WANTED: Legitimate Offsets

Blog Post
Thursday, April 07, 2022

The week of April 4 began with hopeful optimism as a bipartisan group of Senators reached a tentative agreement to replenish emergency funds needed to restock federal supplies of COVID vaccines, therapeutics, and testing equipment. With COVID cases rising again in Europe, the Biden administration wants to prepare for a potential fourth wave here in the U.S. At first glance, the compromise legislation negotiated by Senate Majority Leader Chuck Schumer (D-NY) and Senator Mitt Romney (R-UT) seemed appealing as it included offsets that were both front-loaded and large—a welcome departure from the usual “spend-now-pay-later” approach of Congress (Figure 1). Our enthusiasm was short-lived, however, when Concord realized that one of the largest offsets is a mirage—the product of a stale scoring baseline.

Figure 1

The offset in question is the rescission of $2.3 billion from the Aviation Manufacturing Jobs Protection Program, a financial lifeline designed to preserve airline manufacturing jobs during the pandemic. It was created in last year’s $1.9 trillion American Rescue Plan Act (ARPA) and was allocated $3 billion in budget authority. The program had few subscribers, however, and when the deadline for applications passed on November 30, 2021, only $717 million had been obligated. Since there wasn’t any legal way for the Department of Transportation to obligate the remaining $2.3 billion, when President Biden’s Office of Management and Budget (OMB) published their new budget baseline on March 28, the aviation program accounts reflected zero available balance for FY 2022 and beyond, as was appropriate.

Legislation under consideration by Congress, however, abides by scores provided by the Congressional Budget Office (CBO) and for a variety of reasons, CBO is way behind schedule in producing its scoring baseline for 2022. It is still relying on its July 2021 baseline to estimate the budgetary contours of bills and amendments. That baseline, assembled prior to the aviation program application deadline, still shows money available to obligate in the aviation program (which, if rescinded, would produce budgetary savings). When CBO produces their 2022 scoring baseline the week of May 23, the aviation account will be adjusted to reflect the same zero balance as in the Biden administration’s baseline. Simply put: this offset is not real; it is merely the product of a stale baseline that has a shelf-life of six more weeks. 

It is quite possible that Senators Schumer and Romney were unaware of this when they assembled their compromise–no one is suggesting any nefarious motives–but they are aware now. Stories have appeared in Congressional Quarterly and Roll Call, and their offices have been asked to comment. They know and they have time to correct it.  

When announcing the compromise, Senator Romney said in his press release, “Importantly, this bill is comprised of dollar-for-dollar offsets and will not cost the American people a single additional dollar.” This statement is no longer true: Under a 2022 baseline, the compromise COVID legislation would add $2.2 billion to future deficits. Budget rules don’t allow outlay savings from rescissions of money that was never going to be spent. It’s like claiming proceeds from the sale of a home you no longer own.

Given the size of the federal budget (an estimated $5.5 trillion in FY 2022), $2.2 billion is an insignificant amount and it certainly won’t alter the trajectory of our deficits and debt. But because this amount is so small, it should also be easy to offset. If lawmakers fail this minor task, what signal are they sending about the hard choices we know lie ahead? How can we count on them to address the bigger policy challenges that are driving our deficits and debt to uncharted, unsustainable levels? .

The Senate recesses for two weeks on April 8, giving proponents of the bill and their staff ample time to find a legitimate substitute for the phantom aviation program savings. Senator Romney promised that the measure would “not cost the American public a single additional dollar” and we hope he and his colleagues will return to the negotiating table to fulfill these words.