It is broadly accepted, even among most deficit hawks, that a major increase in the deficit and long-term debt is the price we have to pay during this COVID-19 crisis to preserve the fabric of the U.S. economy and assist embattled American families. But as we do that, we also need to put in place – ideally as part of ongoing stimulus measures – procedures that will help policymakers and the public to prepare for the less urgent but equally important task of managing the future fiscal and economic threats from today’s emergency actions.
The U.S. entered the COVID-19 crisis with historically-high levels of federal deficit and debt, matched only by the level of indebtedness during World War II. Now, factoring in the deleterious economic consequences of the virus and the unprecedented federal response, the Congressional Budget Office projects that federal debt held by the public will exceed the annual output of the total U.S. economy by the end of this fiscal year. A sharply rising debt burden raises the danger of future economic stagnation, a reduced ability to deal with national goals and commitments to the public, and possibly escalating interest rates that would layer on even higher levels of debt.
A large and decisive government fiscal response is certainly necessary during this unprecedented health and economic crisis. But because of the long-term risk posed by the resulting sharp rise in debt, we also need a set of procedural budgeting tools to make sure the country can gradually bring down the public debt to more sustainable and safer levels. With responsible budgeting tools in place, future generations will have the opportunity to make strategic investments and finance their future.
Fortunately, before the economic consequences of the crisis became severe, members of Congress from both parties had been considering these issues. Encouragingly, they have developed several bipartisan proposals that, if legislated now, could help avoid a fiscal cliff in the years ahead. Several of these budgetary tools now need to be moved to the front burner and given serious consideration as companions to measures addressing the economic damage resulting from COVID-19. Among them:
- The Enzi-Whitehouse plan, a bipartisan proposal, was unveiled last year and contains a number of features that would strengthen the budget process and provide tools for better long-term planning. The package includes steps that would build longer-term fiscal targets into the budget resolution in a consensus manner and create a special pathway for responsible fiscal action that commands bipartisan support. The targets could be adjusted yearly if needed, such as during a global pandemic or a change in national priorities. Under the proposal, there would be a biennial budget resolution, but appropriations would continue to be passed annually.
- The proposal would also provide better information about patterns and long-term trends on which to base budget decisions. For instance, tax expenditures amounts would be included in budget publications, interest costs would be added to bill scores conducted by the Congressional Budget Office, and a form of portfolio budgeting would be used to provide a more complete portrayal of the government’s commitments – across programs and departments – in a particular policy area.
- The Trust Act, a bipartisan, bicameral proposal that seeks to sustain the major trust fund programs (including Social Security and Medicare) for future generations. It would require the Treasury Department to report to Congress on the solvency condition of the major trust funds and would empower Congress to create “rescue committees” with members of both parties to propose plans to restore the solvency of each endangered program. The plans would require bipartisan consensus and would be granted expedited consideration in Congress.
- The rescue committees are reminiscent of the commission created in 1981 to address the impending insolvency of Social Security. That commission’s recommended benefit adjustments and new revenues were put into law and placed the program on a sustainable path for many years.
- To be sure, committee-designed fast-track legislation understandably worries some, who fear the result will inevitably be deep cuts in benefits. However, a well-structured committee or commission could consider a wide range of options to place each trust fund program on a sound glide path. Modest but sustained adjustments in outlays and revenues after the current crisis, that are part of a clear plan of action, could help relieve the spiraling federal debt burden while ensuring each trust fund program is available for future generations.
- A long-term budget. The Trust Act would take the important first step of placing those programs with trust funds onto a sound trajectory in a fiscal environment made far more challenging by stimulus legislation. The next step would be for Congress to create a long-term budget plan, covering all major entitlement programs and the revenues needed to sustain them for at least the next 20 years. Such a long-term budget would act as a default for future Congresses. It would not be a straitjacket, however, since the budget plan would be formally reviewed every four years and could be amended as economic conditions or national goals changed.
- Bipartisan Fiscal State of the Nation Resolutions have been proposed in both the Senate and House this session, and in previous Congresses. Such resolutions are designed to raise public and congressional consciousness of the long-term fiscal condition of the country, in order to increase pressure on lawmakers to act decisively. A bipartisan group of budget experts and stakeholder organizations, under the auspices of Convergence Center for Policy Resolution, endorsed a similar State of the Nation Report, together with “stress test” reports on major groups of programs.
- The Resolution proposal recognizes that while information on fiscal trends is released by agencies throughout the year, it often loses its impact because the consolidated picture is not presented in a high-profile manner at a key point in the budget process. Thus, the congressional proposal requires the General Accountability Office – a neutral body – to prepare a report on the nation’s current and future fiscal condition and deliver it at a joint hearing of the House and Senate Budget Committees. Like the Convergence recommendation (where the Congressional Budget Office would prepare the report), the objective would be to focus public and congressional attention on the long-term fiscal condition of the country.
The budget process cannot and should not supplant legislative decision-making on budget matters, but it can create better incentives to plan prudently for the future and provide better information to help shape those decisions. The bipartisan package of budgeting tools in the Enzi-Whitehouse plan, the Trust Act, and other proposals, would help Congress take the incremental steps needed to adjust future spending and revenues and reduce the dangerous long-term side effects of stimulus measures.
We need better information to focus attention on future fiscal trends and their dangers, as well as procedures to induce congressional action to protect key programs. With those steps, we can gradually create the fiscal space for future generations to build their future and respond to challenges and opportunities that lie ahead. It has always been very difficult for lawmakers in Congress to concentrate on tackling fiscal concerns that seem distant and unrewarded at the polls. The long period, until very recently, of sustained growth and low interest rates have also made it a challenge to get the attention of ordinary Americans on the possible consequences of rapidly rising deficits and debt – especially younger Americans, who have little experience of inflation and economic stagnation. That is why, in conjunction with necessary emergency action, it is crucial to adopt budget process tools to help Congress begin to deal with the likely fiscal aftermath.