Things are hot and heavy in Washington in the middle of summer with lots of action on issues affecting the budget and debt. The forecast calls for deficits and debt to rise considerably but the outlook for producing next year’s budget remains unclear. Here’s your fix for the latest developments on the federal budget and national debt.
Health Care Changes on Life Support – After being the hot topic at the start of the year, attempts to change the Affordable Care Act (aka “Obamacare”) flatlined over the summer. The House of Representatives passed the American Health Care Act, which would reduce deficits by $119 billion through 2026 but would also reduce the number of Americans with health insurance by 23 million. However, there was little support for that bill in the Senate. The latest version of the Better Care Reconciliation Act drafted by Senate leaders would reduce deficits by $420 billion through 2026 and reduce the number of insured by 22 million. That bill has yet to get a vote because it doesn’t have enough support. How the health care debate plays out will significantly affect the national debt because rising health care costs are a major driver of the growth of the debt going forward. See more resources on the health care debate.
Trump’s Budget Warm on Reducing Debt, But Cold on the Details – After many Fix the Debt supporters wrote the White House urging that the budget put the debt on a downward path, President Trump’s first budget proposal did indeed include the goal of reducing the debt as a share of the economy. However, it achieved it by using unrealistic economic growth estimates and unspecified savings. The Congressional Budget Office later found that the debt would rise from 77% of the economy today to 80% in 2027 under that budget, but that would still be below the 91% currently predicted under current law.
Congress Budges Some on the Budget – After months of delay, the House Budget Committee adopted a budget resolution for fiscal year 2018 that aims to reduce the debt to 61% of the economy in ten years. It assumes higher economic growth than most estimates, but lower than the White House. The budget is a good first step, but needs more specifics and less gimmicks. The fate of the budget is unclear as it does not appear to have enough votes to pass the full House and the Senate has yet to produce a budget. Congress is well behind in passing a budget and funding the government and still has lots of work to do to avoid a government shutdown come October 1. We have plenty of resources on the federal budget and government spending process.
Tax Reform Cometh? – The White House and congressional leaders are hot to tackle tax reform, but they need to cool their heels until a budget is passed so that they can use the budget reconciliation process to avoid a filibuster. Both the president’s budget and the budget resolution from the House Budget Committee call for tax reform that does not add to the debt. But only time will tell if that is a real commitment or a gimmick. In the meantime, the are lots of tax reform resources to understand what’s involved and what’s at stake.
Social Security and Medicare Are Overheating – The Trustees who officially oversee Social Security and Medicare warn in their 2017 Annual Report that both programs face financial problems that will result in reduced benefits down the road. They urge policymakers to “take action sooner rather than later to address these shortfalls.” The Trustees forecast that Social Security’s combined trust fund will run dry by 2034. At that point, all recipients will see a 23% cut in benefits because incoming revenue will not be enough to cover all benefits. The Hospital Insurance Trust Fund that finances Medicare Part A will be depleted by 2029, which will also affect those benefits. See highlights of the new Social Security numbers.
Deficits and Debt Will Rise Without Action – The nonpartisan Congressional Budget Office (CBO) says that deficits and debt will rise faster than the summer temps unless something is done. The latest forecast sees the fiscal year 2017 budget deficit at $693 billion, more than $100 billion higher than last year. And deficits are projected to rise every year after 2018. Trillion-dollar deficits will return by 2022, and the deficit will be nearly $1.5 trillion in 2027. That will cause the national debt to grow by $11 trillion over the next decade, reaching 91% of the economy. CBO also warns that “high and rising debt would have serious negative consequences for the budget and the nation.” See more on the latest budget numbers.
The Future Isn’t Sunny with Rising Debt – The debt numbers are big, but they are even more powerful when put into human terms. That’s where Hope comes in. We follow Hope as she grows up with rising debt and see how it affects her life. It’s not a pretty picture, but we can turn it around if we start to fix the debt.
Fix the Debt Yourself – Tired of the inability of policymakers to forge a federal budget and fix the debt? Now, you have a chance to show how it’s done. The new Debt Fixer interactive tool from our partners at the Committee for a Responsible Federal Budget allows you to make the budget decisions that lawmakers face and see how those choices affect the debt in the near and long term. Give it a try.
Yellen Says Much of Interest – Federal Reserve Chair Janet Yellen told Congress that more interest rate hikes are on the way. Rates were raised twice this year already. Rising rates, along with increasing debt, means that interest payments on the debt will increase substantially, which will leave less room for doing things that could help the economy grow and improve the standard of living for Americans. In fact, debt interest will be the fastest growing part of the federal budget. Yellen also warned “in the strongest possible terms” that the debt is on an unsustainable path that policymakers must address.
National Debt and You