spending.

“Because of the aging of the population and rising costs for health care, the set of budget policies that were in effect in the past cannot be maintained in the future.”

Over the next ten years, spending is expected to rise “because of increasing expenses generated by the aging of the population and rising costs for health care.”

“A significant worsening of the banking and fiscal problems in Europe could lead to further turmoil in international financial markets that could spill over to those in the United States and greatly weaken the economy here.”

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The Congressional Budget Office said Tuesday it expects the deficit for fiscal year 2012 to be above $1 trillion. The Associated Press, Bloomberg, The Wall Street Journal and The Washington Post report. The Washington Post’s Ezra Klein attempts to decipher who is responsible for the high deficits and increasing national debt.

The New York Post reports that if current tax laws are allowed to expire, Americans’ tax bills will go up about 30 percent in the next few years.

The Hill says the U.S. House is trying to prevent welfare payments from going to strip clubs.

Roll Call reports the U.S. Senate is again exploring a permanent ban on earmarks. According to Politico, Senate Majority Leader Harry Reid defended the earmarking process.

BusinessWeek reports that small business’ share of the economy has declined over the past few years. Bloomberg reports a recent downturn in consumer confidence could indicate the overall economy is slowing.

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Because of this, the CBO creates an alternative baseline, which assumes many temporary provisions are permanent.  This year’s alternative baseline assumes, among other things, that “temporary” provisions such as the 2001 tax cut are extended, the automatic spending cuts in the Budget Control Act never take effect, and payments to doctors under Medicare remain constant.  In general, the numbers of the alternative baseline are much more important than the actual baseline because the alternative baseline is more likely to reflect policies that Congress actually passes into law.

But regardless of how you look at the numbers – the baseline or the alternative baseline – they aren’t good.  Under the CBO baseline, the deficit grows by $3.1 trillion over the next ten years.  Under the alternative baseline, the deficit grows by a staggering $10.98 trillion.  Considering the current national debt is over $15 trillion, both baselines represent a dangerous growth in the national debt – with the country running unsustainable deficits for the foreseeable future.

On a positive note, it’s reassuring to see the CBO warn Congress about the effects of digging deeper into an economic hole, something we’ve been doing for years at Bankrupting America.  In the report, the CBO says:  ”A rising amount of federal debt would increasingly restrict policymakers’ ability to use tax and spending policies to respond to unexpected challenges, such as economic downturns or financial crises. Burgeoning debt also would boost the likelihood of a sudden fiscal crisis, during which investors would lose confidence in the government’s ability to manage its budget and the government would lose its ability to borrow at affordable rates.”

Washington must take note.  While the numbers may be hard to put into perspective, the consequences are all too real. We only have to look to Greece to see what happens when investors lose confidence in a government’s ability to manage its budget – and subsequently lose its ability to borrow at affordable rates.

The time to act is now. Americans need real solutions that lead to real economic growth.BA

The tight-lipped nature of the meetings has left many wondering if the group has made any progress toward developing a deficit reduction plan. ABC News explains, “The lack of transparency has left many on Capitol Hill scratching their heads and wondering just what progress the committee has made since it last met publicly on Sept. 22. Without a steady flow of information coming from the private meetings, it’s also left some political observers skeptical that the 12-member panel will succeed in reaching its mandate.”

As most still ponder how productive the supercommittee has been, the group held a hearing this morning called “Discretionary Outlays, Security and Non-Security.” Douglas Elmendorf, Director, director of the Congressional Budget Office testified.

Mr. Elmendorf provided an overview of discretionary spending:

Discretionary outlays – the part of federal spending that lawmakers generally control through annual appropriation acts – totaled about $1.35 trillion in 2011, or close to 40 percent of federal outlays.  Slightly more than half of that spending was for defense. The remainder went for a wide variety of government programs and activities, with the largest amounts spent for education, training, employment, and social services; transportation; income security; veterans’ benefits; health-related research and public health; international affairs; and the administration of justice.

He continued to outline steps lawmakers have taken to constrain discretionary outlays:

Budget authority provided for defense activities in 2011 was $3 billion (or less than 1 percent) below the amount provided the year before; budget authority for discretionary nondefense programs was $39 billion (or 7 percent) below the amount provided in 2010. As a result, total discretionary funding in 2011 was the lowest, as a share of GDP, since 2002.

And how discretionary spending could evolve in the coming years:

…the Budget Control Act of 2011 instituted statutory caps on discretionary appropriations for each of the fiscal years 2012 through 2021. The new caps do not constrain spending for the war in Afghanistan or similar activities or for designated emergencies; however, if implemented as written in the act, the caps would keep other appropriations for 2012 and 2013 below the amounts provided for 2011 and would limit the growth of those appropriations to about 2 percent a year from 2014 to 2021.

Time is running is running low and the tension is high for the supercommittee. All eyes are on the group as they carry the weight of the immediate and future stability of the nation’s economy. Failure to produce a credible deficit reduction plan could trigger another downgrade and result in more job losses.

Stay tuned to Bankrupting America for the latest as the supercommittee continues to meet.BA

According to The Wall Street Journal, nearly half of all Americans receive some benefits from the federal government.

Bloomberg says the debt supercommittee may propose that Congress create yet another committee to study and recommend reforms to federal pay, health and pension programs.

CBS News reports President Obama will soon go on a bus tour to try to gain support for his jobs proposal, unveiled in early September. According to The Hill, the Congressional Budget Office estimates the plan would add $175 billion in new spending over 10 years.

According to The Hill, The New York Times, Politico, The Wall Street Journal and The Washington Post Democrats would prefer tax increases on Americans making more than $1 million – as opposed to more than $250,000 – to pay for President Obama’s jobs proposal.

The Hill reports Senate Republicans are seeking to cut $40 billion from farm programs.

According to The Wall Street Journal, federal funds meant to be used for loans to small businesses were instead used by community banks to pay off their TARP loans.

On the opinion pages: Scott Baker, Nicholas Bloom and Steven J. Davis argue uncertainty about federal policy making is hurting job creation.

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Most notably, the days leading up to the end of the fiscal year brought (yet again) the threat of a government shutdown. Coming to the rescue, lawmakers put aside their differences and came to an admirable agreement to fund the government…for four more days. That’s right 96 hours. And while, in the meantime, Congress is expected to approve a longer funding measure, that one only goes through November 18^th. Who put these guys in charge of budgeting?

But unfortunately, Congress’s budgeting ineptitude is hardly contained to this year. A new study by No Labels reveals this unfortunate trend:

…Congress has failed to carry out its most fundamental duty in the Constitution — funding the government in a timely manner — for all but two of the past 25 years.

Congress must pass 12-13 appropriations bills by Sept. 30 in order to pass the budget in a timely manner. No Congress has completed its work on time since President Clinton’s first term — and 1995 and 1997 are the only fiscal years since 1986 that Congress passed all its bills by the deadline.

“Congress is batting .080 on discharging its sole annual duty under the U.S. Constitution in a timely manner,” No Labels Co-Founder David Walker said in a statement. “Players with averages like that don’t last in the majors for long.”

And beyond their inability to responsibly budget for the coming year, Congress also continues to spend the country deep into debt. The Congressional Budget Office projects the FY2011 budget deficit will amount to $1.3 trillion, the third largest shortfall in the last 65 years. And while the government continues to spend at record levels, our economy is experiencing anemic growth levels.

So while today marks the end of the year, it’s hardly a call for celebration. Rather it should serve as a marker for lawmakers to get a new start – to learn from their past mistakes and begin to budget and spend responsibly and allow a recovery to take hold.BA

An editorial in the Wall Street Journal explains that far from budgeting and spending responsibly, the federal government has continued to spend at record, and reckless, levels.

Below are excerpts from the piece. Click here to read the full editorial.

[Y]esterday’s mid-year report from the Congressional Budget Office shows definitively that there’s been nothing close to contraction in Washington.

That’s the real news in the CBO numbers, which show that spending in fiscal 2011 (which ends on September 30) will hit a new high of $3.6 trillion, up $141 billion from 2010. That’s higher than the previous record in 2009 of $3.5 trillion, which was supposed to be the peak of the “temporary” stimulus spending.

[T]hat is also nearly $900 billion more spending than in 2007. Total federal outlays will have increased by roughly one third in a mere four years. This hasn’t happened since the Great Inflation of the late 1970s.

As a share of the economy, spending will once again come in at nearly 23.8%, up from 20.7% as recently as 2008. Defense spending is expected to increase by only $14 billion to $703 billion in 2011, despite the surge in Afghanistan. The bigger increases are in Medicare, Medicaid, and the usual panoply of entitlements and other payments to individuals.

All of this means the deficit will roll in at nearly $1.3 trillion, or 8.5% of GDP this year.

The real story told by the CBO report is that the federal government is still pursuing a very loose fiscal policy…

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The Congressional Budget Office yesterday released its updated 10-year budget outlook. CBO expects the federal government to run a $1.3 trillion budget deficit this year and a $3.5 trillion deficit over the next 10 years. The Hill, The New York Times, Politico and The Washington Times have the details.

The Hill, The New York Times, Politico and Roll Call report the debt super-committee is making progress hiring staff and setting rules so it can start deliberations this fall.

The Washington Times reports the 2009 stimulus didn’t create the jobs that lawmakers had promised it would.

Reuters and The Wall Street Journal preview what might be in the economic plan that President Obama plans to lay out after Labor Day.

On the opinion pages: The Wall Street Journal points out federal spending will hit a record-high this year.

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The specifics outlined in the report are nonetheless daunting:

The federal government is expected to run a $1.3 trillion budget deficit for fiscal year 2011 – the third-largest in the last 65 years (only the last two years’ deficits were higher)

The federal government will add more than $3.5 trillion to the national debt over the next 10 years

Economic growth will stay “well below the economy’s potential” for “several years.” (The CBO predicts 2.3 percent growth this year and 2.7 percent the next.)

Unemployment will remain above eight percent until 2014.

Some lawmakers may try to use the news that the deficit is expected to decline as a percentage of economic output (from 6.2 percent of GDP in 2012 to an average of 1.2 percent of GDP between 2014 and 2021) to show that Washington now understands it has a spending problem and is being more fiscally responsible.

This statement would only partially true. While the CBO’s 10-year cumulative deficit number has fallen to $3.5 trillion from the $6.7 trillion predicted in March (due in large part to the recently-enacted Budget Control Act), the CBO’s numbers also make several policy assumptions that may not come true. For example, the CBO numbers predict a cut in Medicare payments to doctors (something Congress has prevented fro happening for years) and an expiration of both the President’s payroll tax cut and Alternative Minimum Tax relief. The Administration and individual members of Congress are pushing for the extension of one or both of these policies. Furthermore, the CBO numbers assume the 2001 and 2003 tax cuts will expire.

In other words, lawmakers shouldn’t be uncorking those champagne bottles yet. The nation is still deep in debt, and going deeper. There are still plenty of places to cut and reform spending programs; Congress should see today’s report only as a reconfirmation that it needs to keep looking for where to cut.BA