Deferring on budget no longer an option, CBO says

Choices on taxes, spending grim

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Congress‘ chief scorekeeper warned Wednesday that the country’s top lawmakers can’t continue to put off big decisions on the budget and the economy much longer, and said either path — belt-tightening now or even deeper cuts later — will be painful.

The Congressional Budget Office, which released its annual August update, said the deficit for fiscal year 2012 is pretty much set at more than $1.1 trillion — the fourth straight year of trillion-dollar deficits, dating back to the end of President George W. Bush’s term and covering all of President Obama’s 3½ years in office.

Now, Congress and Mr. Obama are grappling with 2013 and beyond, and CBO said their options range from immediate belt-tightening and a double-dip recession that clears the economic and fiscal air, to continuing to pump money into the economy and delay, but likely worsen, an eventual reckoning.

“The key issue facing policymakers is not whether to reduce budget deficits,” said Douglas W. Elmendorf, director of the CBO. “The question is when. The question is how.”

Even if the economy picks up, he said, the government will run major deficits over the decade, meaning the fiscal imbalance is caused by the spending promises that the government has made outstripping the amount of money it’s likely to raise in taxes.

“At some point, we will need to adopt policies that require people to pay significantly more in taxes, accept substantially less in government benefits and services, or both,” Mr. Elmendorf said.

With the Bush-era tax cuts expiring at the end of this year, and with automatic spending cuts looming Jan. 2, Congress has about four months to decide which direction it will go.

But lawmakers in Washington, and voters across the country, remain gridlocked. Democrats say the key to rebalancing federal books is to raise taxes, and Republicans say cutting spending will do the trick.

With neither side ready to concede, that has meant every major deal over the past two years has ballooned the deficit, as the government borrows money to grant more tax cuts or push through added spending.

Judging by the politicians’ immediate reaction Wednesday to the CBO report, there is little evidence that Mr. Elmendorf’s warnings have changed the tenor of the debate.

“Instead of doing the right thing, Republicans in Washington have chosen to double down on the same failed policies that led to the economic crisis in the first place,” said White House press secretary Jay Carney.

Mitt Romney, the presumptive Republican presidential nominee, said the CBO report is “another indictment” of the president’s own plans.

As Mr. Obama blamed the GOP, Republicans said it was Democrats who were holding up solutions.

“In 2009, President Obama said, ‘I refuse to leave our children with a debt that they cannot repay,’ but CBO’s analysis shows that the president is doing just that,” said Rep. Jeb Hensarling, chairman of the House Republican Conference.

No matter when Congress acts, there will be pain.

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