Making the

Budget Matter
Outside of
Washington

National Press Foundation

September 11, 2017
Sudeep Reddy | @Reddy
What is good policy?

Steve Breen
San Diego Union-Tribune (2013)
Budget Audiences Beyond D.C.

Individuals (of every demographic)

Businesses shaped by policy actions or
economic cycles (i.e., almost all)
Nonprofit interests (some quiet)
Markets in the U.S. and abroad
Foreign governments and businesses
Budgets Shape the U.S. Economy
e.g.
Infrastructure policy
Taxation of individuals and firms
Education and workforce training
Trade promotion/rules/enforcement
Regulatory power, compliance costs
Labor force/immigration
Budgets Shape Interest Rates
Governments borrow money internally and
externally
Public-sector borrowing can crowd out
private-sector borrowing
Long-run budget sustainability influences
investor confidence & plans
Key Terms

Revenue ($ in) and Spending ($ out)

Deficits (annual) add up to federal debt

Mandatory vs. Discretionary spending

Big Numbers: Deficits

FY2016
deficit:
$587
billion
(Treasury)
or 3.2%
of GDP
Big Numbers: Debt

Total
debt:
$19.8
Trillion
An insurance company with an army
Autopilot: Mandatory Spending

Source: NationalPriorities.org
Discretionary Spending

Source: NationalPriorities.org
Keep It Simple
Deficits & The Economy
Annual U.S. GDP = $18+ trillion

Long-run trend growth = 1.8% to 2.2% (depends on

productivity, investments, education, technological change,
etc.)

Sustainable deficits/debt track GDP growth

Beware Rosy Budget Scenarios
Economic growth solves many problems.
So watch those GDP forecasts. Consider:
- Historical growth (BEA)
- WH vs. congressional estimates
- Federal Reserve projections
- Private: Blue Chip, news outlets surveys
What Markets See
Today, investors care more about a weak economy than
about high deficits.

Cutting short-term spending slows growth.

Cutting long-term could boost confidence.

U.S. credit rating and interest costs arent todays

problems.
Those pesky details...
Big Fear: Debt Ceiling Accident
Congress until 1917 voted on each issuance

2011 crisis, S&P downgrade, market turmoil

Maneuvers to suspend ceiling, limit drama

Next standoff: early 2018

1. Who said it?
Unfortunately, Congress consistently brings the government to the edge
of default before facing its responsibility. This brinkmanship threatens the
holders of government bonds and those who rely on Social Security and
veterans benefits. Interest rates would skyrocket, instability would occur in
financial markets, and the federal deficit would soar. The United States has
a special responsibility to itself and the world to meet its obligations. It
means we have a well-earned reputation for reliability and credibility -- two
things that set us apart from much of the world.
1. Who said it? President Reagan
Unfortunately, Congress consistently brings the government to the edge
of default before facing its responsibility. This brinkmanship threatens the
holders of government bonds and those who rely on Social Security and
veterans benefits. Interest rates would skyrocket, instability would occur in
financial markets, and the federal deficit would soar. The United States has
a special responsibility to itself and the world to meet its obligations. It
means we have a well-earned reputation for reliability and credibility -- two
things that set us apart from much of the world.
2. Who said it?
The fact that we are here today to debate raising Americas debt limit is a sign of
leadership failure. It is a sign that the U.S. Government cant pay its own bills. It is a
sign that we now depend on ongoing financial assistance from foreign countries to
finance our Governments reckless fiscal policies. Over the past 5 years, our federal
debt has increased by $3.5 trillion to $8.6 trillion. That is trillion with a T. That is
money that we have borrowed from the Social Security trust fund, borrowed from
China and Japan, borrowed from American taxpayers. And over the next 5 years,
between now and 2011, the Presidents budget will increase the debt by almost
another $3.5 trillion. Increasing Americas debt weakens us domestically and
internationally. Leadership means that the buck stops here. Instead, Washington is
shifting the burden of bad choices today onto the backs of our children and
grandchildren. America has a debt problem and a failure of leadership. Americans
deserve better. I therefore intend to oppose the effort to increase Americas debt
limit.
2. Who said it? Sen. Barack Obama
The fact that we are here today to debate raising Americas debt limit is a sign of
leadership failure. It is a sign that the U.S. Government cant pay its own bills. It is a
sign that we now depend on ongoing financial assistance from foreign countries to
finance our Governments reckless fiscal policies. Over the past 5 years, our federal
debt has increased by $3.5 trillion to $8.6 trillion. That is trillion with a T. That is
money that we have borrowed from the Social Security trust fund, borrowed from
China and Japan, borrowed from American taxpayers. And over the next 5 years,
between now and 2011, the Presidents budget will increase the debt by almost
another $3.5 trillion. Increasing Americas debt weakens us domestically and
internationally. Leadership means that the buck stops here. Instead, Washington is
shifting the burden of bad choices today onto the backs of our children and
grandchildren. America has a debt problem and a failure of leadership. Americans
deserve better. I therefore intend to oppose the effort to increase Americas debt
limit.
3. He said what?

For many years people have been talking about getting rid of the debt ceiling
altogether. There are lots of good reasons to do that.
- President Trump, Sept. 9, 2017
$4 billion (with a B!)
 Compromise

Mike Luckovich Nate Beeler

Atlanta Journal-Constitution (2013) The Columbus Dispatch (2013)
A Few Resources
- Natl. Assoc. For Business Economics
- USAFacts Institute
- NFIB (Small Business Association)
- Congressional Research Service
- Congressional Budget Office
- Bipartisan Policy Center
- Economic Policy Institute
- American Action Forum