President Trump has a golden opportunity to appeal to the fiscal hawks who were wary about how he would address the $20 trillion national debt. With large cuts to the EPA, Dept. of State, and Dept. of Labor—among other things—things look optimistic for fiscal conservatives. However, the largest portion of the budget, mandatory spending, remains untouched. Mandatory spending accounts for nearly two-thirds of the entire budget, so drastic cuts to other departments are encouraging but ultimately miss the root of the debt problem.
Don’t get us wrong: It’s great that President Trump is recommending these cuts as well as reorganizing agencies within the executive branch to increase efficiency, but refusing to even discuss reforms to Social Security, Medicaid, and Medicare means turning a blind eye to the biggest part of the iceberg that sits just under the surface. Even more troubling, increasing military spending goes to offset the other cuts, leaving taxpayers in the same position as before. After you add in expected tax cuts, the case for spending reform continues to grow. Even ignoring the possibility of economic unrest or fiscal crises down the road, a debt so large comes with real concerns today.
Just last week the Federal Reserve decided to raise interest rates, which is a reminder that holding on to a massive debt and large interest payments is a real risk that could be closer than many like to think. The Congressional Budget Office estimates that the federal government’s net interest costs will go from 1.4 percent of GDP in 2016 to 3.0 percent of GDP in 2026 and to 5.8 percent of GDP by 2046—and if interest rates continue to rise, so could this percentage.
This is extremely detrimental to our fiscal security and becomes an even bigger problem when paired with ignoring mandatory spending. With another debt limit hike coming soon, Representatives should look for meaningful ways to restrain government spending. It is imperative that the spending problem in Washington gets addressed, and small cuts are worth celebrating but will not fix the problem. With a united government, there is a real opportunity for meaningful spending reform – which Representatives ought to seek now more than ever, if we want to ensure America’s continued prosperity.
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The Congressional Budget Office has released their long-awaited score for the American Health Care Act—the ACA replacement legislation. The 37-page cost estimate details the spending implications of enacting this legislation, a report many members of Congress had wanted to see before the expected vote takes place.
CBO has determined that the new legislation would reduce outlays by $1.2 trillion and reduce revenues by $0.9 trillion. This would have a net reduction in the federal deficit of $337 billion over the next 10 years. Over the next five years, the deficit would grow about $9 billion, before dropping off by $337 billion over the 2017-2026 time frame.
One caveat is that this estimate is solely taking direct spending into account—CBO has yet to score the discretionary implications. These savings would largely come from a reduction in Medicaid outlays and the elimination of nongroup health insurance subsidies. The largest costs of the legislation would be from the elimination of much of the taxes and fees that were in the Affordable Care Act and a new tax-credit for health insurance.
This report is not immune to some important criticism, and CBO admits that there is uncertainty with the accuracy of the scoring because of the various factors that contribute to the costs. Between the insurance companies, states, individuals, federal agencies, employers, and so on, it’s difficult to get every prediction entirely accurate.
There are several reasons that fiscal conservatives should be cautious about this legislation — and it’s well worth noting that a full repeal would save more and insure more individuals. But finding meaningful ways to decrease the deficit over the long-term is undoubtedly something to celebrate.
Here’s hoping Congress continues to improve the legislation and pushes through a full repeal and free-market healthcare once and for all.