Foundation

Pros and Cons of the House Budget Resolution

by Demian Brady, Andrew Wilford / /

The House Budget Committee recently released its budget resolution for FY 2018. On paper, the blueprint promises to balance the budget within 10 years, with a $9 billion surplus in 2027. However, when looking at the specifics on how they plan to achieve this goal, the predictions may prove to be overly optimistic. While there are certainly worthy reforms included in the resolution that would lead the way towards a balanced budget, there are also potential pitfalls that will impede progress.

On the positive side, the resolution would lay the groundwork for spending reforms. The blueprint would:

  • Eliminate duplicative programs: NTU Foundation is pleased to see that the resolution includes some of the savings recommendations from our Common Ground report jointly produced with U.S. PIRG to identify common sense budget reforms. The blueprint specifically targets overlapping programs and corporate welfare spending, such as the Hollings Manufacturing Extension Program and the Department of Energy’s Title XVII Innovative Technology Loan Guarantee Program.

  • Slow the growth in spending: Under current law, the spending will grow at an annual rate of 5.1 percent, faster than the projected growth of GDP. The resolution would slow spending growth to 3 percent.

  • Reduce disability insurance fraud: Addressing waste and fraud through the Social Security Disability Insurance Program would save $5 billion.

  • Empower states: The resolution would give states greater authority to reform and modernize welfare programs.

  • Reform civil service pensions: Recommend that federal employees—and Members of Congress—contribute more to their generously defined-contribution pension plans.

  • Smooth the runway for commercialization of air traffic control: The resolution would allow for reduction in future discretionary spending caps and existing aviation excise taxes pursuant to reforming the nation’s outdated air traffic control system. This would address flaws in the Congressional Budget Office’s current estimate of reform legislation.

  • Improve the cost estimates used to project the budget. The resolution would require the Congressional Budget Office to use fair-value estimates of federal loan and loan guarantee programs. This method more accurately accounts for risks in federal credit programs.

Some of the biggest concerns with the budget blueprint are:

  • Health care: The budget assumes that the Affordable Care Act is repealed in its entirety, and replaced with H.R. 1628, the American Health Care Act (AHCA). Congress attempted to do this recently, and though the bill passed the House, Senator McConnell (R-KY) pulled the bill when he realized it would not pass the Senate. At this time, the outlay and tax savings assumed in the resolution from repeal and replace are uncertain.

  • Savings from improper payments: The House Budget Committee promises $700 billion in savings in ten years by reducing an estimated $1.4 trillion in improper payments across all government departments by 40-50 percent. Improper payments have been growing over the past four years despite legislation and executive orders that have attempted to solve the problem. Savings could be achieved by merging duplicative programs and increasing program integrity efforts. But, given the history of the long battle against fraud and abuse, the resolution’s estimate is likely optimistic. Meanwhile, federal agencies are currently targeting a far more modest 4.39 percent reduction.

  • Defense spending: The budget blueprint also calls for a large increase to defense spending. Spending on national defense would increase from an already-high $551 billion in FY 2017 to $621 billion in FY 2018. Such large increases to defense spending are not conducive to the goal of achieving a balanced budget. Additionally, funding is allocated for “new fencing” and “forward operating bases and surveillance technology along our southern border.”

  • Mandatory savings: The Committee for a Responsible Budget identified another issue with the budget reform proposal. While the budget resolution promises $4.3 trillion in savings, only 5 percent ($203 billion) is mandatory under reconciliation instructions. While $203 billion is no small amount of savings, and certainly represents a good step towards more responsible use of taxpayer money, it is insufficient to achieve the kind of meaningful deficit reduction the United State’s fiscal situation requires.

The resolution assumes that if legislation is enacted to repeal the ACA, reduce regulatory burdens, and reform the tax code, the economy would grow, which in turn would improve the long-term budget outlook. A lot has been already been accomplished through enacted legislation and executive orders to roll back regulatory-overreach, but Congress and the President need to roll up their sleeves to make progress on entitlement reforms and to fix our excessively complex tax code whose compliance costs exceed $234.4 billion.


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