A piece in today’s The Hill highlights Americans’ growing unrest with their nation’s growing deficits.
The federal budget deficit will matter more to voters this year than it has in the past decade, according to polls.
While it continues to trail the near-double-digit unemployment rates and overall state of the economy as a leading concern for voters, it is proving central to the 2010 election.
11 percent of those polled by Gallup said the federal deficit was the most important issue facing the nation … (this is) the highest point since the mid-1990s.
Referring to the explosion in spending, Michael Ettlinger, a vice president at the Center for American Progress Action Fund, warned Washington:
“You fought for it, you did it, you own it, you need to defend it.”
Pew and National Journal saw a dramatic shift over the last five months in the number of Americans who would make cutting the budget deficit a higher priority than spending more in attempt to stimulate the economy.
In February, 47% called cutting the budget deficit a priority; today, that number has risen to 51%. But while 47% also called attempting to stimulate the economy a priority back in February; today that number has fallen to just 40%.
Each week the Economist asks registered voters what they think is the most important issue facing Congress and federal policymakers. This week the economy ranks as the number one concern, health care is second, and social security is third.
The credit agency Moody’s just downgraded Ireland’s credit rating, citing weak prospects for economic growth and increasing debt levels. This is sad news for a nation once thought to be a bastion of good fiscal policy.
We’ve seen in Greece what happens when a country’s debt levels rise and credit rating falls: Investors start demanding higher interest rates because they fear that the country may default. That means the country faces higher interest payments, and those higher interest payments mean a worse budget crunch and even high deficits. It’s a vicious cycle that doesn’t end well.
Moody’s warned in March that it would have to consider lowering the United States credit rating if we don’t get our debt under control. We need to take action now so that we don’t follow Greece’s—or now Ireland’s—path.
The Treasury Department announced today a monthly budget deficit of $68 billion for June. The budget year-to-date deficit is now amounts to just over $1 trillion.
According to the CBO, the total deficit for the 2010 budget year is expected to be $1.37 trillion, the second highest since WWII (last year’s $1.4 trillion deficit was the highest). As numerous economists have warned, we face an unprecedented fiscaldisaster if overspending is not reigned in.
In today’s Washington Post, David Broder laments Congress abandonment of its long-term budgeting responsibilities.
On June 30, the Congressional Budget Office issued its long-term outlook, predicting that deficits would come down for the next few years as the need for counter-recession spending eased and revenue improved. But then, it warned, “unsustainable” red ink would flow again, creating debts not seen since World War II.
The next day the House of Representatives passed a one-year budget resolution rather than the normal blueprint committing the government to a fiscal plan of at least five years.
For all the publicity that goes to earmarks and other spending gimmicks, this was a far worse dereliction of duty. And the cynicism of the maneuver just made it worse.
The terrible irony in all this? More and more people are seeing that what this agonizing situation requires is a limited and temporary measure to pump more life into the economy and create jobs, along with a serious commitment to impose real spending discipline and hold down deficits in the long term — exactly what a five-year budget resolution could provide.
Of all the times for Congress to abandon its responsibility for long-term fiscal planning, this is the worst.
Sen. Judd Gregg, a Republican from New Hampshire, was elected to the Senate in 1992. Sen. Gregg is a member of four very powerful committees: Budget — where he is the Republican Ranking Member opposite Chairman Kent Conrad (D-ND); Appropriations; Banking, Housing & Urban Affairs; and Health, Education, Labor & Pensions.
On the same day Gregg famously withdrew his name from nomination to be President Barack Obama’s Commerce Secretary, Gregg also announced he would retire after his current Senate term, which ends this year.
The fiscal commission was borne out of a proposal by Sen. Gregg and Senator Conrad. Under the Conrad-Gregg proposal the House and Senate would have been forced to vote on the commission’s recommendations. In the end, Senate leadership agreed to a commission created by executive order by President Obama – the commission would not have the power to compel Congress to vote on its recommendations. On Jan. 28, both Senators Gregg and Conrad voted against an amendment by Sen. Sam Brownback (R-KS) that would have reflected the original, stronger, proposal.
According to Congressional Quarterly (password required), it was Sen. Gregg’s idea to require a majority of each party to agree on the commission’s recommendations. The commission, as outlined by the White House, requires 14 of the commission’s 18 members to agree on its recommendations.
On Fox News in February, Sen. Gregg warned: “[W]e need to address our deficits, we need to address our debt….I see that as probably the biggest threat we have as a nation, outside of a terrorist using a weapon of mass destruction against us — our impending fiscal bankruptcy.”
Pew and The National Journalasked adults how U.S. states should deal with their budget deficits. 43% favored cutting funding on transportation and road maintenance; 27% favored cutting funding on health services; 25% favored cutting spending on public safety; 22% favored cutting K-12 spending; and 39% favored raising taxes.
According to a Gallup/USA Today poll, 53% of adults think the government is doing too much. Only 39% think the government should be doing more.
Kaiser asked a pool of registered voters how important various issues were to their vote in this fall’s elections. 44% said a candidate’s stance on the budget deficit was “extremely” important; 35% said “very” important.
A recent NBC/Wall Street Journal asked adults whether the federal government should spend more in an attempt to help the economy – even though it would further add to the deficit and debt
Only 34% said the government should act regardless of deficits — about the same number (35%) as a year ago. 63% said the government should worry about deficits, up from 58% a year ago.
Also according to NBC and WSJ, 34% of Americans are “enthusiastic” about a Congressional candidate that says he or she will cut spending. 35% are “comfortable” with such a candidate; 15% have reservations and only 8% are “very uncomfortable.”
The Senate will take up H.R. 4213, the tax extenders bill today. The cost of the bill has seesawed as lawmakers feel pressure from increasing deficits. However, that may not be enough – Politico reports this morning that lawmakers are looking to restore spending, including $24 billion in Medicaid funding, cut from the bill by the House.
Before the House acted, the Congressional Budget Office (CBO) estimated this piece of legislation will increase budget deficits by about $84 billion for fiscal years 2010 and 2011. Between 2010 and 2020, the bill increases federal spending by $102 billion. Some of this spending is offset with tax increases,
As the CBO points out, a good portion of this bill would be designated “emergency” spending and so would not be subject to pay-go rules. We’ve written about this issue in the past. The emergency designation applies to three provisions in the bill, including the extension of unemployment benefits and COBRA (health care benefits for Americans who’ve lost their jobs). For lawmakers who claim we’re in a recovery, this seems like a questionable use of the emergency designation considering that all of these programs had already been financed (and declared “emergencies”) under previous legislation.
Last week, we explored the problems facing the state of New Jersey and the steps that Governor Chris Christie has been taking to shore up the state’s finances. Governor Chris Christie has made an admirable effort to reduce the state’s deficit and to cut back the size of government. Yet much more work needs to be done.
It’s important for New Jersey citizens to realize that its over-sized state government isn’t just a problem because it has lead to out-of-control deficits. Too big government is in itself a problem: it crowds out the private sector and slows economic growth, making citizens less prosperous in the process. New Jersey needs to continue to scale back government spending.
New Jersey will also need to go much further in terms of pension reform. Governor Christie has advanced some modest changes to the pension system, but a lot more needs to be done. Also, Christie’s 2011 budget forgoes more than $3 billion in contribution to the state pension retirement system. This helps the immediate budget crisis, but exacerbates the long-term problem of unfunded pension liabilities.
New Jersey could look to Illinois for guidance for reforming pensions, since Illinois just passed its own set of pension reforms. Under the new Illinois pension laws, new-hires will have to wait until 67 to retire (some current state workers can retire at age 55). Illinois also capped salaries, which can be used as a basis for calculating pensions and limiting cost-of-living increases. These reforms are good in preventing the build up of future liabilities, but do little to address the considerable liabilities that have already been incurred.
New Jersey will have to go further and make sensible changes to payouts for current and near retirees, while revamping the system for younger workers so that the pension system becomes financially sound. It’s unfair to the private sector that provides the resources to the government for the public pension system to act as an anchor on the state’s economic growth and consume so much taxpayer resources.
New Jersey isn’t alone in facing this problem. The Manhattan Institute found all 59 pension funds across the country that are dedicated to public school teachers face shortfalls, with total unfunded liabilities as high as $933 billion. With liabilities so high, and taxpayers already stretched so thin, states are going to have to face these pension issues or face financial ruin.
New Jersey can lead the way and become a model for other states to follow. What do you think about what’s going on with state budgets? Does your state face a budget shortfall due to unsustainable public pension obligations? Let us know in the comments section below, on Facebook and Twitter.
