House Committee's Budget Resolution Is Unrealistic

Blog Post
Tuesday, June 26, 2018

This post was written by Concord Coalition intern Rob Ryan.

Months behind schedule, the House Budget Committee took action last week on the first step in the regular congressional budget process: approving a budget resolution.

The plan aims to balance the budget in nine years and calls for $8.1 trillion in deficit reduction relative to the CBO’s baseline projections, which assume current laws remain unchanged.

While the budget committee’s effort to adhere to the budget process is commendable, its use of overly optimistic economic assumptions and unrealistic spending cuts undermine the resolution’s credibility.

Much of the plan’s proposed deficit reduction stems from policy changes that are at odds with recent experience. For example, the resolution calls for $1.1 trillion in discretionary spending reductions, most coming from the non-defense side. Yet Congress just this spring increased discretionary spending beyond previously established caps.

The plan also calls for $1.5 trillion in Medicaid and other health care spending reductions, much of which would presumably come from the proposed repeal of the Affordable Care Act (ACA). But Congress failed to pass a repeal measure in 2017 and, in any event, the budget does not seem to account for the cost of any ACA replacement.

The resolution includes reconciliation instructions that delegate to 11 House committees $302 billion in deficit reduction over the next decade. Reconciliation instructions can enable the Senate to pass certain bills by a simple majority, rather than requiring 60 votes to overcome a filibuster. Without this procedural protection, the larger cuts in health care and other mandatory spending programs assumed in the budget (those above the $302 billion) have little chance of being adopted in the Senate and becoming law.

The proposed resolution suggests no new revenues or tax cuts. However, it assumes the revenue increase of allowing some of the 2017 tax cuts to expire even though House Republicans are actively trying to extend them. Without that assumption, the budget wouldn't get to balance.

The plan assumes an average of 2.6 percent annual economic growth over the next decade, well above what many economists consider realistic on a long-term basis.

The budget committee did not produce an analysis of how the budget resolution would produce such a marked improvement over the baseline forecast. Nevertheless, assumed macroeconomic feedback accounts for $1.67 trillion, 21 percent of the plan’s $8.1 trillion in deficit reduction.

The proposed resolution suggests no new revenues or tax cuts. However, it assumes the revenue increase of allowing some of the 2017 tax cuts to expire even though House Republicans are actively trying to extend them. Without that assumption, the budget wouldn't get to balance.

While the budget committee’s action was a step forward in terms of the regular budget process, it remains to be seen whether House leaders bring the resolution to the floor for a vote. Doing so would require members to go on the record in favor of spending cuts totaling $6.4 trillion over 10 years -- a prospect many of them may want to avoid in an election year -- or to vote against the party’s own budget, which would also be unappealing.

Moreover, there seems to be even less enthusiasm for doing a budget in the Senate. If that holds true, House leaders might conclude that there is no point in compelling hard votes from their rank-and-file members on a budget proposal that will go nowhere in the Senate.

Notably, both the House and Senate have already begun to consider spending bills without a budget resolution, instead using the topline spending caps set out in a bipartisan deal in February. These bills, however, are just for one fiscal year, deal only with about 30 percent of federal spending and do not cover revenue projections. Nor do they say anything about where the budget is headed beyond the next fiscal year.

A recent report by the Congressional Budget Office (CBO) indicates that budget deficits will surpass $1 trillion by 2020 and remain at that level for years to come. The report also warns that the national debt will grow from 77 percent of GDP in 2018 to 96.2 percent in 2028.

A full budget resolution is needed to provide a framework for considering comprehensive legislation to put the budget on a sustainable path.