October 25, 2014

Washington Budget Report: August 5, 2014

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Long-Term Highway Funding: Congress Takes a Detour

President Obama this month signed a measure that provides $11 billion to fund the Highway Trust Fund through May, relying heavily on a budget gimmick euphemistically known as “pension smoothing.” Congress approved the legislation in late July.

The Senate had stripped the gimmick from House-approved legislation in favor of more legitimate offsets. However, the House rejected the changes, sending its original bill back to the Senate.

With the trust fund reportedly within days of insolvency and reductions in its support for state transportation projects, senators say they had little choice but to approve the bill.

But lawmakers received plenty of advance warnings about the trust fund’s problems, notably the failure of fuel tax revenue to keep up with its expenses. Once again, however, Congress waited to the last minute to address a growing crisis -- and then only approved an irresponsible short-term fix.

The pension gimmick could actually worsen the long-term fiscal problems and weaken pension funds. But it has become an unfortunate go-to for both parties to “pay for” various policies. It’s time to retire it.

Instead, lawmakers should work together to develop realistic solutions to the nation’s pressing fiscal challenges, including the financing of transportation programs.

Washington Fails to Pay for Most New VA Spending

On Thursday President Obama is scheduled to sign “emergency” spending legislation on health care for veterans that will unfortunately add an estimated $10 billion to the deficit over the next decade.

The House and Senate passed the measure last week after failing to find a more responsible way to pay for improvements in care provided by the Department of Veterans Affairs. In addition, Concord Coalition Policy Director Joshua Gordon has argued that the whole congressional strategy is misguided, in part because in trying to fix access problems, it sacrifices a VA strength: care coordination.

Sen. Bernie Sanders, chairman of the Senate’s Veterans’ Affairs Committee, said the $16.3 billion measure includes $10 billion to provide health care outside VA facilities, $5 billion to recruit more health care providers, and $1.3 billion to lease 27 new clinics.

His summary of the legislation says some costs would be offset by about $6 billion in savings from other programs. But lawmakers ducked the pay-as-you-go principle for most of the new spending by calling it “emergency” funding -- even though many items such as hiring and facilities expansion should have been handled through the regular appropriations process.

Disability Insurance Deadline Offers Chance for Reforms

2014 Social Security Trustees Report Infographic

This year’s report by the Social Security trustees reminds lawmakers that the next Congress will face a deadline to act on Disability Insurance by 2016, an opportunity that could be used to pursue comprehensive reforms to put all of Social Security on a sustainable track.

According to the trustees, congressional failure to act before that deadline would mean an automatic, across-the-board benefit cut of 19 percent for Disability Insurance (DI) beneficiaries. Such a steep cut would impose unconscionable harm on people who depend on the program.

Some analysts and policymakers suggest that Congress could simply reallocate the money to DI from the Old Age and Survivors Insurance (OASI) program, but this ignores the reality that both are unsustainable in their current forms.

Absent reforms, the trustees note, OASI beneficiaries would face a 25 percent across-the-board benefit cut in 2034 and beyond -- something any serious advocate of Social Security should find unacceptable.

Those who have insisted Social Security be dealt with independently of a “grand bargain” on the rest of the federal budget should use the next Congress to put their money where their mouth is and propose comprehensive solutions for OASI and DI that can gain bipartisan support.

Partisan Divide Remains on Border Funding

The House passed a $694 million measure Friday to help federal agencies cope with a surge of migrants from Central America but further partisan battles are likely in September, with Democrats seeking higher funding.

The bill would send additional money to the departments of Justice, Defense, Homeland Security, and Health and Human Services to improve border security and provide humanitarian relief. Republicans said they offset the additional immediate spending by reducing the agencies’ future budgets by the same amounts over several years.

After support for the House bill faltered on Thursday, Republican leaders gained more votes by adding $35 million more for National Guard deployment. Although the legislation would supplement Fiscal 2014 funding, the Congressional Budget Office says most of the money would not actually be disbursed until Fiscal 2015.

Senate Democrats oppose the House bill and President Obama has said he would veto it. Obama requested a $3.7 billion emergency spending package while Senate Democrats suggested $2.7 billion.

Unproductive Congress Sticks With Status Quo

Congress just began its long August recess without approving a single regular spending bill for Fiscal 2015, now less than two months away. While that’s troubling enough, lawmakers this summer have continued to neglect the nation’s long-term fiscal difficulties as well.

“Lawmakers stick with the status quo and hope these problems will simply disappear,” says Chase Hagaman, New England regional director for The Concord Coalition. In a recent letter published in the Concord Monitor (N.H.), he adds:

“Entitlement programs are growing exponentially, tax revenues fail to cover our expenses, interest payments on the federal debt already overshadow the budgets of some of our largest government agencies, and parts of the budget are slated for unrealistically large cuts. “

Excessive partisanship, short-term thinking and pandering to special interests are responsible for many of the country’s fiscal problems. Hagaman urges policymakers to focus on compromise and reasonable solutions.

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