Friendly reminder from GAO: You’re about to hit the entitlement iceberg, people

posted at 8:31 pm on December 4, 2012 by Mary Katharine Ham

While we meddle on the margins and stay safely ballparks away from anything that might actually tackle our deficit and debt problems:

The Government Accountability Office warned in a report Monday that if cuts are not made to mandatory spending — including Social Security and Medicare — there will be a fundamental gap between spending and revenue as more baby boomers retire.

“Significant actions to change the long-term fiscal path must be taken,” the GAO warned.

Strangely, the Government Accountability Office does not headline this report with the $800 billion we can raise over 10 years from tax hikes on those making over $250K as a killer solution to our “unsustainable long-term fiscal path.” Odd, that. What it does headline is huge debts caused by entitlement spending— that’d be the spending Republicans have signaled a willingness to tackle while Democrats have insisted we stop up our ears and get to the tax hikin’. The whole paper is here.

As Jim Pethokoukis puts it, “Another day, another government agency, another scary US debt chart.”

Holy Schnikeys

The Alternative baseline — the non-magic unicorn baseline — is the one you should pay attention to. The real difference between Baseline Extended and Alternative is that the latter assumes an unreformed entitlement system.

And the longer we wait to deal with the entitlement debt problem, the bigger the problem becomes and the more dramatic action will be needed to wrangle it.

For example, to keep debt held by the public as a share of GDP in 2086 from exceeding its level at the beginning of 2012 (roughly 68% of GDP) in our Alternative simulation, the fiscal gap is 8.3% of GDP. This means that revenue would have to increase by 46% or noninterest spending would have to be reduced by about 32% (or some combination of the two) on average over the 75-year period. Even more significant changes would be needed to reduce debt to lower levels. …

However, the longer action is delayed the greater the risk that the eventual changes will be disruptive and destabilizing. Under our Alternative simulation, waiting 10 years would increase the fiscal gap to nearly 10% of GDP— meaning a revenue increase of more than 54% or a noninterest spending cut of about 37% or some combination of the two would be required to bring debt held by the public back to its level in 2012 by 2086.

He has plenty more on why even those forecasts are likely too rosey.

Meanwhile, we have one party in Washington utterly unwilling to touch entitlements (aside from this weird peep from Hoyer today), which rejects even Simpson-Bowles-inspired plans to address them out of hand, yet is lauded in the press as the reasonable and adult of the two parties. We have another party that put the guy who risked his entire political career on a good-faith effort to reform entitlements on its national ticket (and by the way, still won senior citizens) being scolded for offering too few details by the party that hasn’t passed a budget in three years. Any guess which party the naked protesters and hecklers belong to? Adult! I don’t claim that Republicans don’t play their share of smoke-and-mirrors games on cuts, but let’s not pretend Democrats are paragons of putting pen to paper when the most talked-about papers were coming from Paul Ryan, who of course was roundly punished in the press for his work.

Oh, but the White House proposal boasts $600 billion in entitlement program cuts, you say? No, not so much:

But a good chunk of this “mandatory” money is not what would be considered entitlement spending — or at least aimed at health-care entitlements. The most up-to-date summary is in the administration’s mid-session review, in which Table S-3 shows $326 billion in health-care savings and $254 billion in “other mandatory savings.” (We had explored how Democrats sometimes mistout the health-care savings in a previous column.)

The “mandatory” side of the budget means the changes are permanent and not subject to annual congressional appropriations. That’s why Geithner could call them “mandatory programs,” though at one point he also called them “entitlement programs.” But they are not “spending cuts” in the traditional sense.

What are some of these “mandatory savings?” The administration lists them in the original 2013 budget, and they include:

■$61.3 billion from “impose a financial crisis responsibility fee”
■$43.7 billion from “implement Internal Revenue Service program integrity cap”
■$27.4 billion from “increase employee contribution” to federal retirement programs.
■$44 billion from “adjust payment timing”

In fact, some $100 billion of these “cuts”come from Geithner’s department. But are these cuts in the Treasury Department? No, the numbers represent additional fees and better IRS enforcement — not what an ordinary person would consider a spending cut. (We realize that Republicans and Democrats may count these as cuts, looking through the prism of the federal budget, but it still not the same thing as an entitlement cut.)

The $44 billion from adjusting the timing in payments is especially dubious — a one-time savings that takes place in 2022, the last year of the budget window. Presumably, those dollars are just transferred to the next 10-year budget window.

Chris Cillizza and David Gergen finally noticed yesterday that Democrats and liberals seem pretty keen on slipping over the cliff, despite possible economic damage. Yes, that’s because they can be nearly 100 percent sure the press will never punish Democrats for not making a deal. They haven’t punished them for breaking the law by not passing budgets for three years, even though they admit they simply don’t want to put their ideas on paper because of political considerations. There was hardly a price to pay for any failure of Obama’s first four years in office because there was a Republican in office before him, so why wouldn’t they assume they can successfully pin the blame on Republicans still actually in office? The calculus has to change for them if anyone expects them to do anything that might avert debt disaster, ever. The press does us all a disservice by not dissecting President Obama’s current plan and four years of utter abdication on budget and debt issues with the same gusto and skepticism it reserves for Mitt Romney’s CostCo shopping cart contents.

All that being said, Republicans can’t ignore the fact that the public is placing blame on them, fairly or unfairly. Counting on the press to be fair enough to change the dynamic is a fool’s errand. It’s therefore the responsibility of Republican leadership to present its ideas with some kind of understanding of the unfriendly ground on which it’s playing. For instance, at least holding a press conference for what it hopes will be a game-changing counter-offer instead of sending a letter that’s quickly ignored in time to get back to Obama’s talking points. Oh, and doing this on the same day. When given a choice between Republican infighting and a letter about a Simpson-Bowles-like proposal by Republicans, which did Boehner think the press would choose? Guy Benson explains how that roll-out could have looked, here. Read the whole thing. We will all have our criticisms of what the team’s game plan should look like, but it’d be nice to have some assurance they’re at least gonna get off the bus.

And, again, as the GAO points out again today, we’re all playing a borderline criminal game of small ball when compared to the challenges ahead. No worries, though. This Dream Team is about to fix everything.

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