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Wisconsin U.S. Senatorial Candidate Spending Analysis – Tommy Thompson
October 24, 2012
Wisconsin U.S. Senatorial Candidate Spending Analysis – Tommy Thompson
Total Net Spending Agenda: -$129.207 billion
Energy, Agriculture, and the Environment: -$402 million
A. Allow Offshore Drilling:
“Open new sources of U.S. territory to oil and natural gas drilling[.] …
Tommy Thompson will support legislative action to open areas of shoreline in the Atlantic, Pacific, Gulf of Mexico and Alaska to oil and natural gas exploration and production. …
The [offshore drilling] regulatory approval process must be streamlined, with definite timelines for review, and we must pursue litigation reform that prevents endless legal action and does nothing but line the pockets of lawyers.”
Cost: -$402 million (-$2.008 billion over five years) (partial estimate).
Government Reform: -$63.383 billion (savings)
A. Ban Welfare to Certain Corporations:
“Ban corporate welfare. … Governor Thompson will pursue a ban on any subsidies to corporations with gross revenues equivalent to those on the Fortune 500 list. There are limited cases where innovation incentives for small businesses can be justified, but larger corporations must stand alone.”
Note: In July 2012, the Cato Institute identified $97.6 billion in total federal spending on corporate welfare. It is unclear how much of this amount would be reduced under Governor Thompson’s proposal.
B. Create a Federal Employee Performance-Management System:
“Create a new performance-management system. Direct the Office of Management and Budget to consult with private compensation experts to define an effective program that incentivizes and rewards performance, not merely time on the job. Current law provides automatic seniority-based pay increases for additional years of service.”
Cost: $14 million ($70 million over five years) (partial estimate).
Source: Related legislation has been introduced in the form of H.R. 1492 (112th Congress), Federal Supervisor Training Act of 2011. The bill would provide for mandatory training for federal government supervisors and the assessment of management competencies. A CBO estimate is available for the bill as introduced in the 111th Congress, S. 674. CBO estimated that the additional training and reporting requirements would cost federal agencies $70 million over five years.
Note: This legislation addresses performance appraisals and standards for certain employees that are related to Governor Thompson’s proposal. NTUF assumes that the costs for training under the implementation of Governor Thompson’s new system would be comparable to that in H.R. 1492. The costs for his proposal could be larger if the new training would be required for a greater number of federal employees. However, tying federal employees’ salary increases to performance could eventually lead to budgetary savings.
C. Cut Federal Spending:
“Reduce waste. … [T]here are … extensive opportunities to make a down payment on long-term deficit reduction by forcing our federal agencies to spend smarter. The best way to deal with the problem is to reduce agency budgets across the board.”
“I would have a 5 percent reduction [for all departments and agencies] across-the-board.”
Cost: -$62.225 billion (First-year savings).
Source: Budget of the U.S. Government, Fiscal Year 2013, Historical Tables, “Table 8.1: Outlays by Budget Enforcement Act Category: 1962-2017,” and Budget of the U.S. Government Fiscal Year 2013 Mid-Session Review, “Table 5: Changes in Outlays.”
Note: NTUF assumes this would result in a reduction of discretionary spending across agencies, including those engaged in national defense and security activities.
D. Establish a 10th Amendment Commission:
“Tommy Thompson will propose establishing a [10th Amendment Commission] panel made up of a bi-partisan group of governors – including Governor Walker – to recommend to the House and Senate Budget Committees which governmental bodies and programs can be eliminated and which powers can be better delegated to the states.”
Cost: $6 million ($28 million over five years).
Source: Related legislation has been introduced in the form of S. 14 (112th Congress), a bill to establish a Commission on Congressional Budgetary Accountability and Review of Federal Agencies (CARFA). A CBO cost estimate is available for a bill in the 109th Congress, S. 3521, the Stop Over Spending Act, which would have established a CARFA.
Note: This estimate accounts only for the administration costs involved in the review process. The potential savings from eliminating federal programs or devolving them to the states could be substantial but are impossible to determine.
E. Increase Employee Health Care Contributions:
“… Governor Thompson is recommending … [to] increase [federal] employee contributions to health care by 10% across the board. Phase in the increase in employee contribution over two years, beginning with the first budget passed after the 2012 elections.”
Cost: -$1.178 billion (-$2.355 billion over two years).
Source: The Budget of the U.S. Government, Fiscal Year 2013, Analytical Perspective, Table 28-4, estimates that enrollees in the Federal Employees Health Benefits Program (FEHBP) will make total premium payments of $14.9 billion in FY 2014 and $16.1 billion in FY 2015. Enrollees include current and retired federal employees and, beginning in 2013, certain Native American Indian tribes will become eligible to enroll in FEHBP. Currently, the federal government pays approximately 70 percent of total premiums under the program. This estimate assumes that all enrollees will see an increase in premiums by 5 percent in FY 2014 and by 10 percent in FY 2015.
http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/spec.pdf (Table 28-4.)
F. Increase the Federal Full Retirement Age:
“… Governor Thompson is recommending … [to] increase the federal full retirement age from the current 56 to 62. Apply the new retirement age to all new employees and any workers currently younger than 45 years old.”
Note: Governor Thompson’s proposal would implement a long-term structural change to the federal government’s retirement system. Although a cost estimate is currently not available, NTUF assumes that the outlay effects would occur outside of the five-year budget window.
On June 29, 2012, President Obama signed H.R. 4348 (112th Congress), the Moving Ahead for Progress in the 21st Century Act (MAP-21) into law. Among other provisions, the legislation gives federal employees the option to transition to part-time work before fully-retiring. CBO estimates the phased retirement component of the bill would result in $187 million in savings in the first five years.
G. Pass Paul Ryan’s Path to Prosperity:
“Governor Thompson fully and wholeheartedly endorses Paul Ryan’s Path to Prosperity and will take all necessary steps to ensure the U.S. Senate takes up the plan. … While Governor Thompson will have additional entitlement, tax and budget reforms to add to Paul Ryan’s plan, its core outcomes of limiting spending to roughly 18 percent of GDP and consistently reducing the deficit over time are the right prescription for our economy.”
Note: The most recent version of the Path to Prosperity was introduced as H. Con. Res. 112 (112th Congress). The Resolution would establish the budget for the federal government for FY 2013 and set forth “appropriate budgetary levels for Fiscal Years 2014 through 2022.” The non-binding Resolution recommends long-term budget targets including reducing outlays to 16 percent of Gross Domestic Product by 2050. The Resolution also provides for a reconciliation budget procedure in the House of Representatives under which six different House Committees are instructed to report $331.36 billion in deficit reduction for the period of FY 2012 through 2022. The Resolution’s accompanying document, House Report 112-421 Concurrent Resolution on the Budget – Fiscal Year 2013 Report of the Committee on the Budget, includes many “illustrative policy options” that the Committees with jurisdiction could implement to achieve the spending and deficit reductions. These options include repealing spending enacted in the Patient Protection and Affordable Care Act (PPACA).
The summary tables in the report indicate that by FY 2018, total spending under the Path to Prosperity plan would reach $3.8 trillion. By comparison, the Budget of the U.S. Government Fiscal Year 2013 Mid-Session Review projects that total spending under the Administration’s plan would reach $4.4 trillion in 2018.
While the reductions under the Path to Prosperity are attainable, it is unclear which policy options the Committees of jurisdiction would employ to achieve them and how they would mesh with Governor Thompson’s other proposals outlined in this analysis. In addition to repealing PPACA, there could be other overlapping measures.
H. Phase in a Flat Tax:
“Tommy proposes to phase in a flat tax, initially offering individual taxpayers the option of filing a single-page tax form with a flat 15 percent rate. Individuals could also chose [sic] to use the current tax form in order to take full advantage of exemptions.
After two years of experience with the flat tax, Tommy would move to an across-the-board flat tax with provisions to encourage savings, investment, home ownership and support for charities.”
Note: It is unclear which credits would be eliminated and which would be retained under Governor Thompson’s flat tax plan. The impact on outlays of this proposal would depend upon the extent to which “refundable” tax credits (i.e., credits in excess of actual tax liability that can result in outlays) are repealed. The Budget of the U.S. Government, Fiscal Year 2013, Appendix (pages 1103-1110) estimates that FY 2012 outlays for various tax credits that are refundable for personal income tax purposes will result in $82.646 billion in outlays.
Related legislation has been introduced in the form of S. 820 (112th Congress), the Simplified, Manageable, And Responsible Tax (SMART) Act. The bill would replace the multi-bracket progressive income tax with a single 17 percent income tax rate. All income tax credits (including the outlays resulting from refundable credits), the Alternative Minimum Tax, and generation-skipping transfer taxes would be eliminated.
Health Care: -$65.422 billion (savings)
A. Allow Personalized Health Insurance:
“Regulations must be relieved to allow individuals to customize and personalize their insurance coverage so that they are purchasing only needed coverage. This would allow Health Savings Accounts to be used more effectively.”
Note: Health Savings Accounts are personalized, non-taxable savings accounts for individuals’ health-related expenses. Unless the accounts were to be subsidized through “refundable” (i.e., in excess of actual tax liability) credits or a federal matching rate, there would be no effect on outlays. Budgetary agencies classify the refundable portion of tax credits as outlays. However, NTUF is unable to estimate any costs that might be associated with the accounts due to the lack of details in Governor Thompson’s proposal.
B. Allow the Sale of Catastrophic Health Care Policies:
“We must allow consumers to buy catastrophic policies without the cost burden of mandated coverage. Consumers must have access to insurance that covers only major medical expenses, which will also lead to healthier lifestyles and more common-sense decisions on medical procedures.”
Note: It is unclear whether the de-regulation of the coverage mandates on health insurance plans would affect spending.
C. Block Grant Medicaid:
“Reform Medicaid[.] Create block grants to states to allow new ideas to emerge. Reduce red tape and regulation and allow states to find new ways to serve the most vulnerable citizens.”
Note: While the block-granting of programs back to the states could result in cost administrative savings to the federal government, NTUF is unable to estimate possible cost reductions due to the lack of specificity in Governor Thompson’s proposal.
D. Encourage Personal Responsibility:
“Tommy believes we’ll never truly reform our health care system until consumers take more responsibility for their health and for spending on their care. …
Health care and insurance reform must provide incentives for healthy behaviors such as smoking cessation, weight reductions and chronic disease management. …
We must protect the ability of consumers to choose their doctors and control their own health records.”
Source: Governor Thompson has called for repeal of the Patient Protection and Affordable Care Act (see item below). CBO estimated that implementing PPACA’s provisions for “Increasing Access to Clinical Preventive Services” would have a net budgetary effect of $9.6 billion over the FY 2013-2017 period. It is unclear whether Thompson would retain these provisions or would find other ways of incentivizing these reforms.
E. Establish a Federal-State Coverage Initiative:
“Give states the option to join a new federal-state coverage initiative. The focus of the partnership would be to:
These objectives would be accomplished primarily through federally funded high-risk pools. States choosing not to participate in the new federal-state initiative would be ineligible for the high-risk pools, but they would be allowed to participate in a reformed Medicaid program … .
The new state-federal partnership would guarantee that Americans who remain in continuous insurance coverage never pay more than 150 percent of standard rates for insurance, regardless of changes in their health status.
The federal government would provide new block grants to the states with sufficient funding to subsidize the premiums of insurance enrollees who otherwise would be facing premiums above the 150 percent threshold.”
Cost: $833 million ($2.5 billion over three years) (partial estimate).
Note: Related legislation has been introduced in the form of H.R. 6283 (112th Congress), the Guaranteed Access to Health Insurance Act of 2012. The bill would establish state-based pools to ensure that high-risk individuals have access to health insurance. The text would authorize the spending for high-risk pools. It is unclear whether additional funding would be required for Governor Thompson’s proposed premium subsidies.
F. Establish Health Vouchers for the Unemployed:
“Provide a federally financed state-administered voucher to the unemployed … set at $2,500 for individual coverage and $5,000 for family coverage. The federal government would provide block grant payments to the states to cover the costs of these vouchers.”
Note: A related program has been enacted. The Trade Act of 2002 established the Health Coverage Tax Credit (HCTC) that makes available refundable credits to certain recipients of the Trade Adjustment Assistance program and certain beneficiaries of the Pension Benefit Guaranty Corporation. The HCTC helps pay for 72.5 percent of health insurance premiums. The Budget of the U.S. Government, Fiscal Year 2013, Appendix, page 1105, estimates that payments where the health care tax credits will exceed liability for taxes will total $189 million in 2013. The credit is set to expire at the end of 2013 (thereby resulting in a $189 million outlay). A cost estimate for Governor Thompson’s proposal is unavailable.
http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/tre.pdf (Page 1105.)
G. Expand Employer Health Coverage:
“Provide new federal support for employer health insurance by creating tax credits to offset costs of premiums. Any federal support not used for premium payments would be deposited into a Health Savings Account for future health care costs.”
Note: The impact on outlays would depend upon the extent to which subsidies or refundable credits for insurance are offered.
H. Purchase Insurance Across State Lines:
“An essential element of a functioning health care system is a competitive market for catastrophic insurance, which consumers can purchase across state lines and retain as they move from employer to employer.”
“You have to be able to purchase health insurance across state lines … .”
Cost: $65 million ($326 million over five years).
Source: CBO cost estimate for H.R. 2355, the Health Care Choice Act of 2005 (109th Congress), a bill to amend the Public Health Service Act to provide for cooperative governing of individual health insurance coverage offered in interstate commerce. CBO’s initial cost estimate has been adjusted for inflation. The bill was reintroduced in the 112th Congress in the form of H.R. 346.
I. Reform Medical Malpractice:
“Enact [m]edical [l]iability [r]eform[.] …
Tommy will support legislation to establish tighter limits on noneconomic damages, create penalties for frivolous lawsuits and limit liability for products approved for use by the [Food and Drug Administration].
Tommy will also pursue policies to allow broader use of experimental treatments for patients who are diagnosed as having terminal illnesses. Our citizens should not have to leave our country to receive potentially life-saving treatments. This action will require careful easing of liability for drug makers, medical providers and the FDA.
We all know someone who has suffered through a terminal illness. These people should be able to voluntarily take experimental drugs that could help them or future victims of disease.”
Cost: -$2.42 billion (-$12.1 billion over five years).
Source: Related legislation has been introduced in the form of H.R. 5 (112th Congress), the Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2011. A CBO cost estimate is available.
J. Reform the Fee-for-Service System:
“Tommy will pursue linking federal reimbursement for health care costs with quality outcomes, driving down costs and incentivizing innovation. The current fee-for-service system bases reimbursements on procedures. We must move to a new system of rewarding quality outcomes, not merely procedures.”
K. Improve Transparency of Medicare Claims:
“… Tommy believes Medicare, as a major element of the health care system, should also provide its claims data to organizations such as the [Wisconsin Health Information Organization] in order to benchmark and track quality improvements. Improved data transparency can be accomplished without compromising privacy.”
Note: Related legislation has been introduced in the form of S. 848 (112th Congress), the Consumer Information Enhancement Act of 2011. This legislation would provide for reporting data on Medicare and other public and private health care statistics. A cost estimate is currently not available.
L. Repeal the Patient Protection and Affordable Care Act:
“Tommy’s immediate priority in the U.S. Senate will be to repeal Obamacare and restart health care reform deliberations from a clean slate.”
Cost: -$63.9 billion (-$319.5 billion over five years).
Source: Repealing “Obamacare”: A Look Beyond the Media’s Misguided Deficit Focus, National Taxpayers Union Foundation, Issue Brief 164, July 2012.
Note: NTUF’s estimate is based on CBO reports for H.R. 2 (112th Congress), the Repealing the Job-Killing Health Care Law Act, and H.R. 6079, the Repeal of Obamacare Act. However, four other introduced bills would repeal the Patient Protection and Affordable Care Act and replace it with alternate reforms. Those bills are H.R. 364, the Common Sense Health Reforms Americans Actually Want Act; H.R. 371, the Health Care Choice Act of 2011; H.R. 397, the Reforms Americans Can Afford Act of 2011; and H.R. 408, the Spending Reduction Act of 2011.
A. Adjust Social Security Benefits for High-Income Individuals:
“Tommy will propose the repeal of federal taxation on Social Security benefits. He will make the repeal budget-neutral by adjusting benefit costs for high-income individuals.”
Note: NTUF is unable to estimate the level of cost reductions that could be achieved due the lack of details in Governor Thompson’s proposal. The savings would depend on the income threshold for adjusting benefit costs and the time frame for implementation. According to The 2012 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, “Income based on taxation of benefits amounted to $22.2 billion in 2011.”
“Tommy Thompson will strongly oppose any increases in the federal debt limit without accompanying legislation to balance the budget in a timeframe consistent with the Path to Prosperity.”
“… Governor Thompson will support … [making] the earmark ban permanent.”
“… Governor Thompson will support … [instituting a] Line Item Veto.”
“… Tommy would exempt all households earning less than $100,000 from capital gains taxes.”
“Tommy will pursue a policy of zero taxation on foreign profits repatriated to the U.S. when those profits are used for investment in plant and equipment, job training or research and development.”
“… Tommy will fight for a dramatic step toward international competitiveness by border adjusting our taxes, applying taxation to imports rather than exports.”
“To ensure the federal government abides by this target [to limit federal spending to roughly 18 percent of Gross Domestic Product], Tommy will propose a revenue limit on the federal government that restrains federal tax receipts to no more than 18.5 percent of GDP. Tax tables would be uniformly adjusted to collect no more than the revenue limit, creating an incentive for Congress and the White House to live within our means and accelerate economic growth.”
“Reform Senate [b]udget [p]rocess to [e]nsure [e]nactment of a [b]udget. … Governor Thompson has called for reforms that empower all [S]enators to bring a budget to the floor. If they don’t act, a budget bill calling for across-the-board cuts would be automatically scheduled for floor action. And if they fail to pass a budget, all [S]enators would lose their pay for that fiscal year.”
Note: It is impossible to determine the savings due to the conditional nature of Governor Thompson’s proposal. Based on current salary data, Senators receive a combined salary $17.4 million.