Foundation

Study Explores "The Good, The Bad, and The Gimmicks" in Senate's Budget Restraint Plan

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(Alexandria, VA) -- Hot on the heels of Senate passage last night of proposals aimed at slowing the growth of the federal budget, a timely analysis from the National Taxpayers Union Foundation (NTUF) provides many insights that are best described -- with apologies to Clint Eastwood -- as "The Good, The Bad, and The Gimmicks."

"For the first time in eight years, Congress seems intent on actually using the budget process to slow rather than expand the growth of government outlays," NTUF Senior Policy Analyst Demian Brady and Director of Government Affairs Paul Gessing observed. "However, as we have seen all too often in Washington, even legislation that is billed as 'spending restraint' does not necessarily live up to the definition many Americans apply to that phrase."

Brady and Gessing conducted an examination of the budget reconciliation package that just passed the floor, uncovering straightforward savings, new programs that could add to the deficit, and tactics that will do little to improve the long-term fiscal picture. Examples include:

The Good

  1. A 2.5 percent reduction in direct and countercyclical farm payments through 2010.
  2. $403 million in Medicaid savings, mostly from a state overpayment prevention clause.

The Bad

  1. The total savings of under $40 billion are small compared to inflation-adjusted amounts in earlier deficit-cutting plans from 1995 ($325 billion) or 1997 ($133 billion).
  2. The original legislation racks up $33.5 billion in new spending, such as extending Dairy Market Loss Payments and subsidizing the transition to digital TV programming.

The Gimmicks

  1. The bill would reclassify a "mandatory" Federal Housing Administration grant into an appropriated program, supposedly to subject it to more scrutiny (and budget savings). However, for three years the grant would be funded at its old levels, making it doubtful Congress would have the will to enforce cuts in "out-years."
  2. $1.09 billion in reductions of "advance direct payments" on farm loans are achieved by simply shifting the payments past 2010 -- the total value of funds farmers will receive would remain unchanged over time.
  3. A significant portion (49.5 percent) of the bill's reported savings come from "offsetting receipts" on everything from changing borrower interest rate formulas to spectrum auctions. While the merits of such policies vary, on balance they do not work to reduce the future size and burden of the federal government.

"Now all eyes are on the House as it takes up budget reconciliation," the authors concluded. "Time will tell if that effort, and the resulting conference proposal, will be a mere sequel to current spending policies or the premiere of dramatic new deficit reductions."

NTUF is the non-partisan research arm of the 350,000-member National Taxpayers Union. Note: Numerous other facts about the Senate's budget reconciliation package appear in NTUF Issue Brief 150, The Good, The Bad, and The Gimmicks: How the Senate Plans to 'Cut' Nearly $40 Billion in Future Spending While Saddling Taxpayers with New Burdens, available at www.ntu.org.

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