With the expected passage of the Bipartisan Budget Act of 2019, the era of discretionary spending caps put in place by the Budget Control Act of 2011 will come to an end. And with them, the best opportunity to make lasting changes to our nation’s long-term debt problems.
The dominant takeaway from this week’s budget deal is Republican hypocrisy. But it’s important to remember that Democrats also felt the urgent need to address our budget problems when the Budget Control Act passed in 2011.
That year, America racked up its third straight year of deficits exceeding $1 trillion. The massive support of the fiscally-focused Tea Party swept the Republicans into the House majority. Democrats were also expressing grave concerns with our fiscal situation – with President Obama creating a National Commission on Fiscal Responsibility and Reform the year before and many senior Democratic Senators involved in deficit reduction “gangs.”
There was real urgency from both parties to address our nation’s debt problems.
That urgency culminated with the Budget Control Act (BCA), which put in place budget caps that would slow the growth of discretionary spending by $900 billion through 2021. The bill also setup a bipartisan Super Committee to find an additional $1.2 trillion in savings. To incentivize the Super Committee’s success, the bill would kick in a lower set of “sequester-level” caps in the event that the Super Committee failed. Those reductions would pinch both defense and non-defense discretionary spending to keep both parties engaged in finding solutions.
When it passed, then-Senate Minority Leader Mitch McConnell referred to the BCA as “just a first step…toward fiscal sanity.” He specifically highlighted the purpose of the Super Committee – stating that it is “designed to function and to tackle some of the very difficult problems that we have been unwilling or unable to deal with. The [Social Security and Medicare Boards of Trustees] say they’re both in trouble. Medicare sooner than Social Security.”
Like it or not, those mandatory programs are the major drivers of our debt. The costs for Social Security and Medicare alone are increasing by $140 billion every year – the equivalent of creating a new Pentagon every five years. Absent reforms, both trust funds are expected to go insolvent within the 15 years.
What began as a serious debate about right-sizing these budget imbalances through both spending and revenue reforms faded into partisan bickering and eventually complacency. The Super Committee was unable to come up with cost savings – triggering the harsher sequester-level caps. The same ones that Congress is escaping from with this week’s $320 billion budget boost.
Instead of the sequester being the impetus to address the major drivers of our debt, careerism, partisan scorecards, and short-term election cycle thinking kicked in. Push-grandma-over-cliff fear mongering tactics placed political opportunism over earnest problem solving.
By 2014, the economy predictably recovered from the worst crisis in 80 years. The sky-high deficits had fallen by 66 percent from the $1.4 trillion peak in 2009. And the urgency to fix our budget fell with them.
This engendered a misplaced sense of accomplishment.
The trillion-dollar deficits from 2009 to 2012 were driven by the housing bubble bursting and the Great Recession.
The Congressional Budget Office’s projection in June 2011, a month prior to the passage of the BCA, showed that a reversal in one-time payments related to the financial crisis along with increased revenue from a recovering economy would bring down the deficits through 2015 regardless of congressional action.
Those massive deficits – while certainly harmful – were not the fiscal crisis that we needed to prepare for. The $100 trillion in unpaid for promises associated with Baby Boomers retiring at a clip of 10,000 per day has always been the real threat.
That conflation between the Great Recession deficits and the long-term imbalances meant that once the deficits got relatively better, complacency set in. Instead of using the sequester-level caps as a means to solve the long-term debt problems as originally intended, they were simply pushed aside.
The most common refrain about this week’s budget deal is that it represents the backsliding of the Republican party’s fight against deficits. Under a Democratic administration, budget caps were lifted by a total of $140 billion. Under Republican control, budget caps were boosted by $620 billion.
The Republican hypocrisy label is well earned and the budget caps agreements certainly represent a shift in the GOP away from limited government.
But the budget caps only covered one-third of federal spending. Sticking to them was never going to solve our nation’s long-term debt problems. They weren’t meant to.
The sequester could have provided the leverage to trade short-term spending relief for a long-term budget fix. Something that both parties agreed was needed.
When the BCA was signed into law, Speaker Pelosi declared that “every generation has always believed that it would make the future better for the next, for their children, for their grandchildren.”
And as the BCA-era comes to a close, the real threat to her children and grandchildren is finally here. Despite a strong economy, we are soon to hit the $1 trillion annual deficit mark on a permanent basis. We are likely to hit $2 trillion within a decade. We need $400 billion in deficit reduction every year for the next 30 years just to sustain our currently large debt levels.
Yet the public policy discourse right now is dominated by new unrestrained spending proposals from presidential candidates and budget blowouts in Congress.
Republican hypocrisy abounds. But Democratic indifference is no better.
When the next generation is grappling with an unbearable debt load, higher taxes, smaller benefits, and perhaps even a fiscal crisis, we will look to this past decade where our lawmakers failed to address the clearly foreseeable fiscal calamities.
Lawmakers had plenty of chances to fix these problems through hard negotiations and trade-offs. Instead, both parties became complacent.
The inability for both sides to come together to solve the biggest problem that faces the future of our country will be the sad legacy of the BCA-era.