Why Obama Can Never Really Fix the Deficit
Policy + Politics

Why Obama Can Never Really Fix the Deficit


President Obama and House Republicans are gearing up for a budget fight, but don’t expect any kind of a fix that stops their haggling over the deficit from being repeated again and again and again.
That’s because Washington refuses to deal with the health care spending that has been propelling the $16.7 trillion debt upwards, according to two veteran lawmakers who devoted their careers to federal budgeting.

Instead, the White House and Congress have been content to tinker on the discretionary side with its 2011 Budget Control Act.

Recent budget proposals by the Obama administration have found savings in Medicare from prescription drug spending, but have left the program largely untouched under the hope that Obamacare will tamp down price increases for medical treatment.  His own party has little appetite for bargaining on entitlements.

On Tuesday, the president proposed corporate tax reform as a vehicle for compromise, once again sidestepping the entitlement question.

House Republicans have passed budgets that would turn Medicare into a voucher-style program more than a decade from now, but critics note that their approach would shift medical expenses onto individuals in a way that would become a burden for the whole economy.

So Washington has instead plucked the low-hanging fruit of discretionary spending, a fallback position that could easily shape budget and debt ceiling negotiations this Fall.

“We’re cutting the part of the federal budget that is already in decline,” said retired Sen. Kent Conrad (D-ND), who retired this year as chairman of that chamber’s Budget Committee, at a Tuesday panel sponsored by the Bipartisan Policy Center.  “Just as a policy matter, to me it doesn’t make a lot of sense.”

The Budget Control Act achieved more than $2 trillion in deficit reduction over 10 years by essentially placing caps on discretionary spending. This translates into cuts to the Pentagon, medical research, consumer safety, airport networks, environmental protection, and the national park system.

By the Obama administration’s own estimates, discretionary spending as a share of the economy plunges to the lowest level since Dwight Eisenhower occupied the Oval Office.

Non-defense discretionary spending was 3.4 percent of gross domestic product in 1962—and it’s currently slated to drop to 3 percent by 2018, according to the Office of Management and Budget.

Mandatory spending on programs such as Social Security was 5.8 percent in 1962. Three years later, Medicare, which provides health insurance coverage for seniors, was introduced. An aging population and health care costs have pushed up mandatory spending to 13.6 percent of GDP.

Former House Appropriations Committee Chairman David Obey, who retired in 2011, recalled meeting in the office of Vice President Joe Biden where everyone in the room agreed that real deficit reduction hinged on entitlement reform.

“Every year, everybody agrees with that,” the retired Wisconsin Democrat said. But when the results come out, discretionary spending gets cut because it must receive appropriations every year, while mandatory expenditures continue to chug upward because no Congressional action is required for funding.

“That’s why it’s backwards,” Obey said.