Once again, Congress delivered subpar results
Reader feedback at end
December can be a busy time on Capitol Hill because, among other things, that’s when the annual appropriation bills are typically passed (rather than before the start of the fiscal year as called for by the congressional budget rules). The existence of all this “must pass” legislation creates opportunities for unrelated proposals to be pushed through that would be hard to pass on a standalone basis.
While this “logrolling” strategy can deliver wins as well as losses, the overall quality of legislative output suffers. Certainly that seemed to be true last month.
I. Expectations – We didn’t have high hopes for the results of the final weeks of congressional activity in 2019 for two reasons:
•The possibility of favorable outcomes was clouded by an impeachment inquiry in the House, which was being conducted in a high-handed and intensely partisan basis. Little evidence of actual crimes versus indiscretions – near certainty that a trial in the Senate would result in acquittal – impropriety of attempting to remove the president from office only a few months before the 2020 presidential election. Who’s the biggest liar in the land, 11/18/19.
Message for House Democrats: This impeachment effort should never have been started, and it should be ended now.
•The usual year-end scenario of delayed appropriation bills figured to soak up most of the remaining time and attention, leaving little opportunity for constructive legislation before 2020 (when the political focus would inevitably shift to the upcoming elections).
SAFE did identify a few goals for December, but our main focus was damage control. Impeachment push is symptom of underlying problems, 12/2/19.
•Break the stalemate over funding for border barriers, which given the amounts involved (e.g., $5 billion per year) has had an inordinate effect on overall budget negotiations.
•Pass the United States-Mexico-Canada Agreement (USMCA) that has been negotiated to replace the North American Free Trade Agreement (NAFTA), thereby eliminating concerns of a major disruption of existing relationships with our northern and southern trading partners.
•Block a proposed bailout of multiemployer pension plans without, at a minimum, changes in the law to prevent the problem from continuing to grow. Similarly, defend against any other proposals that would increase currently projected deficits (some $1 trillion per year with no clear-cut end in sight).
•Longer term, mount a serious effort to balance the budget rather than continuing to grow the government while undermining the US economy. Experience has shown that Congress can’t address this problem on its own, so presidential leadership would be essential.
II. Impeachment – As expected, the House passed articles of impeachment before adjourning in December. Testimony of several high ranking officials was foregone based on the supposed urgency of taking action. No Republicans voted for impeachment.
Belying the purported urgency of taking action, Speaker Nancy Pelosi then elected to hold the articles of impeachment rather than forwarding them to the Senate. She eventually agreed to take this step under pressure, and will reportedly follow through this week (e.g., by January 17).
According to Senate Majority Leader Mitch McConnell, a trial will begin promptly once the charges have been received. He has not committed to the introduction of documents and testimony that were not considered in the House proceedings; unless such evidence is used, the trial may be rather short.
Still, it is quite possible that the impeachment trial won’t be completed before February 3, when President Trump is scheduled to give the State of the Union Address. This would not be unprecedented, as President Clinton was facing impeachment charges when he gave the State of the Union Address in 1999.
Clinton said nothing about the impeachment proceedings in his 1/19/99 address, and he had better news to deliver than the current president will – including a balanced budget.
For the first time in three decades, the budget is balanced. From a deficit of $290 billion in 1992, we had a surplus of $70 billion last year. And now we are on course for budget surpluses for the next 25 years.
Trump isn’t known for verbal restraint when attacked. We have no idea what he might say if the impeachment proceeding is still pending on Feb. 3rd, but would expect him to fire back at his accusers. If that’s how things play out, it won’t do much for the image of the US government. Too bad!
III. Legislation – Congress found time to pass three omnibus appropriation bills (several thousand pages in total), thereby completing its budget paperwork for the year.
•S. 1790 - National Defense Authorization Act
•H.R. 1158 - Consolidated Appropriations Act
•H.R. 1865 - Further Consolidated Appropriations Act
Several unrelated issues that we had noted previously were involved, plus quite a few others. Here are some highlights, including one victory and half a dozen defeats.
#USMCA – Shortly after passing articles of impeachment, the House approved this agreement by a vote of 385-41. Senate approval is expected in early 2020. House approves USMCA trade deal after more than a year of talks, Jacob Pramuk, cnbc.com, 12/19/19.
Cynics might see this action as political posturing, e.g., the minority party wanted to disprove the “do nothing Democrats” label, but never mind – a win is a win. Ibid.
“This vote today is a reminder that, even while the House was working to hold the President accountable for his abuses of office, we were still working hard to deliver on our promises to the American people to focus on economic opportunity,” House Majority Leader Steny Hoyer, D-Md., said ahead of the vote.
#BORDER WALLS – Did the two sides reach a sensible accommodation on the amount of border barrier renovation or new construction that could be undertaken? No, evidently that was too much to expect. The officially authorized amount was $1.4 billion, which simply wasn’t enough to accomplish the administration’s goal of materially improving the security of the 1,800 mile southern border.
The administration finessed the border funding issue last year by re-designating several billion dollars in military construction funding to border barriers. A federal district judge in Texas enjoined reliance on this approach in December, but an appellate court subsequently lifted the injunction. Federal appeals court lifts block on $3.6 billion in funding for Trump’s border wall, Dominick Mastrangelo, Washington Examiner, 1/9/20.
Democrats wanted language in the FY 2020 appropriations bills to block such re-designation of funds, but their demand was ultimately dropped so the administration may get the money it wants. This wasn’t exactly a win, since further litigation appears likely, but a presidential tweet hailed the court victory. Ibid.
The Fifth Circuit Court of Appeals just reversed a lower court decision & gave us the go ahead to build one of the largest sections of the desperately needed Southern Border Wall, Four Billion Dollars. Entire Wall is under construction or getting ready to start!
#MULTIEMPLOYER PENSION PLANS – Almost all of these plans (promising pension benefits for some 10 million Americans) are significantly underfunded and the federal government is seen as the logical savior even though it didn’t create the problem. A joint select committee spent most of 2018 studying the matter, but failed to agree on an actionable solution. Meanwhile, the outlook keeps getting bleaker.
A number of conservative organizations (including SAFE) recently urged Congress not to bail out the multiemployer pension plans given the substantial price tag involved and the bad precedent that would be set re the looming insolvency of many state and local pension plans. Coalition letter to members of Congress, 11/15/19.
Underfunded pensions are a serious problem affecting private businesses, state and local governments, and their workers. Yet taxpayers have not caused these problems – pension managers have. Many pension plans in the multi-employer system face severe financial shortfalls and, on the whole, the system can only pay 42 cents of every dollar in promised benefits. Managers of both the pension funds and businesses created this sad problem; they should be accountable and find solutions that don’t simply transfer the burden on the taxpayers.
A multiemployer plan bailout was reportedly being worked on in the Senate that would be somewhat less onerous than a bill previously passed by the House which the Congressional Budget Office had scored as costing $55 billion over the next 30 years. (N.B. Never mind how the situation shows up on the books of the Pension Benefit Guaranty Corporation, the multiemployer retirement plans are underfunded by some $600 billion in the aggregate.) GOP senators unveil plan to shore up multiemployer pension plan, Sean Higgins, Washington Examiner, 11/20/19.
"Chairman [Chuck] Grassley and I have a balanced proposal to shore up the PBGC’s role as an insurance company with a limited infusion of taxpayer dollars instead of an open-ended bailout and institute important structural reforms so this does not happen again,” [Sen. Lamar] Alexander said. The senators did not state how many taxpayer dollars would be needed.
If Congress wouldn’t refuse to accept federal government responsibility, the objective of limiting the damage sounded like the next best option. Simply kicking the can down the road obviously wasn’t going to work, any more than it will work for other floundering entitlement programs such as Social Security and Medicare.
Congress reacted to the situation by bailing out the United Mine Workers pension plan (some $6 billion in underfunding) without requiring any cost sharing or plan changes. This will naturally fuel demands for nearly 1,400 other plans to be bailed out in a similar fashion - at very substantial expense. What does “the Irishman” have to do with Congress’ latest spending bill, Rachel Greszler, dailysignal.com, 12/16/19.
That would either create huge inequities—with mine workers receiving 100% of promised benefits, while others receive mere pennies on the dollar—or else it would set the stage for a massive taxpayer bailout of numerous other private and public pensions.
If Congress opens the door to pension bailouts—including $638 billion in private union pensions and up to $6 trillion in state and local pensions—the price tag could reach $52,000 for every household in the U.S.
#EXPORT-IMPORT BANK – Created during the New Deal era, this enterprise primarily benefits a few large corporations (notably Boeing) that should be readily able to secure private financing for their export sales. Accordingly, SAFE had joined in coalition letters (5/2/19 and 9/12/19) urging that the EIB be phased out in the interest of eliminating an unnecessary government program.
Not realizing what was afoot, we were surprised to learn in December that someone had succeeded in getting a measure to renew the EIB charter for another seven years into the appropriation bills. So much for having a reasoned, fact-based debate of the issue. A reversal by Trump revises agency that aids exporters, Andrew Ackerman & Lindsay Wise, Wall Street Journal, 1/9/20.
That decision sealed the bank’s renewal by tucking it into a large must-pass spending package—and depriving opponents of the agency of the opportunity to fight it through debate and an up-or-down vote on the renewal.
#FISCAL PROBLEM – Although a trillion dollar deficit for fiscal year 2020 was already “baked in the cake,” the provisions of the appropriation bills made the outlook even worse. This reflects a bias toward trying to offer spending programs for every conceivable problem, plus the delusion that budget deficits financed by borrowing represent “free money.”
We’ve already noted the bailout of the UMW pension plan, and other costs were added as well between July when spending limits for FY 2020 were supposedly set and the December appropriation bills. Budget watchdogs howl over deficit-ballooning deals, Niv Ellis, thehill.com, 12/19/19.
. . . as negotiations over the 12 annual spending bills heated up through the fall, lawmakers kept piling on their funding requests. Miners’ pensions, disaster relief, emergency spending and various medical programs all added to “off-book” spending that technically does not breach the new budget caps. When lawmakers released the details of the spending bill on Monday, the additional spending amounted to another $24.7 billion.
Then there was the enactment of a paid family leave benefits for federal employees, which will increase the top-heavy employee benefits and total compensation for these workers. This may not have any immediate effect on funds to be appropriated for FY 2020, but longer term it will raise the cost of government operations.
Also, it’s not hard to foresee efforts to expand the new benefit to the private sector via government mandates or subsidies – when the government can’t afford the entitlement plans that are already in place. Big business for mandates [paid family leave for all], Wall Street Journal, 12/19/19.
If businesses want to offer paid leave, good for them. But the [Business Round Table] is lobbying to ease its labor burdens while imposing higher costs on competitors. The political friends it makes will be of the fair-weather kind.
Repealing three excise taxes on healthcare services (imposed by the Affordable Care Act) had some appeal. Unpopular on both sides of the aisle, the taxes in question (medical devices tax, Cadillac tax on premium healthcare services, and annual tax on healthcare insurance) have been repeatedly postponed by Congress. Given the goal of bringing down the cost of healthcare, moreover, these levies never made much sense. Still, the effect will be to increase projected deficits by some $373 billion over the next decade and no measures were proposed to offset the revenue loss. Budget watchdogs howl, op. cit.
Also costly, and in our opinion totally unjustifiable, was the last minute rescue of an array of special tax breaks (aka extenders) that were on their way out. The effects will not only reduce tax revenue, but also distort economic decision-making based on normal business considerations. We’ve seen this movie before, e.g. in February 2018, and it’s getting increasingly annoying. Ibid.
Late on Monday night, just hours before the appropriations bills were set to come to the House floor, lawmakers agreed *** to prevent a slew of tax breaks, set to expire in 2020, from fizzling out. They also retroactively extended provisions that expired over the past two years. The extenders — from tax breaks for biodiesel to tax credits for energy efficient buildings and railroad tracks — will lower revenue by $39 billion over a decade, including a $22 billion cut in 2020.
* * * * * *
In sum, Congress delivered one win and multiple losses in December 2019. Such mediocre performance cannot be afforded, and changes must be made. But what changes? It seems idle to hope that the upcoming elections will straighten everything out, although they will certainly have an effect, and we don't see any other ready answers. Reader suggestions would be greatly appreciated.
Congress has surely been undershooting our expectations, but I’m dubious that many of the members will pay a political price as a result. – SAFE member (DE)