The Bottom Line

March 21, 2016

The Fiscal Year (FY) 2017 House budget resolution that advanced out of the House Budget Committee last week keeps up the recent tradition of targeting a balanced budget within ten years. To do so, the budget claims $6.5 trillion of policy savings, a number that is notably less than the $8 trillion we previously said would be needed to balance the budget by 2026. Upon closer inspection, though, the House budget ends up in about the same place that we did. Here's how.

Our $8 trillion number uses the Congressional Budget Office's (CBO) January budget projections as the baseline. The House budget, by contrast, makes a few adjustments to that baseline that it does not count in the savings. The first is that it assumes a drawdown of war spending after FY 2017 from $74 billion to $27 billion per year from 2018-2021 and zero after that. The second is that it assumes economic effects of $194 billion in reduced deficits from last December's tax deal, of which $150 billion comes from increased revenue and $44 billion comes from decreased outlays. The deal came after CBO had already prepared its economic forecast for the January baseline, and the agency said that when those effects were incorporated, it could add $100-$200 billion to revenue. These two adjustments (plus a minor adjustment to remove FY 2016 emergency spending from the baseline) reduce deficits by $900 billion over ten years.

March 18, 2016
How House Republicans Could Attract Bipartisan Support on Entitlement Savings

Maya MacGuineas, president of the Committee for a Responsible Federal Budget and head of the Campaign to Fix the Debt, wrote a commentary that appeared in the Wall Street Journal Washington Wire. It is reposted here.

March 16, 2016

The Fiscal Year (FY) 2017 House budget resolution released yesterday contains ambitious promises of deficit reduction to balance the budget within ten years. To take a step toward achieving those savings, the budget includes two different sets of instructions to committees to achieve deficit reduction. It also includes several budget enforcement or process reforms that attempt to keep lawmakers from worsening the fiscal situation. Here's a rundown of those proposals.

The first part involves instructions to five committees – Agriculture, Energy and Commerce, Financial Services, Judiciary, and Ways and Means – to save at least $30 billion over two years and $140 billion over ten years. This process already began last week with the Energy and Commerce and Ways and Means Committees releasing packages that would get most of the way there themselves. The budget resolution specifically mentions recovering exchange subsidy overpayments, eliminating enhanced Medicaid payments for prisoners, and ending Medicaid eligibility for lottery winners as policies that can be included – and all were already in the two packages.

The second part involves reconciliation instructions to 12 committees to achieve at least $1 billion of savings over ten years. The budget resolution describes these instructions as "a down payment on the deficit reduction necessary to achieve a balanced budget by fiscal year 2026," so this will likely be the biggest avenue to achieving some portion of the savings that the budget promises.

March 16, 2016

The Overseas Contingency Operations (OCO) designation has often been used to circumvent spending limits, and the budget resolution released by House Budget Committee Chairman Tom Price (R-GA) is no exception.

The budget goes beyond what the Bipartisan Budget Act of 2015 already did to explicitly rely on OCO to backfill the normal defense budget. Even more troubling, the budget appears to greenlight Fiscal Year 2017 appropriations that would underfund true war-related spending needs, setting the stage for a supplemental appropriations request next year to cover the shortfall.

Because the statutory limits on discretionary spending are automatically increased by the amount of spending designated as OCO spending, it is effectively exempted from spending limits. The OCO designation creates a loophole to circumvent discretionary spending limits when regular funding in the base defense budget is designated as OCO.

For many years, this loophole was used in small ways, with Congress providing slightly less than the administration requested for OCO needs and funding some items in the base defense budget through OCO to keep total spending in line with the administration’s request.

The bipartisan budget agreement last year relied on a much larger and more blatant use of the OCO gimmick to backfill both the defense and non-defense budget. The agreement called for OCO spending of $74 billion in Fiscal Years 2016 and 2017, $15 billion more than the President’s request for OCO in FY 2016. The increased spending above the caps was divided evenly between defense and international affairs function, effectively freeing up room to backfill the defense and non-defense appropriations by $7.5 billion in each of those years.

The President requested $74 billion for OCO for FY 2017, with $10 billion split equally to backfill non-war defense and international spending and the remainder for legitimate OCO needs. The budget resolution released by Chairman Price sets OCO spending at $74 billion, but supporting materials explicitly assume $23 billion of the OCO allocation is used to backfill regular defense needs. By increasing the amount of normal defense funding provided through the OCO designation while keeping the same total amount for OCO, the budget is effectively underfunding true OCO needs requested by the Defense Department by $18 billion.

March 15, 2016

House Budget Committee Chairman Tom Price (R-GA) today released the FY 2017 House budget resolution to formally kick off the Congressional budget process. The budget proposes about $6.5 trillion of spending reductions, which along with a war draw down, economic effects, and interest would lead to $7.9 trillion of total savings -- enough to balance the budget by 2026.

March 14, 2016

All of us at the Committee for a Responsible Federal Budget are deeply saddened by the loss of former Congressman Martin Sabo, a dedicated member of our board and an exemplary public servant throughout his 28 years of service in the House of Representatives.

In an era of partisanship, Congressman Sabo represented the people of Minnesota and the country with remarkable grace, dignity, and civility. His unmatched kindness and unwavering commitment to bipartisan cooperation made him not just an outstanding legislator, but also a decent man. 

March 14, 2016

Republican presidential candidate Donald Trump recently released a health care reform plan entitled “Healthcare Reform to Make America Great Again.” This plan has two major components. First, it would fully repeal the Affordable Care Act (“Obamacare”) and replace it with several new policies. Second, it would turn Medicaid into a “block grant” program.

March 14, 2016

Last week, two House Committees, Ways and Means and Energy and Commerce, released a package of bills that would reduce mandatory spending. The bills, which mostly contain policies included in a 2012 sequester replacement bill, would save a combined $123 billion over ten years. The Energy and Commerce legislation will be marked up next today, and the Ways and Means Committee may act as soon as this week.

The W&M package contains three separate bills. The first would require taxpayers claiming the refundable portion of the child tax credit to provide a Social Security number, which would save $4.8 billion over two years. The second bill requires taxpayers to repay any overpayments of health insurance subsidies; current law limits repayments to $300-$1,250 for singles and $600-$2,500 for married couples who make below 400 percent of the poverty line. This policy would save $8.7 billion over two years. The third bill would eliminate the Social Services Block Grant, which would save $3 billion over two years.

The Energy and Commerce package is one bill with five different policies:

  • Limiting Medicaid eligibility for lottery winners by counting winnings as income beyond the month they win.
  • Eliminating enhanced Medicaid matching for prisoners.
  • Reducing the Medicaid provider tax threshold, which limits how much revenue states can raise from providers to finance their Medicaid program, from 6 percent to 5.5 percent.
  • Eliminating the increased matching rate for the Childrens' Health Insurance Program (CHIP) contained in the Affordable Care Act
  • Eliminating the Prevention and Public Health Fund
March 11, 2016

As House Republicans continue to discuss the Fiscal Year (FY) 2017 budget resolution, Rep. Tom McClintock (R-CA) has recommended budget process reforms in exchange for supporting the budget with FY 2017 discretionary spending of $1.070 trillion, as agreed to in the Bipartisan Budget Act of 2015.

March 10, 2016
Candidates' Numbers Must Add Up

Marc Goldwein is the Senior Vice President and Senior Policy Director of the Committee for a Responsible Federal Budget. He wrote a guest post that appeared on the RealClearPolicy blog. It is reposted here.

March 10, 2016

Progress on policies to slow the growth of health care spending is expected to be slow in an election year, but this week, the Center for Medicare and Medicaid Services (CMS) announced a proposed rule to test new ways to pay providers or charge beneficiaries for outpatient drugs in Medicare Part B, including testing a proposal we put forward in our PREP Plan last year. These payment model tests, which will be run by the Center for Medicare and Medicaid Innovation (CMMI) created in the Affordable Care Act, intend to encourage more efficient and effective use of outpatient drugs by correcting some of the flawed incentives in the current system. This announcement is a step forward in encouraging more efficient health care delivery, and hopefully at least some of these strategies will prove useful enough to be expanded on and produce significant budgetary savings in future years.

The tests will come in two steps. The first step involves changing the formula for reimbursing physicians to administer outpatient drugs, which is currently set at the average sales price (ASP) of the drug plus a 6 percent add-on payment. This formula may encourage physicians to use more expensive drugs since the add-on payment grows with the cost. The new model that would be tested starting late 2016 would change the add-on payment to 2.5 percent of the ASP plus a flat fee of $16.80 (which would be indexed for inflation in future years). This would reduce the incentive to use more expensive drugs; for example, the difference in the add-on payment for a $5 drug and a $1,000 drug is currently $59.70 but would be reduced to $24.87 under the new formula.

This policy is similar to one we proposed in our PREP Plan, though our policy would have converted the entire add-on payment to a flat fee and would have saved $10 billion over ten years. It is also similar to an option the Medicare Payment Advisory Commission (MedPAC) evaluated, with them saying that "A flat-fee add-on may help address concerns about reimbursement for very inexpensive drugs." The CMS policy is intended to be budget-neutral on a static basis assuming no change in physician behavior, but it would produce savings if physicians used less expensive drugs in response to the change in incentives. An analysis of a proposal to convert the entire add-on payment to a flat fee found savings of $4 billion over ten years as a result of the shift to lower-cost drugs.

March 10, 2016
Experts to Explain Fiscal Impacts

Update: The event is now over, and a recording of the video will be available soon.

March 8, 2016

As the 2016 Presidential primary season rolls on, CRFB continues to fact check the candidates on budget-related statements made during the campaign on our Fiscal FactCheck site. Within the past month, we have fact checked four statements, all related to federal spending. Below is a summary of each of them.

Reducing Fraud Would Make Social Security Solvent

At the February 13 Republican presidential debate in South Carolina, Donald Trump stated that he would make Social Security solvent by reducing waste, fraud, and abuse in the program, citing thousands of 106-year-olds on the program who likely do not exist. We noted that only a tiny fraction of Social Security beneficiaries were found to be deceased and only 13 Social Security beneficiaries were over age 112. Even eliminating all improper payments would save just a small fraction of what would be needed to ensure solvency. Thus, we found that Mr. Trump's statement was false.

Our Rating: False

March 4, 2016
Candidates' Budget Plans Don't Add Up

Marc Goldwein is the Senior Vice President and Senior Policy Director of the Committee for a Responsible Federal Budget. He gave an interview to the Orlando Sentinel that appeared online. It is reposted here.

A budget analyst says presidential candidates aren't being realistic about deficits and debt.

March 4, 2016

House Members appear to be resolving a disagreement over what this year’s discretionary spending cap should be. Some House Republicans have been asking Congress to retroactively pay for the $30 billion increase in the FY 2017 discretionary caps that was authorized in last year’s Bipartisan Budget Act (BBA), which we have shown only truly offset half of its spending. According to press reports, mandatory savings are being identified to offset the $30 billion in sequester relief.

Regardless of the reason, we welcome the use of reconciliation instructions to reduce mandatory spending since the debt remains on an unsustainable course and 88 percent of non-interest spending growth over the next decade will come from the mandatory portion. Much of the discussion surrounding potential mandatory savings assumes that it even if it passes the House, it would have little chance of becoming law. But proposals with bipartisan appeal are available, and we need to look no further than the President’s budget for such mandatory savings ideas that could be enacted this year.

March 3, 2016

Alan Auerbach of the University of California-Berkeley and William Gale of the Tax Policy Center recently published a report, "Once More Unto the Breach: The Deteriorating Fiscal Outlook" that details their own budget outlook. Their findings are similar to the projections put out by the CBO, which shows debt increasing almost continuously after this year. The report also shows how different policy assumptions would affect the path of long-term debt.

Auerbach and Gale show debt to be on a continuous upward path from 76 percent of GDP in 2016 to 93.6 percent by 2026 (compared to the CBO estimate of 86 percent in 2026). Auerbach and Gale’s projections are similar to our alternative outlook, which shows debt reaching 92 percent in 2026. Like us, they assume that temporary tax cuts are made permanent, the health care taxes that were delayed in last year’s tax deal are repealed, and discretionary spending is increased above sequester levels.

February 29, 2016

Senator Ted Cruz's campaign promises to date would cost more than $12 trillion over a decade, according to the central estimate calculated as a part of our Fiscal FactCheck project. As a share of the economy, debt under these policies would grow from roughly 75 percent of Gross Domestic Product (GDP) today to 131 percent of GDP in 2026 (compared to 86 percent of GDP under current law).

February 24, 2016
Tough Choices: The Next President Must Campaign Responsibly On Fiscal Issues

Maya MacGuineas, president of the Committee for a Responsible Federal Budget and head of the Campaign to Fix the Debt, wrote an essay for the University of Virginia's First Year Project, a series of essays on fiscal policy for the next President's first budget. It is reposted here.

February 23, 2016
Lessons From a Coming Recession

Judd Gregg, a former Republican senator from New Hampshire, served as chairman of the Senate Budget Committee from 2005 to 2007 and ranking member from 2007 to 2011. He recently wrote an op-ed featured in The Hill. It is reposted here.

February 23, 2016

Senator Ted Cruz (R-TX) has released a comprehensive plan to increase defense spending. We've calculated the cost of the campaign's statements as a part of our Fiscal FactCheck project and found that these defense increases would cost $2.4 trillion over the next ten years.

Read the full explainer on our Fiscal FactCheck website.

 

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