Washington is as Myopic as it is Dysfunctional
By Marc Goldwein
Policymakers are patting themselves on the back for managing to avoid a federal government shutdown even though they ran up close to the deadline and are several months late. While the difficulty in performing one of the basic tasks of governing without constant drama and delay is troubling, sadly overlooked is the fact that all the turmoil is over a small and diminishing share of the federal budget. Meanwhile, the primary forces driving the unsustainable growth of the national debt over the long-term are largely ignored.
Congress passed catchall legislation bundling together the 12 bills required to fund the government just ahead of the latest deadline. This was after temporary measures had been used to keep the doors open for the last seven months. This funding is supposed to be well in place before the new fiscal year begins on October 1.
Now, lawmakers are already behind in the process for the coming fiscal year. Congress missed an April 15 deadline to agree on a budget resolution for fiscal year 2018, which is no surprise since the deadline has not been met since 2003. Agreeing on a budget is a key step in funding the government.
Washington’s budget follies are well known. However, very few realize that the vast majority of government spending is not even covered by this process. That has serious consequences for the national debt.
For all the difficulty the process causes and the time it consumes, the government spending involved, which includes the various departments and alphabet soup of federal agencies, represents less than one-third of the overall federal budget. The rest goes to spending that is essentially on autopilot because it does not need annual approval. This includes Social Security, Medicare, Medicaid, and interest payments on the debt.
More importantly, autopilot spending will account for most of the growth in overall spending in the years to come. The aging population and rising health care costs will cause Social Security, Medicare, and Medicaid to skyrocket. Rising interest rates and growing national debt will make interest on the debt the fastest growing part of the budget. We cannot fix the debt if we continue to ignore this spending.
Policymakers must also start focusing on the other side of the budget equation because revenue will not keep pace as spending increases. A big reason is that the plethora of tax breaks and loopholes result in nearly $1.6 trillion in lost revenue each year. These tax preferences are sometimes referred to as tax expenditures because they are essentially spending through the tax code. If accounted for in the budget, tax expenditures would represent more than one-quarter of federal spending. Comprehensive tax reform must be a part of any plan to boost the economy and get the debt under control.
The growing rift between spending and revenue will cause deficits to increase. In turn, the national debt will climb. The latest forecast shows the debt doubling from the current level of 77 percent of the economy to 150 percent by 2047, far higher than it has ever been. Debt at such levels will limit the growth of the economy and wages, make it more difficult to respond to problems like a recession, and leave the country more vulnerable to a fiscal crisis. And the longer we ignore the problem, the harder it will be to fix.
Washington needs to get its act together and agree on a budget and funding for the government in a timely manner because it needs to devote more time to what is really causing the national debt to grow towards unprecedented levels. Delaying short-term commitments and disregarding the long-term challenges will make growing the economy in a sustainable way much more difficult.
We need less drama and more decisive action to put the country on the right track.
Note: Updated 07/27/17 with up-to-date charts.
The Campaign to Fix the Debt is a nonpartisan movement to get the national debt under control and put America on a better path http://www.fixthedebt.org/.