The House Budget Committee, led by Chairman Tom Price (R-GA), released its budget on Tuesday. This proposal cuts overall spending by at least $5 trillion over 10 years, cutting $400 billion more in spending than the harmful budget passed by the House last year. The budget slashes funds for critical human needs programs and would push millions of people into poverty or make them more deeply poor. The proposal cuts taxes by at least $1.5 trillion and claims to pay for that loss with unspecified other revenue increases. It also claims to balance the budget in 9 years, but only achieves this by assuming its policies will produce enough economic growth to generate more revenue, using controversial and highly uncertain estimates that many respected economists are skeptical of. Overall, the $3.8 trillion budget includes $1.017 trillion in discretionary spending in FY16: $523 billion for defense spending with an additional $94 billion for the global war on terrorism in Overseas Contingency Operations (with $4 billion going to State Department activities), plus $493 billion for non-defense discretionary spending.
Sequestration and defense spending: The House Budget Committee pretends to leaves sequestration caps in place for FY2016, but it increases Pentagon spending by upping the defense expenditures in the uncapped Overseas Contingency Operations (OCO) account to $90 billion (up from $64 billion this year and up from the President’s proposed $51 billion). The OCO fund is supposed to fund war-related activities, but has repeatedly been used by the Pentagon to cover non-war-related items, effectively avoiding much of the impact of sequestration cuts. After the first year, the Committee’s proposal directly increases defense spending, without resorting to the OCO ploy. Over 10 years, defense spending increases by $387 billion in this budget. An amendment by Rep. Rokita (R-IN) to increase OCO funding by an additional $2 billion without offsets caused a showdown between defense hawks and deficit hawks on the Budget Committee. This effort was postponed and will likely come up again next week when the budget resolution goes to the House floor.
Non-Defense Discretionary Spending Programs (those programs subject to the annual appropriations process): The budget slashes critical human needs programs by $759 billion below the already-painfully-low sequester caps over 10 years starting in FY17. The Obama Administration has estimated that if these cuts were applied proportionately across domestic discretionary programs, they would, to name a few examples, result in 35,000 fewer children in Head Start; $1.2 billion less spent in Title I education funding for low-income K-12 schools (equal to eliminating the jobs of 17,000 teachers and aides); $347 million cut from special education (IDEA) funding (equal to cutting out 6,000 special ed teachers and other staff); and 133,000 fewer low-income families receiving rental housing vouchers.
Mandatory Spending Programs (those programs not subject to the annual appropriations process): The budget ‘unifies’ Medicaid and the State Children’s Health Insurance Program (SCHIP) and turns them into a block grant (called “state flexibility funds” by Rep. Price). SNAP/food stamps is also converted to a block grant starting in 2021. Block grants make it easier to cut these programs without saying how many people would be dropped or how their benefits would be cut, since that would be left to states, forced to operate programs with less money. Medicaid is cut by $913 billion over 10 years, while SNAP/food stamps is cut $125 billion. It turns Medicare into a voucher program (called a “premium support program” by Rep. Price) starting in 2024 and cuts Medicare funding by $148 billion over 10 years. It also cuts unspecified “Other Mandatory” programs by $1.1 trillion over 10 years. In particular, it freezes the maximum Pell Grant award, rescinds work requirement waivers in TANF, and takes money away from Americans who qualify for both disability insurance and unemployment insurance.
Affordable Care Act: The budget calls for a complete repeal of the Affordable Care Act, including Medicaid expansion. This would take away health insurance from millions of Americans, many of whom are low-income and recently obtained insurance for the first time. The ACA has been estimated to save billions, taking both its revenue increases and spending into account, but this budget estimates a savings of $2 trillion by repealing the program.
Taxes: The budget calls for comprehensive tax reform but includes few specifics. It does call for a repeal of the Affordable Care Act taxes and the Alternative Minimum Tax (AMT), which is designed to ensure that higher-income people pay at least some base level of tax. The cost of getting rid of the ACA revenues and the AMT are estimated at $1.5 trillion; the budget assumes still more unspecified tax rate reductions, but says it all will be made up by other tax increases. It also call for unspecified cuts in personal and corporate taxes that some say would result in tax cuts to millionaires and billionaires of $50,000 to $200,000 each. However, taxes would go up on working low-income families, as the budget allows expansions of the Earned Income Tax Credit and Child Tax Credit to expire, pushing 16 million people into poverty or making them more deeply poor. For more on taxes, see this piece from the Center on Budget and Policy Priorities.
Reconciliation: The budget includes reconciliation instructions to 13 House committees, which requires these committees to come back with legislation that would produce savings (usually by cutting spending in programs under their jurisdictions) for at least the amount specified in the instructions. The required savings varies by committee. The committees are also instructed to search for ways to repeal the Affordable Care Act. The committees would have until July 15 to submit such proposed legislation to the House Budget Committee. These requirements are only binding if the House and Senate agree on a joint budget resolution. Reconciliation bills cannot be filibustered in the Senate and therefore only need 51 votes to pass. In addition, unlike the budget resolution itself, bills drafted as a result of reconciliation instructions have to be signed into law by the President and therefore are subject to a possible veto.
Other: The budget prevents the transfer of funds from the Social Security Trust Fund to shore up the Social Security Disability Insurance (SSDI) and offers no solutions to the solvency problem facing SSDI. If left unresolved, the SSDI shortfall will require approximately 20 percent benefit cuts in about a year. It also calls on Congress to pass a balanced budget amendment. It does not include proposals for increased spending on infrastructure, job creation, paid leave initiatives, or immigration.
This graph from the Center on Budget and Policy Priorities provides a nice summary of the House Budget Committee budget resolution.
Categories: Budget and Appropriations