Senator Daniel Patrick Moynihan, who I had the privilege to work for in the Senate, was famous for the truism that “everyone is entitled to their own opinions, but not their own facts.” He was also well known for insisting on the right metrics to evaluate progress in our nation, states, and cities. As we are bombarded by punditry on the first 100 days of the Administration, we would all benefit by focusing on the right metrics. The number of bills proposed or passed, the number of orders signed or overturned, or the number of promises checked off are the wrong metrics.
Every Administration and every Congress — regardless of the Party in power — should be judged by how its actions impact: the growth of America’s Middle Class; the opportunities for education, training and economic advancement; access to affordable healthcare; the stability and long-term health of our environment; the strength, openness, and vitality of our democracy and confidence in our democratic institutions; the security of our people, both domestically and internationally; and the advancement of democracy, stability, tolerance, and human rights globally. In this spirit, FedWeb.com will continue to provide nonpartisan, factual, and plain English updates on Federal #budget, #spending, #taxes, #debt, the #economy, #healthcare, #international-trade, and all things #Federal.
2017 Spending and Avoiding a Federal Shutdown:
Sunday night, congressional leaders reached a deal on an omnibus appropriations bill to fund the government for the remainder of FY 2017 (i.e. through September 30). On April 28, Congress sent a one-week continuing resolution (HJRes 99) to President Trump averting a government shutdown while final action is taken on FY 2017 appropriations.
Under the deal: (1) the Administration gets $15 billion in additional defense spending, $2.5 b of which is contingent on the President presenting to Congress a new plan to defeat ISIS; (2) the Administration gets $1.5 billion in additional homeland security funding, but no money for a US-Mexico border wall, punting that issue to FY 2018; (3) the requested $18 billion in non-defense cuts were rejected in total; (4) Congress added $2 billion in funding for the National Institutes of Health including the “cancer moonshot,” rejecting the Administration’s proposal to cut funding; (5) retired coal miners got a a permanent fix for their depleted health fund; (6) $295 million in stopgap funding is added for Puerto Rico’s Medicaid program; (7) $2 billion is provided for disaster relief for California, West VA, Louisiana, and North Carolina; (8) $407 million is added for wildfire suppression; (8) $100 million is added to combat opioid abuse; (9) nearly $1 billion is added for humanitarian assistance to alleviate famine; and (10) negotiators rejected proposals to strip federal funding from Planned Parenthood and withhold grants from “sanctuary cities.” Separately, the Administration has agreed to continue funding for Obamacare cost-sharing reduction (CSR) subsidies while the payments are challenged in the courts. Legislative text and summaries from Majority website Bill Summaries from Minority website
Health Care: ACA Repeal-and-Replace Bill
House GOP leaders continue efforts to secure the votes to pass a revised Obamacare repeal-and-replace bill, including an amendment crafted by House conservative Freedom Caucus Chairman Mark Meadows (R-NC) and centrist Tom MacArthur (R-NJ) allowing States to opt out of requirements to: (i) cover all persons with preexisting conditions and (ii) provide essential health benefits. Under the revised approach, States could opt out as long as they offer “high-risk pools” that aim to slow premium increases by moving sick people to a separate pool. The American Medical Association and American Hospital Association have announced their opposition, saying it would drive up costs for older, sicker Americans.
FY 2018 Budget: Balancing the Budget Requires $8 Trillion of Deficit Reduction
- The House Budget Committee is aiming to markup in May a Budget Resolution to balance the Federal budget in 10 years (by FY 2027). The math is daunting.
- Assuming the continuation of current Federal programs and policies, annual federal deficits are projected by the nonpartisan Congressional Budget Office to increase from nearly $500 billion in FY 2018 to $1 trillion in 5 years, and $1.4 trillion in 10 years.
- CRFB estimates that getting on a trajectory to achieve a balanced budget within 10 years would require $8 trillion of deficit reduction – spending cuts and/or tax increases.
- A more modest goal of stabilizing the debt at the current share of GDP – 77 percent – would require more than $3 trillion in spending cuts or tax increases.
- The math gets even more challenging if additional spending for defense, parallel increases in non-defense spending, $20 billion or more for a border wall, $1 trillion for infrastructure investment, and trillions in tax rate cuts are thrown into the mix.
- Adoption of the FY 2018 Congressional Budget Resolution is a necessary procedural step to launch a filibuster-proof “Budget Reconciliation” Tax Reform bill. Tax reform cannot proceed unless and until a Budget Resolution is adopted.
The Administration released on April 26, 2017 a one-page skeletal outline of “2017 Tax Reform for Economic Growth and American Jobs”.
The outline proposes “the biggest individual and business tax cut in American history,” and Treasury Secretary Mnuchin said the plan “will pay for itself with growth and reduced deductions.” However, the outline includes no Treasury revenue estimates and the revenue losses are certain to cost trillions of dollars over 10 years.
Without offsets, the plan will clash with the impending House GOP budget plan for FY 2018 which aims to balance the budget in 10 years, requiring more than $8 trillion dollars of spending cuts and/or tax increases. Adding the Trump tax proposal could add an additional $5 – $6 trillion to the cost of achieving balance. For approximate revenue estimates, see the nonpartisan Tax Policy Center analysis of candidate Trump’s tax plan and CRFB Fiscal FactCheck estimates.
Individual tax reforms in the Trump outline include major tax cuts for upper income taxpayers: cutting the top rate from 39.6% to 35% (about $1.5 tr), and repealing the 3.8% Net Investment Income Tax ($145 b), the Estate Tax ($174 b), and the Alternative Minimum Tax ($413 b). Provisions with broader taxpayer impact would double the standard deduction and provide unspecified tax relief for families with child and dependent care expenses. According to Mnuchin, most itemized deductions would be eliminated except for mortgage interest and charitable contributions.
Business tax reforms in the outline aim to reduce the corporate rate from 35% to 15%; and shift to a “territorial tax system” where only domestic profits would be taxed while profits from offshore would be tax-free, unlike the current system where taxes on off-shore profits are deferred, but taxed when brought back to the U.S.. The outline proposes to tax “trillions of dollars held overseas” but offers no details and makes no mention of using repatriation tax revenues for infrastructure–a trial balloon floated earlier in the year. Reduction of the corporate rate to 15% has been estimated by Tax Policy Center to cost $2.4 trillion in the first 10 years and $3.5 trillion in the second 10 years.
The procedural plan is to adopt in May a Budget Resolution for FY 2018 that will launch a filibuster-proof “Budget Reconciliation” bill to advance tax reform (and this could be delayed since it is unclear whether adoption of an FY 2018 Budget Resolution would terminate the FY 2017 budget process — under which the ACA repeal-and-replace Reconciliation bill is being considered).
Another consequence of using the filibuster-proof Budget Reconciliation process is the Senate’s “Byrd Rule” — which prohibits Reconciliation legislation increasing deficits in the out-years (i.e., years following the 10-year budget window). Under the Byrd Rule, either the tax cuts will have to be fully paid for by closing existing deductions and credits, or the tax cuts will have to expire at the end of 10 years (like the Bush tax cuts enacted in 2001). House Speaker Ryan has said he wants the bill permanent and paid for — but coming up with trillions of dollars in repealed deductions and credits will be very challenging.
Contrary to recent claims, passage of the healthcare legislation would not create savings that can be spent on tax reform. The only interaction of health care and tax reform is that failure of the repeal-and-replace bill might lead GOP leaders to attempt to repeal some of the Obamacare taxes in the tax reform bill, which would actually make tax reform more difficult by increasing the amount of revenue losses requiring offsets. Read more at: http://fedweb.com/update-and-outlook/