Budget news for FY 2020

Update and reader feedback at end

It’s been awhile since we reported on the budget scene in DC, so perhaps an update would be helpful. While there are no breakthroughs to report, there have been a few encouraging developments.

1. A call to action – As some readers may recall, SAFE wrote to selected members of Congress (11 representatives, 16 senators) on 2/25/19 suggesting a “do no harm” approach to addressing the fiscal problem.

For the next two years, we would recommend that Congress operate in damage control mode. Prune spending where possible (OMB has offered many suggestions), don’t hike taxes, and don’t expand existing entitlement programs or create new ones.

All presidential candidates in 2020 should be urged to commit to balancing the federal budget by 2025 and explain specifically how they would propose to do so. One of the three presidential debates should be devoted to discussion of the fiscal problem. The winner would hopefully keep his or her promises with strong support from the members of Congress.

We also wrote to
the president (with a copy to acting chief of staff/budget director Mick Mulvaney), thanking him for responding to a previous SAFE letter, praising the targeted spending cuts that were requested in his budget proposal for FY 2020 (BP-2020), and urging that he propose a goal of balancing the budget in the 2020 presidential campaign.

Both of our letters included a link to the SAFE website for more detailed discussion of (a) why action is urgently needed, and (b) how the budget could be balanced within the proposed time frame (as happened during the second term of the Clinton administration). It’s time to balance the budget,

It would be nice to report a flurry of responses to these letters, but only one has been received so far.
The letter came from Rep. Lisa Blunt Rochester (D-DE), who commented primarily on tax policy vs. spending. We posted it at the end of SAFE’s letter to selected members of Congress, just scroll down.

None of the major presidential candidates for 2020 is advocating a balanced budget by 2025, at least not yet. And there are isn’t much evidence that members of Congress are concerned about deficit reduction in the meantime. Consider the following developments.

B. House of Representatives - On March 12, the House Budget Committee conducted what appeared to be a perfunctory review of BP-2020 (one round of questions, 5 minutes per member). Many of the questions/comments were negative, and there was no apparent agreement that the projected trillion dollar deficits represent a valid cause for concern. Whither BP-2020, Section A, 3/25/19. The committee subsequently took up proposals for a House budget resolution, but this effort bogged down due to divisions within the Democratic caucus. House Democrats surrender on 2020 budget resolution, David Sherfinski, Washington Times, 4/1/19.

House Democrats ultimately couldn’t balance the needs and wishes of their liberal members who wanted the budget to reflect far-reaching proposals on universal health care and climate change with those of more moderate members who said those plans were unrealistic. “We’ve got a very diverse caucus with a lot of different views about priorities and we know we’re going to get no Republican votes, so it’s where we are,” said House Budget Committee Chair John Yarmuth (D-KY).

The discussion then turned to proposals for lifting the existing budget caps for FY 2020 and directing more of the resulting spending increases to non-defense spending than the GOP would like.
Ibid. Proposed legislation (H. Res. 293) passed the House on 4/9/19.

C. Senate – The Senate Budget Committee (SBC) chaired by Sen. Mike Enzi (R-WY) reviewed BP-2020 on March 13. Minority members in this hearing demonstrated a notable lack of respect for either the president or the budget proposal. See examples below. Whither BP-2020, Section A, 3/25/19.

•Sen. Bernie Sanders (D-VT), the ranking minority member, said BP-2020 was an “absolute disaster” and an “insult to working class families,” which exposes the president as a charlatan. So the idea is to slash Medicaid and Medicare, while giving tax cuts to the 1%? And the government pays for 2/3 of all nursing care, so where will Granny go when the Medicaid budget gets slashed? Let’s discard this document immediately and do a serious budget.

•Sen. Ron Wyden (D-OR) called BP-2020 “a big bunch of bad ideas,” suggesting that the inclusion of healthcare proposals modeled after the Graham-Cassidy bill was pointless as Republicans had been unable to pass this legislation while they had control of both houses of Congress and it certainly wasn’t going anywhere now. He also questioned a proposal to sell off assets of the Bonneville Power Administration on the Columbia River, saying that this proposal would raise power costs for working families in Oregon who he happened to represent.

In a positive vein, Republican members of the SBC subsequently unveiled their own budget proposal – which featured marginally lower deficits than the president’s proposal. Whither BP-2020, Section B,

After review with Democratic members, the Enzi plan was approved by the SBC. Senate panel approves GOP budget that slashes spending, Niv Ellis, thehill.com,

As the House won’t have a budget resolution, it seems doubtful that the budget resolution will be voted on by the full Senate. What would be the point? Accordingly, the spending limits on congressional appropriation bills will necessarily be worked out on some sort of ad hoc basis – providing one more demonstration, if such was needed, of Congress’s seeming inability (or at least unwillingness) to comply with its own budget procedures.

Sen. Enzi became chairman of the SBC after the 2014 elections, and he is currently slated to retire at the end of 2020. In the meantime, hoping to leave things better than he found them perhaps, Mr. Enzi has launched a series of discussions on possible improvements to the congressional budget process.

Oh, no! Wasn’t the idea of process reform beaten to death by the joint select committee in 2018, only to find that the JSC members didn’t agree on anything that really mattered? JSC proposals for budget system reform,

But judging from the first review session, as recapped under the next heading, the new SBC effort may be more promising than we expected.

D. Budget process – Last week, the SBC heard testimony of two fiscal hawks who had previously served on the SBC: Kent Conrad (D-ND, 1987-2013) and Judd Gregg (R-NH, 1993-2011). Being of different parties, Sens. Conrad and Gregg had alternated as chairman and ranking member on the SBC after attaining the requisite seniority. Fixing a broken budget and spending process: Perspectives of two former chairm[e]n, Senate Budget Committee, video (1 hr., 23 min.) 5/14/19.

Another shared experience was discussed in the session, namely Sens. Conrad and Gregg had both served on the presidentially-appointed Fiscal Commission of 2010 (aka Bowles-Simpson commission) and voted in favor of its recommendations. For details, see SAFE’s report on the outcome. Fiscal Commission sets stage for further discussion,

Rejection of the Bowles-Simpson recommendations had been perceived by the witnesses as a major blow and may have contributed to their respective retirement decisions. Thus, Sen. Conrad observed during his testimony that he had decided to leave the Senate after concluding that a solution to the fiscal problem would be impossible until a crisis forced Congress to take action.

The premise that the congressional budget process is “broken” was readily accepted by both the witnesses and SBC members. However, several speakers pointed out that the real problem may be lack of political will to balance the budget versus specific details of the budget process that could be changed.

Sen. Conrad’s suggested a number of process changes that had been discussed during the JSC review in 2018, e.g., (a) biennial budgeting, (b) making budgets on a calendar year basis, (c) automatic CR’s if budget deadlines aren’t met to avert possible government shutdowns, (d) procedures to mitigate the effects of not raising the debt limit when required, (e) a ban on using the budget reconciliation process to cut taxes vs. reducing the deficit, (f) requiring 20-year fiscal projections in presidential and congressional budgets, etc. Ho hum!

Sen. Gregg’s proposals were more interesting.. For example, he suggested that (a) the SBC should be reconstituted as equally representing the Senate appropriations committee, finance committee, and general membership; (b) there should be the same number of Republicans and Democrats on the SBC so that no decisions could be made without bipartisan support; and (c) continuing resolutions should be eliminated so that no appropriation bills could be approved before the budget resolution was approved.

If the fiscal year began without a budget, then (d) all permissible spending would be reduced by 5% from the prior year and payroll tax rates would be increased by 5% until the deficiency was corrected. “This would put extreme pressure on the bipartisan committee and the Congress,” observed Sen. Gregg dryly, “to produce and pass the budget.” He also wanted to (e) expand the budget to cover review of the big entitlement programs, which are currently classed as “mandatory expenditures,” and (f) add a capital budget in order to distinguish between capital and operating expenditures.

Some left-leaning senators on the SBC who had aggressively attacked the BP-2020 on March 13, e.g., Sens. Bernie Sanders, Ron Wyden, etc. were not in attendance, and the conversation between the witnesses and the SBC members who were present was businesslike and constructive.

Everyone seemed to agree that deficits matter, the rate at which debt is being run up will lead to dire consequences (although no one can pinpoint exactly when the roof will cave in), and the longer that corrective action is deferred the more painful the eventual day of reckoning will be. Amen!

There were differences of opinion on various points, but withal a sense that any process improvement package the group came up with would probably represent an improvement over the status quo.

Should the fiscal problem be solved by cutting spending, raising taxes, or some combination of the two? Both witnesses said a combination would be needed, albeit probably weighted in favor of spending cuts. A mixed approach had been reflected in the Bowles-Simpson proposals, it was noted, even though that plan had ultimately been rejected. And blanket refusal to allow any tax increases would give big government advocates no incentive to support a negotiated settlement.

Sen. Enzi asked whether the budget resolution should be passed by the two houses of Congress, as is the current procedure (in years when Congress succeeds in passing a budget resolution), or whether the budget should be expressed in legislative language and require the president’s signature.

Sen. Conrad was inclined to maintain the status quo in this regard, noting his experience that presidents have plenty of ways to communicate to the members of Congress about budget proposals that are under discussion.

Sen. Gregg suggested that getting the president’s signature on budget resolutions would be a plus, versus deferring presidential action until detailed appropriation bills have been hammered out and then potentially creating a crisis if said bills get vetoed at the proverbial “last minute.”

In sum, process reform certainly won’t solve the fiscal problem but we think it could prove helpful. Let’s hope that the additional sessions that are contemplated will prove equally productive.

In the meantime, SAFE would offer some modest suggestions for the Senate Budget Committee. (1) The overall goal should be to balance the budget, not simply reduce the deficit to some supposedly acceptable percentage of Gross Domestic Product; (2) Experience has shown that spending cuts are far more effective in eliminating budget deficits than tax increases; (3) Granted that entitlement reforms will be needed to fully balance the budget, congressional budget committees should get the ball rolling by giving serious consideration to targeted cuts in discretionary spending (including the many suggestions offered by the president and his budget staff in BP-2020); (4) One excellent process change would be to abolish the debt limit, which has evolved into a meaningless exercise that distracts attention from the real issues.

**********UPDATE & FEEDBACK**********

#Sent DE members of Congress a link to this entry, 5/20/19.

#Was Sen. Mike Enzi promoting the “penny plan” in the Senate Budget session? He and Rep. Mark Sanford were promoting this approach back in
2016. - SAFE director

Comment: No, and just as well. Overall restraints on spending never work for long. The only thing that does work is targeted cuts (which is what OMB built into Trump’s BP-2020).

# Thanks for the heads up! And please do add me to your weekly list. – Contact, Senate Budget Committee staff

#Not having a budget allows the House to freely spend. – SAFE director

Comment: Absent a deal the sequester will force discretionary spending cuts, so whether Congress passes a budget resolution or not the Democrats will come to the table.

# Although I’m not convinced that a balanced budget is needed right now, I agree with Alexander Hamilton that there should always be a method of paying off the debt, such as a sinking fund, so I am not too far from SAFE’s stated goal. We can talk about this in more detail at some point. – SAFE member (DE)

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