They're At It Again----Congress Will Increase This Year's Deficit By More Than $100 Billion

By Stan Collender at Forbes


If you haven’t noticed that Congress is about to increase the federal deficit substantially you haven’t been watching very carefully…or at all.

Virtually every policy change that has already or soon will be considered seriously in the House and Senate will make the deficit higher rather than lower. In addition, the procedural choices Congress is making all favor increasing the deficit rather than at least requiring it not get any worse.

And we’re not talking about small increases either. Based on what Congress is now considering, the deficit could be $100 billion or more next year than it otherwise would be if you just put Washington on autopilot, that is, if you made no changes to existing tax and spending policies. That would be an almost 21 percent increase.
I first posted about this last November when I predicted that three big policy changes – higher military spending, higher domestic spending and reenacting and making permanent a variety of special tax breaks – could easily add $100 billion to the deficit.

Since then these three possibilities not only have become increasingly possible (although the permanent extension of expiring tax provisions seems less certain than the increases in military and domestic spending), but the previously unanticipated permanent change in the Medicare “sustainable growth rate” – the so-called “doc fix” – without a complete revenue increase or spending cut payfor is now a very real possibility. The SGR change without a full offset is projected to add an average of around $14 billion a year to the deficit.
As a result, even if the tax provisions are not extended, the combination of the military and domestic spending increases of $80 billion or more and the doc fix will still raise next year’s deficit by close to $100 billion. Add the tax extenders and the increase could be even higher.

The actual increase in the budget deficit is hardly the only indication that reducing the deficit no longer is the political driving force in Washington that it was in recent years. Consider the following.

The most vocal and previously potent deficit hawks in Washington – the tea party Republicans in the House – were resoundingly defeated by those wanting more spent by the Pentagon with or without an offset.

While paying lip service to the deficit hawks, the House leadership made it both possible and likely that military spending would be increased without offsets when the budget resolution approved by the budget committee was debated by the full House.

Appropriations Committee Chairman Hal Rogers (R-KY) has already said that Republican votes don’t exist in the House to pass the domestic appropriations bills at the levels set by the spending caps currently in place. The clear implication is that the caps will have to be raised and, therefore, that the deficit will be higher.

The Obama administration made it clear in the budget it released in February the president would not agree to more military spending unless Congress also agrees to more for domestic priorities, and Office of Management and Budget Director Shaun Donovan has repeated this a number of times. But other than the deficit hawks, whose influence is obviously waning (see above), this demand and threat by the White House has barely been a public point of contention in the House and Senate.

The previously assumed to be influential anti-deficit groups are clearly having less of a political or media impact than at any time in the past decade. For example, most of the groups oppose the permanent doc fix but that hasn’t stopped the House, Senate and White House (the president has promised to sign what is moving through Congress) from pushing ahead.

There are no prospects for a deficit reduction deal of any kind this year.

There is overwhelming support in Congress and at the White House for mitigating the impact of sequestration or eliminating it entirely. This means that that the procedure put in place in 2012 to keep appropriations from exceeding the annual spending caps and, therefore, from increasing the deficit is no longer in political vogue.

Congress Will Increase The Deficit By 20% This Year - Forbes.

David Stockman's Contra Corner is the only place where mainstream delusions and cant about the Warfare State, the Bailout State, Bubble Finance and Beltway Banditry are ripped, refuted and rebuked. Subscribe now to receive David Stockman’s latest posts by email each day as well as his model portfolio, Lee Adler’s Daily Data Dive and David’s personally curated insights and analysis from leading contrarian thinkers.