Transcript
CRFB.org
CRFB.org
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2005 2010 2015 2020 2025
Why We Can’t Afford Gimmicks –The Debt Is On An Unsustainable Long-Term Path
1
Current Law
78%
Source: CBO
86%Alternative Fiscal Scenario
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Gimmick #1: Using War Spending to Circumvent Budget Caps
Source: CBO, Budget Conference Agreement
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FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016
President's Request
Appropriated Level
$38B
Billions
Congress provided $38 billion more in the war account than the Pentagon requested.
Proposed Level
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$400
$450
$500
$550
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$700
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
Base Defense
War Spending
Current Policy*
Budget Resolution
$38b
3
Budget Resolution Increases Defense Spending with OCO
Billions
Source: S. Con. Res. 11,*Current policy assumes the Budget Control Act defense caps and the President’s request for OCO spending
Higher-than-needed war spending lets Congress exceed caps by $185 billion through 2021.
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2010 2013 2016 2019 2022 2025
War
Spe
ndin
gGimmick #2: Claiming Phony War Savings
Source: CRFB calculations based on CBO and OMB dataNote: Spending refers to budget authority. “Current War Spending, Inflated” refers to CBO’s current law baseline war budget authority. “Planned Troop Drawdown” uses CBO’s drawdown of war spending assuming troop levels are reduced to 30,000 by 2017.
~$450 Billion Slush Fund
Caps on future war spending only “save” money that would never have been spent.
Billions
4
Current War Spending, Inflated
CBO War DrawdownPresident’s War Drawdown
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“There is clearly bipartisan opposition to using the Overseas Contingency Operations budget as a slush fund for non-war related projects.”
— Rep. Chris Van Hollen (D-MD), Ranking Member of the House Budget Committee
“The savings from troop reductions in Iraq and Afghanistan do not represent actual savings.”— James Horney, Center on Budget and Policy Priorities
“Drawing down spending on wars that were already set to wind down and that were deficit financed in the first place should not be considered savings. When you finish college, you don’t suddenly have thousands of dollars a year to spend elsewhere — in fact, you have to find a way to pay back your loans.”
— Maya MacGuineas, Committee for a Responsible Federal Budget
“An honest budget cannot claim to save taxpayers’ dollars by cutting spending that was not requested and will not be spent.”
— Rep. Paul Ryan (R-WI), former Chair of the House Budget Committee
War Gimmicks Cannot Be Used As Slush Fund Or Savings
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2003 2004 2005 2007 2008 2009 2010 2011 2012 2013 2014 2015
Gimmick #3: Using CHIMPS to Monkey With Budget Caps Phony cuts known as CHIMPS have become increasingly common since 2011. These cuts are used to pay for more discretionary spending above budget caps.
Source: CRS, CBO, CRFB calculations
Billions
$12Timing Shifts
$7 Empty Cuts
<$1 Legitimate Changes
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Gimmick #4: Double CountingBudget rules sometimes allow lawmakers to count the same money twice.
For example: The Tax Reform Act of 2014
$125 BillionRevenues from
repatriation
Offset a transfer to the Highway Trust Fund
Offset tax rate reductions
But in reality, a dollar can only be spent once.
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Gimmick #5: Savings Now That Reverse Later
Source: JCT
Pension smoothing increases revenues in early years, but decreases them over time. Billions
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2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Total Revenues: $18 billion
Total Costs: $12 billion
Costs Continue
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Pension Smoothing Does Not Generate Real Savings“These are gimmicks, plain and simple...collecting more taxes now and less in taxes later doesn't help our bottom line.”
— Maya MacGuineas, Committee for a Responsible Federal Budget
“This proposed change in pension funding rules can’t ‘pay for’ anything. While it would raise money at first, it would lose money in later years.”
— Chye-Ching Huang, Center on Budget and Policy Priorities
“The proposal to ‘smooth’ pension contributions would merely shift tax revenue from the future into the present while destabilizing pensions even further and increasing the risks of a taxpayer pension bailout.”
— Romina Boccia, Heritage Foundation
“Such tactics mock the very idea of PAYGO. These are not offsets. They are charades.”
— Bob Bixby, Concord Coalition
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2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027Source: CRFB staff calculations based on CBO estimates. For simplicity, numbers exclude interest savings.*LIFO (Last-In First Out) Accounting is a preferential method of measuring profits from inventory sales and one of
the ten largest breaks in the corporate code.
Billions End of the 10-year budget window
Costs Continue:
~$10 bn/yr
Using one-time savings to pay for a permanent tax cut will increase debt in future years.
Savi
ngs t
o th
e Fe
dera
l Bud
get
10-Year Costs From a 1% Corporate Rate Cut: $113 billion
10-Year Savings from Repealing LIFO*:
$114 billion
Gimmick #6: Using Temporary Savings To Offset Permanent Costs
Debt Impact
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Gimmick #7: Shifting Savings Inside The Budget Window
Source: Congressional Budget Office and CRFB staff calculations
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2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Man
dato
ry S
eque
ster
Sav
ings
10 Year Increase in Savings: $2.1 Billion 11th Year Cost: $2.1
Billion
The “Pathway to SGR Reform Act” shifted $2 billion of the sequester from 2024 to 2023.Billions
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2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Cum
ulat
ive
Cost
s
12
$25billionsavings
$8.6 billion
interest
Accrued interest from waiting 10 years could leave a third of a bill’s costs unpaid.Billions
Near Gimmick: Offsetting 1st-Year Costs With 10th-Year Savings
$25 billion costs
Source: Congressional Budget Office and CRFB staff calculations
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For More Information, Contact Adam Shifriss at
shifriss@crfb.org or 202-596-3597
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