Senators get sobering long-term budget news

Senate Budget Committee members today heard sobering warnings from General Accounting Office Comptroller General David Walker about the long-term fiscal challenges facing the nation's economy as Baby Boomers prepare to claim their retirement Social Security and Medicare benefits.

Walker warned that while the Congressional Budget Office is projecting total budget surpluses of $5.6 trillion over the next decade--$3.1 trillion is outside of Social Security--"the long-term outlook looks worse. Without a change in entitlement programs, demographics will overwhelm the surplus and drive us back into escalating deficits and debt" long before the projected 2037 Social Security trust fund and 2025 Medicare Part A trust fund insolvency dates, he said.

"Absent reform," Walker said, "the impact of federal health and retirement programs on budget choices will be felt... when the cash needs of these programs begin to seriously constrain overall budgetary flexibility."

The Social Security trust funds are expected to begin running a cash deficit in 2015, just outside the 10-year CBO surplus window, and the Medicare trust fund in 2009.

Walker cautioned that current surplus projections present policy-makers with both an opportunity to address today's pressing needs as well as an obligation to "hand a strong economy and sustainable fiscal policies on to our children, grandchildren and future generations."

Senators of both parties were quick to use Walker's warnings to support their differing approaches to writing this year's budget.

Budget ranking member Kent Conrad, D-N.D., who has cautioned that Bush's $1.6 trillion tax package devotes too much of the surplus to tax cuts at the expense of long-term debt reduction, cited Walker's testimony in pushing for his budget plan. Conrad has called for allocating one third of the non- Social Security, non-Medicare surpluses to tax cuts, one third to spending priorities and one third to addressing long-term fiscal challenges.

But Chairman Pete Domenici, R-N.M., and Senate Banking Committee Chairman Phil Gramm, R-Texas, were no less forceful in arguing that tax cuts are an engine for economic growth and wealth creation, and are therefore the best approach.

"Nothing could be worse for the long-term health of the economy than a sustain[ed] downturn in productivity," Domenici said. "I want to work with my colleagues to fashion a budget that puts us on an enforceable glide path to the minimum debt level" recommended by Federal Reserve Chairman Greenspan.