Why the President's Last Budget Will Matter

With the release of the President's FY 2017 budget, it is common for reporters and observers to say that the budget is dead on arrival on Capitol Hill or ultimately won't matter. The sentiment is understandable considering that Republicans control Congress, and there is little prospect for major legislation this year, but it misses the mark a bit. There are a few different ways that the President's budget can still be relevant even if they are less high-profile than Congress agreeing to pass major parts of the President's agenda.

For one, President's budgets are relevant each fiscal year in appropriations negotiations. Especially in recent years, when the government has been funded in one fell swoop in omnibus bills, the budget serves as a starting point for appropriators who have to consider many issues at the same time and can fall back on budgets that agencies across the government have developed over many months. This will definitely be the case this year, since the budget does not change the spending caps that will be in effect for FY 2017, so appropriators will likely be working off the same overall funding levels the President used.

But even mandatory spending and tax policy changes can be adopted under circumstances that would not seem politically favorable to them. For example, many policies proposed by former President George W. Bush in his final budget (FY 2009) were adopted by lawmakers even though they were for the most part enacted during the Democratic-controlled 111th Congress. Specifically, they used many of President Bush's health care savings policies to offset the cost of the Affordable Care Act. And among policies that have not been enacted, there are still others that continue to show up in President Obama's current budget.

The list below shows policies in President Bush's FY 2009 budget that were subsequently enacted or proposed by President Obama in the FY 2017 budget (this includes partial policies or ones that are very similar in concept). Both the legislation they were included in and the budgetary effect originally estimated in the FY 2009 budget (where available) are in parentheses. Note that this does not include extensions of temporary policies, which would include things like the 2001/2003 tax cuts and several tax extenders.

Enacted

  • Phase out indirect medical education (IME) payments from Medicare Advantage (Medicare Improvements for Patients and Providers Act of 2008)
  • Reduce updates for inpatient hospitals, outpatient hospitals, hospices, and ambulance services by 0.65% (Affordable Care Act of 2010 (ACA)) ($275 billion)
  • Freeze income-related Part B premium thresholds and apply income-related premiums to Part D (ACA) ($30 billion)
  • Reduce Federal Upper Limit for Medicaid drug payments (ACA)
  • Adjust payments for never events (ACA)
  • Create hospital value-based purchasing program (ACA)
  • Adjust Disproportionate Share Hospital payments to better align with cost of care (similar concept enacted in ACA, extended several times)
  • Trigger 0.4 percent Medicare cut for each year Medicare funding warning is issued and not acted on (similar in concept to the Independent Payment Advisory Board enacted in the ACA)
  • Require information reporting on payments to corporations greater than $600 (ACA) (Part of other information reporting requirements that saved $36 billion)
  • Require disclosure of value of employer health insurance coverage on W-2 (ACA)
  • Phase out bad debt reimbursements to hospitals (reduced in the Middle Class Tax Relief and Job Creation Act of 2012) ($23 billion)
  • Reform Pension Benefit Guaranty Corporation premiums to ensure solvency (partially enacted in Bipartisan Budget Acts of 2013 and 2015) ($18.5 billion)
  • Extend spectrum auction authority ($1.4 billion)

Proposed by President Obama

  • Move towards site-neutral payments for five procedures performed in IRFs and SNFs
  • Align graduate medical education payments with patient costs
  • Extend federal unemployment insurance surtax ($0.6 billion)
  • Lengthen amortization period for geological and geophysical expenditures from 2 to 7 years ($0.4 billion)
  • Limit earnings stripping (Bush's policy applied only to inverted companies, a policy Obama adopted in previous budgets; his current policy differs slightly and applies to all companies) ($1.3 billion)
  • Authorize spectrum license user fee ($4.1 billion)
  • Repeal the telephone excise tax (-$1.1 billion)
  • Make repeated willful failure to file a tax return a felony
  • Require contractors to have a Taxpayer Identification Number
  • Enact Food Safety and Inspection Service (FSIS) and Grain Inspection, Packers, and Stockyards Administration (GIPSA) fees ($1.4 billion)

Going forward, many of the Obama Administration's proposals may be in play regardless of which party wins control of the White House and Congress. Of course, the Democratic Presidential candidates already support many of the Administration's health care and tax policies, and those policies figure to be critical in offsetting the cost of other priorities. Republican Presidential candidates may also find some of the health care policies attractive -- the budget's cost-sharing proposals in particular -- and may propose some of the other mandatory spending cuts in future budgets as well.

In short, the President's final budget will still matter in future years as a source of policies to offset costs or reduce deficits. Don't be surprised if some of the policies there find their way into a future President's budget or legislation after 2016.

Debt

What are we going to do to reduce and or eliminate the debt?

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