The Senate is undergoing vote-a-rama, an annual event where the Senate considers hundreds of amendments before voting on the budget resolution. Of the dozens which are normally voted on, most are typically policy statements or messaging documents, rather than changes to the underlying numbers in the budget.
One of the few amendments that would actually lead to savings will be offered by Senator Mark Warner (D-VA). The amendment would restore $1.6 billion in funding on “program integrity” activities to reduce overpayments and fight fraud and abuse in Medicare, Medicaid, and disability programs. Program integrity funding is currently not included in either the House or Senate budgets, despite the fact that the Budget Control Act allows funding of up to $1.6 billion for these activities in FY 2016.
While considering the FY 2016 budget, the Senate Budget Committee voted on about 50 amendments before passing the budget resolution on a party line 12-10 vote. (We described the underlying budget here). Some of these amendments were steps toward fiscal responsibility, some were steps backwards, and some were more mixed. Below, we describe the good, the bad, and the other notable amendments, even though not all of them passed.
Senate Budget Committee Chairman Mike Enzi (R-WY) has released his FY 2016 budget resolution, which prescribes $5.1 trillion of spending cuts to reach a balanced budget by 2025. Those spending cuts, which exclude savings from drawing down war spending, include $4.2 trillion of program changes (almost entirely from mandatory spending including the Affordable Care Act), $710 billion of interest savings, and $164 billion from the "fiscal dividend" that counts the economic benefits (and short-term costs) of the deficit reduction contained in the budget. The Senate budget is slightly less aggressive than the House budget, with most of that difference coming from fewer non-defense discretionary cuts.
With its relatively aggressive savings targets, the Senate budget would put debt on a sharp downward path as a percent of GDP, from 74 percent in 2015 to 57 percent by 2025. Even excluding the fiscal dividend's effects on spending and revenue (the budget does not count the increased growth in its GDP numbers), debt would only be about 0.6 percentage points higher.
The budget also significantly reduces deficits, having them fall from 2.7 percent of GDP in 2015 to 0.5 percent in 2018 and to a small $3 billion surplus by 2025. Although the budget would not balance without the fiscal dividend, it would only record a small deficit of $52 billion (0.2 percent) in that year. Even then the budget might be close to balance, because the budget bases its numbers off CBO's January baseline, which has a $49 billion higher 2025 deficit than CBO's most recent baseline released last week.
In her testimony, MacGuineas told Senators that we are not out of the woods yet from the economic problems following the Great Recession and that critical national objectives require controlling our historically high national debt.
MacGuineas’ testimony focused on four key points:
Our deficit and debt problems are far from solved.
While the deficit has come down by about two-thirds since the 2009 peak, this was only after a 780 percent increase in the prior two years. Importantly, the recent declines in the deficit are only temporary. The deficit is only projected to shrink for the next three years, and trillion-dollar deficits are projected to come back within a decade. In addition, CBO’s already-bleak projections might be too optimistic, since they assume that lawmakers won’t further increase the deficit, including by continuing temporary policies as they often have in recent years.
If tax reform is going to happen in the 114th Congress, Sen. Orrin Hatch (R-UT) will be a central figure as the incoming Chairman of the Finance Committee. In a National Review op-ed yesterday, he reiterated seven principles for tax reform that he first outlined in a report last month. Many of these principles are frequently discussed as important goals of tax reform, but lawmakers may disagree about the best course to achieve them.
Hatch first notes the serious need for reform:
Everyone agrees that the American tax system is broken and in need of reform. It stifles job creation, innovation, and competitiveness. It’s counterproductive, confusing, and a serious drag on the economy. Simply put: Tax reform is no longer an option but an obligation.
We certainly agree that after nearly 30 years without a major reform and the tax code getting more and more complex since then, the time is now for tax reform. Even setting aside fiscal concerns, it should be done to improve the code for taxpayers and the economy alike.
Hatch's seven principles involve promoting:
- Economic growth
- Savings and investment
The end of the 113th Congress saw the retirement of two Senators who actively fought for controlling and limiting the U.S. federal debt. Senators Saxby Chambliss (R-GA) and Dr. Tom Coburn (R-OK) gave farewell speeches in the final days of the Congress that addressed the fiscal position of the U.S.
Senator Saxby Chambliss has been a strong voice for the need for bipartisan action to address the debt. Along with Senator Mark Warner (D-VA), he was one of the cofounders of the bipartisan "Gang of Six", who attempted to assemble a bipartisan agreement on the deficit and debt in 2011. In his final speech on the U.S. Senate floor, he spoke briefly on the debt problem facing the country.
Second, it is imperative that the issue of the debt of this country be addressed. Just last week, our total debt surpassed $18 trillion. We cannot leave the astronomical debt our polices have generated up to our children and grandchildren to fix. It is not rocket science as to what must be done. Cutting spending alone, i.e. sequestration, is not the solution. Raising taxes is not the solution.
His farewell speech also covered the need for future budget agreements to bridge the gap between the two parties.
As Simpson-Bowles, Domenici-Rivlin, and Gang of Six agreed, it will take a combination of spending reduction, entitlement reform, and tax reform to stimulate more revenue. Hard and tough votes will have to be taken but that is why we get elected to the United States Senate. The world is waiting for America to lead on this issue and if we do, the U.S. economy will respond in a very robust way. The Gang of Six laid the foundation for this problem to be solved, and it is my hope we do not leave the solution for the next generation.
The Committee for a Responsible Federal Budget hosted a policy discussion this past Tuesday on dynamic scoring. CRFB President Maya MacGuineas opened the event by noting that dynamic scoring is an issue that will receive considerable attention over the coming months and could have an impact on fiscal policy decisions. Speakers offered their perspectives on the merits and challenges of using dynamic estimates in the legislative and budget process. Senator Rob Portman (R-OH) and Representative Chris Van Hollen (D-MD) offered remarks on their opinions and perspectives on dynamic scoring. A panel of dynamic scoring experts followed, moderated by CRFB President Maya MacGuineas. See CRFB's paper on dynamic scoring for a detailed discussion or our updated 2-page summary.
Sen. Portman spoke in favor of CBO and JCT providing dynamic estimates of bills. He argued that, at the very least, estimates should be done to inform staff and lawmakers how bills will affect the economy. He spoke about the bipartisan support for his bill, which passed by a vote of 51-48 with six Democrats voting in favor of it, when he offered it as an amendment during consideration of the FY 2014 Senate budget resolution. Portman acknowledged that there is a legitimate debate over which models and assumptions should be used, but he encouraged detractors to support presenting dynamic estimates as supplemental information, as his amendment would, not for official purposes. It would be apparent if dynamic estimates are significantly different than current methods, and policymakers would be able to look back to see which estimates were more accurate.
Congressman Van Hollen gave the opposing viewpoint. Van Hollen argued that dynamic scoring inherently demands that CBO or JCT adopt a specific ideology when estimating a bill. He mentioned estimates from the Heritage Foundation predicting revenue increases from the 2001/2003 tax cuts and claims that the 1993 tax increases would harm the economy. He also said that many models for dynamic analysis make assumptions about future actions to offset the cost of tax cuts, effectively giving legislation credit for policies not in the bill. He drew a distinction between the CBO estimate of immigration reform legislation, which took into account the direct impact of additional workers in the labor force, and dynamic estimates which incorporate the estimated indirect economic effects of legislation. Van Hollen reminded audience members that CBO and JCT already use microdynamic analysis in scoring bills—they weigh behavioral responses from individuals and businesses and the factors of supply and demand. He also acknowledged that dynamic analysis is useful as supplemental information, as long as policymakers understand the underlying assumptions.
In response to the recent VA scandal and hospital backlogs, Senate Veterans Affairs Committee Chairman Bernie Sanders (I-VT) has proposed legislation that would address the situation and authorize additional funding for the Department of Veterans' Affairs (VA). Congressional Quarterly's (subscription required) Alan Ota explains:
Appropriations season is in full swing. The House has already passed the Legislative Branch and Military Construction-Veterans Affairs bills, while the Senate Appropriations Commitee is scheduled to officially set 302(b) allocations and mark up the Military Construction-VA and Agriculture bills this Thursday.
The Senate is moving forward with tax extenders legislation, renewing a variety of breaks that expired at the end of last year for research, small business, and wind energy, among other provisions.