The bipartisan budget deal announced by congressional leaders and the Trump Administration is fiscally irresponsible and flies in the face of warnings by the Congressional Budget Office that the federal budget is already on an unsustainable path.
“Raising the 2020 and 2021 spending caps by more than $300 billion and then allowing the caps to expire is a bizarre reaction to recent projections that budget deficits will exceed $1 trillion as soon as this year,” said Concord Executive Director Robert L. Bixby.
“If there is any good news, it is that President Trump and Congress have at least lowered the chances of another government shutdown and suspended the debt limit for two years, postponing for now the dangerous prospect of default,” Bixby said.
“The bad news is that the agreement was purchased at the cost of increasing the deficit and raising the debt from their already elevated levels. Less than a quarter of the proposed new spending would be offset. This type of ‘bipartisan cooperation’ is all too familiar and ignores the economic harm that will inevitably come from failing to put the budget on a sustainable path,” Bixby said.
Few in Washington, including the president and those seeking the presidency in 2020, took notice last month when CBO issued its annual update of the long-term budget outlook. The combination of rising deficits and slower economic growth will ratchet up the debt-to-GDP ratio to a record 144 percent by 2049, according to the CBO baseline.
However, this budget deal makes that baseline outdated and optimistic. Instead we are well on our way towards the CBO’s alternative scenario where the debt-to-GDP ratio could hit 219 percent by 2049. This scenario assumed the spending caps were ignored and that expiring tax cuts are continued.
In tandem with the budget deal, the recent House vote to kill the so-called “Cadillac Tax,” which was supposed to help pay for expanded health care coverage under the Affordable Care Act, indicates a willingness to dig the hole even deeper on both the spending and tax sides of the ledger.