Author: thebudgetguy

Congress Could Use The Budget Process To Stop Trump’s Child Separation Policy

The House and Senate could use the congressional budget process to stop or at least express its strong displeasure over the Trump administration’s policy to separate children from their parents, especially if an immigration bill can’t be enacted.

This post was triggered by this tweet this morning from Emily Holubowich, executive director of Coalition for Health Funding and a self-professed federal budget nerd.

From a strictly procedural point of view (I am not at all minimizing the morality and humanity of Trump’s actions), this is the exact right question: Where’s Trump getting the money to spend on this if dollars weren’t appropriated for it in the fiscal 2018 omnibus appropriation enacted in March?

And why aren’t the House and Senate Appropriations Committees asking this question?

Federal departments and agencies typically have some limited discretion to move money around by transferring and reprogramming funds from one account to another. But that usually requires at least the tacit approval of the appropriations committees.

At least in theory, therefore, these committees could tell the federal departments that are implementing the Trump child separation policy that the use of other funds for this purpose isn’t acceptable.

The appropriations committees could also:

  1. Compel the secretaries of the departments of Homeland Security and Health and Human Services to testify at what would be extremely difficult hearings that would be embarrassing (to say the least) for the White House.
  2. Include language in the fiscal 2019 appropriations now working their way through the legislative process that prevents any funds from being used for child separation.
  3. Reduce funding for these departments if the appropriations committees are ignored.
  4. Include language in the fiscal 2019 continuing resolution that will be needed by October 1 preventing any funds from being used for child separation.

This could all be futile. The cabinet secretaries could refuse to testify and Trump almost certainly would veto appropriations or a CR with this prohibition (although the votes could easily exist to override).

In addition, given the Trump administration’s already demonstrated willingness to ignore federal budget laws when it wants, there’s no guarantee whatsoever that it would let a congressional prohibition on spending funds stop it from doing what it wants.

Congress isn’t likely do any of these things. The appropriations committees long ago ceded their authority as federal spending watchdogs and the GOP House and Senate majorities haven’t yet demonstrated any willingness to take on Trump on this issue.

But the path is definitely there if the situation changes.

 

 

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Congress Will Never Again Obey The Budget Laws

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The Joint Select Committee on Budget and Appropriations Process Reform that Congress created earlier this year to redo the budget process is on an absolute fool’s errand and should immediately stop what it’s doing.

Even if the committee of eight Republicans and eight Democrats manages to agree on something meaningful (which is highly doubtful), it won’t be acceptable to the full House and Senate.

And even if the committee comes up with something meaningful that passes the House and Senate and is signed by Donald Trump (which is even more doubtful), it will never be implemented as written, intended and promised because:

  1. Congress won’t want to.
  2. Congress won’t have to.
  3. The new process will be politically out-of-date from the moment it’s enacted.

This isn’t innovative analysis; It requires nothing more than understanding the actual history of congressional budgeting over the past 50 years.

The Congressional Budget and Impoundment Control Act, which has long been venerated by budget wonks (myself included), ran into almost immediate trouble after it became law in 1974 when the same overwhelming majorities that adopted it realized they didn’t actually want to do what the law required.

House Speaker Tip O’Neill (D-MA) forced the budget act to be implemented that first year. Whether or not Congress would comply with it since then has been an open question each year with the House and/or Senate often simply refusing to do some or all of what the law required.

This year is a perfect illustration. The Congressional Budget Act (It’s been amended multiple times but is still in effect) legally requires Congress to adopt a budget resolution for fiscal 2019 by April 15.

But there has been no formal attempt by either budget committee to draft one. And even if, as is rumored, the House Budget Committee does try to produce a 2019 budget resolution this week (1) it will still be months late, (2) there’s absolutely no guarantee the full House will take up what the budget committee passes, (3) there’s even less of a guarantee the full House will adopt it and (4) neither the Senate Budget Committee nor the full Senate so far have shown any interest in considering any budget before the 2018 election.

This year is also a perfect illustration of why Congress is refusing to comply with the budget law: Neither House Speaker Paul Ryan (R-WI) nor Senate Majority Leader Mitch McConnell want to force their members to vote for a budget that will project permanent trillion-plus dollar deficits and certainly don’t want Republicans to embarrass the leadership by defeating something it wants.

Congress also has little-to-no fear of political or legal retribution for not complying with the budget laws.

Voters don’t seem to care at all about whether Congress follows its own budget procedures. It’s also not clear who would have standing to sue the House and Senate to do what the Congressional Budget Act requires or that the courts would consider what is obviously a very political issue.

On top of everything else, new budget processes and budget deals are only good for the  moment in time when they’re adopted. When that moment passes, the political problem Congress and the White House were trying to solve with that agreement is over.

For example, the 2012 budget deal created caps on spending that looked politically smart at the time but have been repeatedly revised since because the strict limits became unacceptable.

Gramm-Rudman-Hollings — the Balanced Budget and Emergency Deficit Control Act — was enacted in 1985 and then revised two years later when it’s restrictions became politically unpalatable.

And the revised version of GRH — the Balanced Budget and Emergency Deficit Control Reaffirmation Act — was itself revised three years later when even its relaxed restrictions were again deemed to be politically impossible.

All of this means that if the joint select committee comes up with something it most likely will only be politically appropriate for that one moment. The new process will then be instantly derided and not followed by a House and Senate that sees more political harm doing rather than no doing what’s required. Virtually no one on Capitol Hill will be even slightly worried about any consequences.

The words “Why bother?” immediately come to mind.

 

 

 

You’ve Been Warned: Trump’s Trillion Dollar Budget Deficits Are Here To Stay

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That there will be trillion dollar budget deficits almost every year of the Trump administration and beyond isn’t a secret.

Long before the Congressional Budget Office became the first federal agency to project them officially, many of us who follow this closely (here and here, for example) were saying that $1 trillion or higher annual budget deficits had become a real thing.

What doesn’t seem to have registered is that the Trump trillion dollar budget deficits are not short-term aberrations: They’re here to stay.

According to CBO, the deficit this year will be $804 billion and will rise to $981 billion next year and $1 trillion in 2020. CBO then projects that it will keep rising through the end of the 10-year projection window until it hits $1.5 trillion in fiscal 2028.

These projections are based on current law, which says that many of the tax cuts enacted in 2017 expire as the Tax Cuts and Jobs Act requires. If, as many expect, the law is changed so that none or only some of the provisions are allowed to expire, the revenue loss will be even greater and the deficits even larger.

CBO’s projections are also based on solid economic growth. Although CBO’s forecast is less rosy than what the Trump administration used in its budget, it still assumes that what is already the longest economic expansion in U.S. history will last another 10 years. Slower economic growth or a downturn will obviously increase the deficit even further.

As a result, CBO’s already-unprecedented projected trillion dollar-plus deficits should be considered as the best-case scenario. It’s actually more likely that the deficit will reach $1 trillion at least a year earlier in 2019, that is, next year.

Before the trolls come out to play…yes, there were four consecutive trillion dollar budget deficits (see table 1.1) during the Obama administration from 2009 to 2012. It reached the current all-time high of $1.4 trillion in fiscal 2009.

But the Obama trillion dollar deficits declined precipitously once the economy began to recover. From 2012 to 2013, the deficit fell from $1.2 trillion to $720 billion and stayed below the trillion dollar level every year thereafter.

By contrast, the Trump budget deficits are projected to hit $1 trillion and keep rising every year over the next 10 years.

But what’s most important is that, no matter what Office of Management and Budget Director Mick Mulvaney or any elected official may tell you, there’s not much that Congress and the White House will be willing to do about this.

Theoretically, of course, the deficit could be reduced or even eliminated entirely with legislated tax increases or spending reductions, or the U.S. economy could grow faster than expected and revenues could automatically flow into the Treasury while spending decreased.

But what could happen in theory for mostly political reasons isn’t at all likely in reality.

The existing national debt is going to be refinanced at higher interest rates in the months and years ahead so the interest payments will be rising. In addition, the new Trump trillion dollar deficits will add substantial additional debt to the government’s already significant borrowing so the legally untouchable interest payments will be even higher.

There’s no tax increase on the horizon. Period.

The trillion dollar deficits are already based on high economic growth.

In the current hyper-partisan environment, military spending is uncuttable.

That same hyper-partisan environment makes Social Security, Medicare and Medicaid almost as uncuttable.

The incontrovertible coming demographic changes mean that spending for Social Security, Medicare and Medicaid will increase under current law.

All of this means the estimated $724 billion in 2019 domestic appropriations (take a look at table 2.4 here) would have to be almost completely cut to substantially reduce the deficit. But at least half of that is nuts and bolts domestic programs (National Institute of  Health, National Cancer Institute, federal jails, national parks, veterans, etc.) that are more likely to be increased rather than cut. Congress so far has shown little inclination to reduce much of the rest.

And this doesn’t even include Trump’s wall between the U.S. and Mexico, an infrastructure program or any other new proposal that could add billions more to the deficit each year.

That points directly to just one conclusion: Trump’s trillion dollar budget deficits are permanent changes in the United States’s fiscal future.

OMB Director Mulvaney Commits Multiple Sins On IRS

Part-time Office of Management and Budget Director Mick Mulvaney (He’s also acting director of the Consumer Financial Protection Board) committed big sin of omission in this letter he sent Tuesday to House Appropriations Committee Chairman Rodney Frelinghyusen (R-NJ) about the extra funding being provided to the Internal Revenue Service.

The letter states that the Trump administration “appreciates” the additional spending. It goes on to say “…every dollar invested in tax enforcement would, over time, reduce the deficit by at least five dollars.”

I added the emphasis in the above quote because it points directly to what Mulvaney isn’t saying: This is going to result in lower federal revenues and a higher budget deficit over at least the next few years and possibly forever.

This was explained to me years ago by Roscoe Egger, Ronald Reagan’s first IRS commissioner, when we both worked at what was then called Price Waterhouse (Now PWC).

First, the extra dollars IRS receives by themselves will increase federal spending and the deficit.

Second, it will take IRS close to a year to hire the additional employees and there will be recruitment costs.

Third, the new employees will need be trained and that typically takes an additional one to two years.

Fourth, IRS typically uses its best auditors and other staff to do the training. That reduces current productivity and revenue collection.

In other words, there will be no additional revenue for at least three to four years. In fact, if enforcement activity goes down because of the training, there could (or will) be less.

Fifth, although Mulvaney mentions that the additional funds are for “tax enforcement,” the White House really wants a higher appropriation so IRS can draft the regulations for last year’s big tax cut — which lowers rather than raises revenues — faster.

One final note. Mulvaney’s claim in the letter that every addition dollar spent (he says “invested”) would “reduce the deficit by at least five dollars” at best is highly questionable. Unlike the one noted above, this is a Mulvaney sin of commission.

 

 

Fasten Your Seat Belts: It’s Going To Be A Very Bumpy Rest Of The Year In Washington

In the midst of all of the tweet storms, special counsel and criminal investigations, deep state conspiracy paranoias, off and on summits, tariffs imposed on our allies and multiple pardons, it’s easy to forget that Congress and the White House still have routine legislative responsibilities — like appropriations — that will need to be completed over the next few months.

These legislative responsibilities could include the most contentious domestic issues the Republican-controlled Congress and Trump administration will have to deal with all year such as Planned Parenthood, immigration, a wall between the United States and Mexico and multiple highly contentious domestic spending cuts.

Each one’s political significance will be greatly magnified by the very narrow GOP Senate majority, the hyper-partisanship, a lame duck speaker, almost 50 GOP retirements in the House, an abandoned budget process, a very unpredictable president and an extremely high stakes congressional election that’s only five months away.

In other words…To paraphrase Betty Davis in “All About Eve,” Fasten your seat belts, it’s going to be a bumpy rest of 2018 in Washington.

According to Congress.gov, as of today, none of the 12 funding bills for fiscal 2019 have passed Congress.

It’s not unusual for no appropriations to be approved by now. But there’s usually more time between June and when the fiscal year begins on October 1 for Congress to do what needs to be done than there will be this year.

If the published schedules aren’t changed, the House now only plans to be in session for 35 more days before fiscal 2019 begins; the Senate only expects to be in session for 51 days, although Majority Leader Mitch McConnell (R-KY) indicated last week that some or all of the Senate’s August recess will be cancelled.

But 35, 51 or some other number very likely overstates the actual amount of time that will be available for legislative work given Congress’s tendency not to take many votes on Mondays and Fridays.

This very limited about of time would be problematic in a good year if House and Senate Republicans were working together, the House Freedom Caucus wasn’t making Speaker Paul Ryan’s (R-WI) final days as speaker miserable as it did on the recent agriculture bill and the president wasn’t demanding funds for a wall that Congress has refused to provide multiple times.

But with all of these things happening, the very limited amount of time that’s left makes “problematic” into the best-case scenario this year.

It also makes yet another continuing resolution – which in recent years has become the unfortunate but very standard operating procedure on Capitol Hill — an almost sure bet to be needed to prevent a government shutdown just before the election.

And because CRs can be filibustered, that will give Senate Democrats influence over a short-term funding bill that, with their changes, isn’t likely to be acceptable to the House Freedom Caucus or the White House.

In theory, Trump should want to do what Ryan and McConnell want: put a CR in place as early as possible so Congress can recess quickly and GOP incumbents running for reelection have as much time as possible to defend their seats.

In fact, Ryan and McConnell should be seriously considering doing a continuing resolution before the start of the August-Labor Day recess that will keep the government operating through the lame duck session so Congress can stay home in September as well.

But Trump is more likely to view his own congressional leadership’s strong desire to recess before the election as something that gives him leverage to get his wall rather than as a way to make continuing GOP House and Senate majorities more certain.

Add to that the extreme displeasure from conservative commentators after he signed the 2018 omnibus appropriation in March and the fact that healthcare and immigration are hot button issues for the White House, congressional Republicans and Democrats, having a CR in place in time to prevent a government shutdown has to be considered anything but certain.

But even if a continuing resolution is enacted by October 1, the road to get there will be anything but smooth. It is likely to set the new bar for bumpy rides in Washington.

Trump Again Shows He’s All Talk On The Deficit And Debt

The “rescission”’ bill the GOP-controlled House of Representatives passed Thursday night is the just latest example of what Donald Trump thinks of anything and everything related to the federal budget: It’s just one big public relations stunt.

According to the superlative-loving Trump, this rescission – a presidential proposal for Congress to “unappropriate” previously enacted spending – is the biggest ever requested by any president.

But that’s only true if, as he’s doing, Trump takes credit for the bill’s unreal and unrealistic top line…what budget wonks call “budget authority.”

Trump is actually mostly proposing to cut appropriations that were never going to be spent anyway. Even if its enacted, the real impact of the Trump rescission on the federal deficit and national debt will be about 93 percent less than he’s claiming, or only about $1 billion.

A billion dollars is definitely worth saving. But even this much smaller amount overstates the savings from the Trump proposal because it’s not going to be enacted. The Senate GOP leadership has already indicated it has no plans to consider the rescission bill and the legislation would face a virtually certain filibuster anyway if were debated.

That means the most likely impact on the federal deficit and national debt from the Trump rescission plan is…wait for it…$0.

This most recent fiscal escapade is just latest in what has already become a steady series of total budget stunts by the Trump administration.

For example:

Trump’s first fiscal 2018 “budget” only covered about one-third of all federal spending, didn’t mention revenues, didn’t project the deficit or debt and didn’t even include an economic forecast. Not surprisingly, it was ignored by Congress.

Trump’s first full 2018 budget, which was released with lots of fanfare, was also ignored by the Republican House and Senate when the White House walked away from it just a few days after it was released.

The fiscal 2019 budget Trump sent to Congress earlier this year was abandoned so quickly by the White House that it wasn’t even a topic of discussion on that weekend’s political talk shows.

And who could ever forget the spectacle from this past March when Trump signed the fiscal 2018 omnibus appropriation and then minutes later angrily announced that he should have never done it.

That brings us back to the rescission bill stunt.

In response to harsh criticism on Fox News and elsewhere, Trump promised that he would look into ways to cut the domestic spending in the 2018 omnibus appropriation his signature had just enacted. The rescission bill was supposed to be just that: reductions in the spending that bill provided.

But it wasn’t.

In spite of Trump’s post-signing tantrum, his rescission proposals didn’t touch even a dollar of what was included in the omnibus. As noted above, he instead proposed totally meaningless cuts to other programs and then took credit for what he said is a historic budget achievement that in reality is anything but significant.