Soaring deficits hard to square with fiscal responsibility

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As SAFE has stated many times, chronic deficits and rising government debt are a major problem – a fiscal meltdown appears inevitable unless decisive corrective action is taken – and the basic problem is a lack of political will, not a lack of sufficient resources to pay for the essential functions of government.

All concerned bear responsibility for the pork-stuffed omnibus spending bill that was enacted on March 23, nearly halfway through fiscal year 2018, with the president vowing that he would never sign such a bill again. But unless things are done quite differently on the next go round (budgeting for FY 2019, which begins on October 1), similar results (appropriation bills not prepared, debated and enacted in a timely manner; continuing resolutions to keep the government running; omnibus spending bill in December or later without meaningful review by the vast majority of the members of Congress) should be expected. Rebooting the budget process,
4/9/18.

Given the oft-demonstrated proclivity of politicians to defer action until the last minute, it’s none too early to consider whether anything is being done (or even proposed) that might augur for a better outcome.

I. Steps taken

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Our take on the president’s budget proposal for fiscal year 2019 (BP-19) was previously reported. In sum, we were disappointed by the disparity between the rhetoric about “tough choices” and “fiscal responsibility” in the text and the fiscal data shown in the budget tables, e.g., gross debt projected to increase from a current level of some $21T to nearly $30T by 9/30/28. Let’s make the budget process work, section I, 2/19/18.

There was an ensuing burst of activity, with Budget Director Mick Mulvaney appearing before the Senate Budget Committee on
February 13 and the House Budget Committee on February 14. Herewith some general observations on these sessions based on the videotaped record (nearly six hours in total):

•Each member of these committees was allowed five minutes (with a time clock) for a dialog with the witness. Some members devoted most of the time to their own comments whereas others asked questions and allowed the witness to answer them.

•While some members complained about budget cuts that were being proposed, others focused on the projected deficits/debt. Various theories were offered for the dismal fiscal outlook, e.g., recently enacted tax cuts, the urgent need for a higher defense budget (which was balanced politically by raising non-defense spending), and doubts that recent economic gains would prove sustainable.

•In the Senate discussion, there was some harsh criticism of the president’s budget proposal. Sen. Bernie Sanders (the ranking member) called it “the budget of the Koch brothers” and “Robin Hood in reverse.” This “budget is going nowhere” and “everyone knows it.” Sen. Sheldon Whitehouse said the budget process was “ridiculous” and the funding of government would eventually be taken care of by the appropriation committees. Sen. Jeff Merkley displayed a chart of Trump tax giveaways and Trump budget cuts and accused the witness of never answering questions from Democrats. With massive tax cuts and austerity flying out the window when it came to defense, said Sen. Patty Murray, the projected deficits were no surprise – and the president didn’t care. Would the witness care to step back from this hypocrisy?

•Senate Republicans struck a conciliatory tone. Sen. Mike Enzi (the chair) spoke of the need for budget process reform and advocated the 80% rule (“let’s get the things done that we can agree on”). Sen. Chuck Grassley spoke of positive results already being seen from the tax bill. Sen. Bob Corker expressed appreciation that the BP-19 data had not been tweaked to artificially show a supposedly unattainable budget balance in 10 years, but asked the witness “where do we go from here?” Sen. Lindsey Graham praised the leadership shown to get the defense funding that was needed, followed by a pitch for revisiting and passing the Graham-Cassidy healthcare bill. Sen. John Kennedy (LA) praised the witness for doing a great job, expressed agreement with the need to safeguard the interests of future generations, and advocated a “stop paying dead people” bill that is being co-sponsored by Senator Tom Carper.

•The House session was more collegial in tone, and the members treated the witness with greater deference. Thus, Rep. Steve Womack (chairman) characterized BP-19 as an important document for Congress to consider, including plenty of worthwhile ideas. Although BP-19 calls for $3T in deficit reduction over 10 years, “balance must remain the ultimate goal.” Rep. John Yarmuth (ranking minority member) mildly suggested that some of the non-defense spending that had been added in the budget caps deal would contribute, like defense spending, to national security. There were various comments about the budget process being deficient, but it was noted that the House had completed its appropriation bills in a timely manner in the FY 2018 budget cycle with the hold-up being in the Senate.

•In general, Mr. Mulvaney came across as quick on the uptake, candid, and thoroughly conversant with the details of the budget proposal. He did not appear to be consulting documents at any point, and never sought assistance from staff members. He seemed particularly at home during the House Budget Committee session, perhaps reflecting his previous service the HBC and acquaintance with many of the members, but also held his own with the Senate Budget Committee.

The CBO’s report to the budget committees reflects a seemingly less favorable outlook than BP-19. Budget and Economic Outlook for 2018 to 2028, cbo.gov,
4/9/18 (download PDF). Consider this disheartening chart, which is based on steadily widening deficits in dollar terms throughout the budget projection period, ending at $1.5T in FY 2028. In contrast, BP-19 projects a deficit that declines from roundly $1T in FY 2019 to $363B in FY 2028.



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However, the CBO is projecting budget baseline data that don’t reflect the various budget savings being proposed by the president (presumably because Congress is supposed to decide about such matters). The OMB and CBO baselines are quite similar, e.g., fiscal year deficits of $1.3T (OMB) vs. $1.5T (CBO) in fiscal year 2028.

II. Items outstanding

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It’s unclear whether a final decision has been made, but there has been no move to start working on a budget resolution and Congress will probably skip this step as it has done in several other years.

The Joint Select Committee on Budget and Appropriation Process Reform (JSC) was appointed some time ago, but its initial meeting on March 8 was basically a “meet and greet” event. DC braces for another legislative deadline, Section II,
3/19/18. At its meeting on April 18, the JSC heard from two veterans of the current budget process. Each of the co-chairs issued a brief statement about how useful the meeting had been, but we will need to track down a transcript or video to learn what actually happened. To be continued.

The House Armed Services Committee is reportedly working on a defense appropriation bill, which would include a mandated cut in Pentagon overhead (primarily residing in the supporting network of government contractors). [Rep.] Mac Thornberry wants to slash Pentagon support budget by $25 billion; cites waste and bloat, Travis Tritten, Washington Examiner,
4/17/18.

Opposition to this proposal quickly surfaced from the interests that would be affected, and the defensive strategy seems to be studying it to death. Union tries to scuttle Mac Thornberry’s plan for Pentagon cuts, Travis Tritten, Washington Examiner,
4/20/18.

The Texas Republican, the House Armed Services chairman, should pull his bill proposing about $25 billion in across-the-board cuts to 28 DOD agencies and instead opt for reviews every five years without setting goals for reducing spending, the American Federation of Government Employees wrote in a letter Thursday to the chairman.“We respectfully suggest that the committee pull back the [bill] draft because of the misconceptions about defense agencies,” wrote J. David Cox, who is the national president of the union.

Otherwise, we aren’t aware of any efforts to accelerate work on the appropriation bills this year, particularly in the Senate (which has been the real bottleneck). It might behoove Republicans to get behind such efforts in the run-up to the mid-term election as a means to demonstrate that their rhetoric about fiscal responsibility is more than empty talk. Rebooting the budget process,
4/9/18.

Other pre-election moves for the same purpose have been suggested, but don’t seem as promising because they are so obviously symbolic versus substantive.

#MORE TAX CUTS – In the tax bill that was enacted in December, individual tax cuts and various other provisions (e.g., current expensing of qualifying business investments) were made temporary rather than permanent. This was done to limit the projected fiscal cost of the bill and thereby comply with requirements of the reconciliation process that was used to work around the Senate filibuster rule. Given ensuing criticism that Republicans cared more about lowering corporate taxes than tax relief for the working class, it is now proposed to have a second bill that would make the individual tax cuts permanent. Paul Ryan promises House will vote to make individual tax cuts permanent, Susan Ferrechio, Washington Examiner,
4/17/18.

One problem in putting up such a bill would be explaining why the individual tax cuts weren’t made permanent in the first place – the arcane nuances of the reconciliation process are incomprehensible to the average voter. And the tax cuts in future years wouldn’t carry much weight because voters wouldn’t see the results quickly.

If there is a vote along these lines, we would recommend that it include immediate termination of all the expiring tax breaks that were left out of the tax bill only to be restored in the omnibus spending bill. See SAFE’s
2/26/18 letter to House Ways and Means Chairman Kevin Brady.

Note also that the bill could not conceivably be pushed through the Senate without abolishing the filibuster rule (as both SAFE and the president have advocated), and if Senate Republicans aren’t willing to take that step then passing the bill in the House would accomplish nothing.

#BALANCED BUDGET AMENDMENT – The president asked for a BBA and a reasonable case can be made for one (subject to questions about how it would work, the deadline for compliance, etc.), so why not schedule a vote on the matter? Answer: there is no way 2/3 of both houses of Congress would vote for such an amendment, and Republicans would be left looking foolish for having proposed it.

#LINE ITEM VETO – The president also suggested that Congress should give him a line item veto, an idea that is far from new. President Ulysses S. Grant asked for a line item veto in 1873 – which he didn’t get – and such a veto was enacted during the Clinton era only to be stricken by the courts on constitutional grounds.

In principle, we would see some merit in a line item veto. If a president can veto an entire bill, subject to congressional override, why not empower him (or her) to take the lesser step of deleting a spending provision within the bill? But as with a BBA, the requisite 2/3 vote of both houses of Congress would be far out of reach.

#RESCISSION – Under the Impoundment Act of 1974, the president could propose the cancellation of selected items in a spending bill subject to congressional approval (within 45 working days, and the legislation would not be subject to a filibuster). Numerous instances of wasteful spending in the omnibus spending bill could be targeted, thereby supposedly restoring the GOP’s reputation for fiscal responsibility. Why rescission is a must, Dave Brat, Washington Times,
4/12/18.

My constituents did not elect me to conduct “business as usual” and bankrupt America. Republicans made a lot of promises last year — the best way to ensure we stay in power is to deliver on those promises, and that means not spending like Democrats. They “pay to play” for a living. We do not.

It should be obvious that Democrats would resist such a proposal, however, and many Republicans would defect as well. If a spending deal negotiated for months can be casually amended, what can legislators place their trust in? Trump push to redo $1.3T spending bill he signed sparks GOP revolt, Sarah Ferris & Kaitlyn Burton, politico.com,
4/12/18.

#OTHER MATTERS – Republican prospects in November have been further clouded by Rep. Paul Ryan’s recent announcement that he does not plan to stand for reelection in November, ostensibly for personal reasons, but wants to continue serving as Speaker of the House until January.

Having a “lame duck” leading House Republicans in the upcoming elections would make it that much harder to craft an appealing platform for the GOP and sell it to voters but no one else clearly has the needed support to replace him. Speakership drama pits McCarthy vs. Ryan, Rachel Bade & John Bresnahan, politico.com,
4/16/18.

Whatever happens (and one obvious possibility is that Democrats will win the House in November), House conservatives don’t have the votes to elect one of their own as the next Speaker and at best could hope for some sort of “seat at the table.” Who cares about a new speaker? Conservatives need a new vision, Daniel Horowitz, nationalreview.com,
4/12/18.

Heading forward, it is more important for conservatives to field a new, galvanizing vision and strategy than to focus simply on another candidate for speaker of a GOP conference that is irretrievably broken.

Having become a senior editor of a respected conservative publication at a young age, by the way, Mr. Horowitz appears to be a rising star. Check out his positive comments in the following interview, it’s an enjoyable discussion. Young conservatives (Charlie Kirk & Daniel Horowitz) discuss the state of American politics with Mark Levin, foxnews.com, video (14:32) or transcript, 4/15/18.

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#What would a “convention of states” accomplish? -SAFE member (DE)

The basic rationale for a COS would be to propose constitutional amendments that the members of Congress (by a 2/3 vote in both houses) would never support, e.g., proposing a balanced budget amendment or giving the president a line item veto. Washington won’t reform itself, 9/10/17.

#It’s proposed that the GOP insist on completing the FY 2019 budget process in a businesslike manner before the October 1 deadline. This will never happen, however, because the Republicans “want to deal with Democrats and keep their phony-baloney jobs.” - SAFE director

Just because a goal is hard doesn’t mean it should be rejected unless alternatives with equivalent results are more readily attainable. Republicans would have the votes to take charge of the appropriation process if they were willing to “go nuclear” in the Senate. For reasons discussed in the entry, other GOP options that have been proposed seem even more problematic.

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