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What CBO Had to Say about Our Long-term Fiscal Health

June 29, 2019

This week’s CBO report on the long-term fiscal health of the U.S. government got the attention of a lot of policymakers. In FY 19, federal expenditures will exceed revenue by about $900 billion. It is expected that annual deficits will stay at the same level or grow even larger over the next 10 years. In turn, each annual deficit adds to the national debt, which is already $22 trillion in 2019.

This may actually understate the situation. The CBO estimates are based on “current law assumptions” (i.e., today’s laws projected forward). That means that the spending limits in FY 20 contained in the Budget Control Act of 2011 (BCA) are assumed, even though it is likely they will be increased as part of the budget deal.  So, for example, a budget deal that sets FY 20 at the FY 19 spending levels will add about $125 billion dollars to the CBO’s baseline. This will ripple forward over the next 30 years.

Yet, another possible example of likely upward adjustment in the future: the CBO analysis anticipates that the 2017 individual tax cuts will expire in 2026 without extension. If Congress chooses to maintain some of those tax cuts (and this seems likely), then this would also increase the annual deficit and the long-term national debt.

So, the long-term fiscal situation, as currently projected, is likely to be bad … and we can point to several concrete examples of how it could get worse (e.g., a recession).

However, these numbers are so global, that it is hard to see how they would effect a relatively small federal agency like FDA. And yet they do.

In the past, I have described “the iron triangle of deficit reduction” (illustrated >here). Short of reneging on our nation’s debts (totally unthinkable), there are only three ways to reduce annual deficits and end annual increases to the national debt. We can: (1) cut discretionary program spending; (2) increase government revenue by growing the economy, raising taxes, or closing loopholes; or (3) make changes to entitlement programs that reduce their cost.

It is to be noted, actually emphasized, that wiping out all federal discretionary spending (currently $1.1 trillion) would take care of the annual deficit … but only by eliminating almost all government functions including defense, homeland security, safety net, housing assistance, education, agricultural programs, air traffic controllers, and, of course, FDA, etc. Congress knows this. However, raising taxes (even closing loopholes) and changing entitlement programs are incredibly difficult. All that’s left to cut in the name of deficit reduction are discretionary programs.

Cutting discretionary spending was the operative assumption behind BCA. Fortunately, at least this year and in this Congress, relative to the BCA ceilings, Republicans and Democrats are interested in maintaining or expanding discretionary programs, although they differ on amounts and priorities.

If CBO is to be believed, the future holds increasing pressures on the iron triangle and we can expect annual assaults on discretionary programs. Our job is to be sure that Congress understands that if cuts are necessary, then FDA should be among the last to be affected. The agency is truly performing a core function of government. In the future, we will need to be even more effective as advocates for FDA’s budget.

Editorial note: The Analysis and Commentary section is written by Steven Grossman, Deputy Executive Director of the Alliance for a Stronger FDA.

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