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If a Trend Can’t Continue Forever …

February 14, 2014

A number of times in the past, this column has dealt with “the iron triangle of deficit reduction.” That is, there are only three ways to reduce the annual federal budget deficit: trim entitlement programs, raise more money through taxes/closing loopholes, and reduce discretionary spending.

All the emphasis over the last few years has been on cutting discretionary spending — with non-defense programs taking a bigger hit than defense programs, but both seeing their allotments shrink. Further, those reductions have largely been achieved by across-the-board cuts, rather than a deliberate assessment of national priorities. This is why we are so hopeful for FY 15 and the potential for “regular order appropriations” in 2014 (see the Analysis and Commentary dated Friday, January 31).

As we look toward the future, the headline is scary: eliminating all discretionary spending, including the Defense Department, would not bring the federal budget into balance a decade from now. The Congressional Budget Office (CBO) has said we face a trillion dollar annual deficit in 2024, about the amount our nation now spends each year on discretionary programs. This means that sooner (hopefully) rather than later (dangerous to our nation’s wellbeing), Congress must address entitlements and taxes. There is just no other way.

Do I believe this will happen? Actually, I do. There is a saying that if a trend can’t continue forever, it won’t. Starting no later than 2017, projected deficits are going to overwhelm whatever further discretionary spending reduction is deemed politically feasible. There is also some evidence for limits on how far Congress can and will cut discretionary programs. Last summer, House Republican leadership took a whip count and realized it did not have enough votes to pass a transportation, housing and urban development appropriations bill that embodied steep cuts.

FDA still has one of the best cases for future increases, perhaps better than almost all federal agencies. But downward pressures on discretionary spending will make advocacy more difficult every year until Congress deals with entitlements and taxes.

Before concluding, it is useful to note that the CBO report actually expands upon the iron triangle. Future deficits will continue to get bigger because of an aging population and increased demands on entitlement programs, coupled with insufficient government revenue. But taxes and loophole closing are not the only way in which federal revenue can be impacted. The CBO points to lowered estimates of economic growth as a contributing factor to future deficits. Here, too, FDA’s case is strong — investment in FDA contributes significantly to economic growth, as the Alliance documented in its 2011 report: The U. S. Food and Drug Administration: A Cornerstone of America’s Economic Future.

Note: This week’s analysis and commentary was written by Steven Grossman, the deputy executive director of the Alliance for a Stronger FDA

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