Taxpayer's Tab: Federal Budget Important but Debt Ceiling Resolution Vital

Federal Budget Important
but Debt Ceiling Resolution Vital

While the White House, the House of Representatives, and the Senate continue to agree to disagree over the budget for the new Fiscal Year, the government and many of its services will remain closed. And though the House is being urged to pass a "clean" Continuing Resolution, it is likely that funding would be set at a level higher than the $967 billion limit enacted in the Budget Control Act. If that is the outcome, then automatic cuts would again be triggered in 2014. But a much bigger problem awaits lawmakers in the coming weeks when the U.S. Treasury will run out of the options it has used since May to continue borrowing funds without breaching the statutory limit on federal debt.

The debt ceiling, which is set in law, currently stands at $16.699 trillion. The last time Washington faced a vote on setting the level was in 2011. A standoff between the House, Senate, and the Administration ultimately led to passage of the Budget Control Act. This law provided for an increase in the debt limit in three stages and set in place some deficit reduction measures, including the automatic cuts known as sequester. Although the Treasury Secretary and the President have each issued warnings that they want a "clean" increase in the debt limit this time and are unwilling to negotiate over the matter, fiscal watchdogs see this as an opportunity to push for more limits on spending.

Source: Congressional Research Service

In a blog post, NTUF's Michael Tasselmyer put together some stats comparing the budget in 1996 -- the last time the government was shutdown -- to today. Two striking figures stand out: federal debt has increased from 65 percent to 101.6 percent of GDP, and as the charts below illustrate, the makeup of outlays has drastically changed. Mandatory, or entitlement, spending now comprise the majority of federal outlays.

Source: Office of Management and Budget

The debt ceiling has been raised by Congress 12 times since 2001, and eight of those increases have occurred in the last six years. And it will likely be raised again before the end of this year. But if Congress passes an increase which the President signs into law that does not include entitlement reform, an opportunity will have been wasted. If not addressed, the unfunded liabilities for programs such as Social Security, Medicaid, as well as the new entitlement program enacted in the Affordable Care Act, will lead to more and more federal debt over the coming decades. The current low interest rates will not last forever. The government's debt problem will only become more pressing and burdensome if it is kicked down the road.

Most Expensive Bill of the Week

The Bill: H.R. 2721, the Pathways Back to Work Act of 2013

Annualized Cost: $4.2 billion ($12.5 billion over three years)

In early September, the Labor Department reported its most recent analysis of the American economy, and the numbers were not good. In August 2013, the U.S. economy added 169,000 new jobs, but that news came alongside findings that June and July employment figures were lower than originally estimated, and the labor force participation rate (i.e., the number of people actually looking for jobs) had fallen to its lowest point in 35 years. The number of long-term unemployed rose by 44,000, and the average unemployed American has been out of work for over eight months. Because of the government shutdown, the release of the October report has been delayed.

In response to the lingering recession, several Members of Congress have offered numerous proposals to provide additional stimulus as follow-ups to the $800 billion-plus American Recovery and Reinvestment Act of 2009. One such bill was introduced by Congressman George Miller (D-CA). The Pathways Back to Work Act would authorize $12.5 billion in funding for employment programs targeted at unemployed adults and children in at-risk communities.

The legislation would establish a new Pathways Back to Work Fund that would distribute money to states to help them subsidize employment for qualified individuals. In particular, H.R. 2721 would target "areas of substantial unemployment" (areas with a population of at least 10,000 and an unemployment rate of 6.5 percent or more). A portion of the funding would be used to place low-income children who are 16 years or older in seasonal and year-round positions.

President Obama suggested a similar proposal in his 2013 State of the Union address, which was taken from a portion of the American Jobs Act, S. 1249, in the 112th Congress that was ultimately not signed into law. Senators Bernard Sanders (D-VT) and Richard Blumenthal (D-CT) have introduced related bills in the Senate.

Based on the text of the bill, NTUF scored Rep. Miller's legislation as a $12.5 billion cost over three years, for an annualized cost of $4.2 billion.

To learn more or discuss this bill visit WashingtonWatch.com.

Least Expensive Bill of the Week

The Bill: S. 902, a bill to amend the Patient Protection and Affordable Care Act to apply the provisions of the Act to certain Congressional staff and members of the executive branch

Annualized Cost: $98 million ($489 million over five years)

The Patient Protection and Affordable Care Act (ACA) took another step towards full implementation on Tuesday as online insurance exchanges officially opened.

ACA remains a central focus in the ongoing budget debates that has resulted in the government shutdown (both occurring on the same day), and indeed has been ever since its introduction in the President's first term. The opening of the exchanges comes in the wake of several setbacks, as difficulty in coordinating the program's rollout prompted the White House to delay certain requirements for employers, and updated cost estimates have shown that the bill will likely cost taxpayers more than was originally expected.

A point of contention in the initial ACA debates was how the law would affect Members of Congress and their staffs. Senator Chuck Grassley (R-IA) proposed an amendment that was adopted requiring them to purchase insurance through ACA's exchanges. This August, the Office of Personnel Management (OPM) interpreted this provision to mean that the federal government could extend subsidies to Congressional Members and staff to help them purchase insurance through the exchanges.

Senator David Vitter (R-LA) has argued that such an interpretation is unlawful and, in essence, offers many Executive branch employees an "exemption" that does not exist in the private sector. He introduced S. 902 to deny those taxpayer-funded subsidies to Members of Congress, their staff, committee staffs, Executive branch appointees, the President, and the Vice-President. The bill was offered as an amendment to another piece of legislation -- the Energy Savings and Industrial Competitiveness Act by Senator Jeanne Shaheen (D-NH) -- in September.

The Congressional Budget Office (CBO) offered a cost estimate for Senator Vitter's amendment, and determined that eliminating the ACA subsidy for certain federal employees would result in net savings of $489 million over five years. CBO also estimated a loss in tax revenues, but under BillTally rules, revenue effects are not included in annualized scores.

Similar bills have also been introduced in the House. Congressman Mike Coffman (R-CO) introduced H.R. 1912, the Affordable Care Accountability Act, and Congressman Ron DeSantis (R-FL) proposed H.R. 3076, the James Madison Congressional Accountability Act.

To learn more or discuss this bill visit WashingtonWatch.com.

Missed an Issue?

Issue 34 - Sept 26
Building upon Unique Learning and Development (BUILD) Act

Issue 33 - Sept 19
Jobs for Urban Sustainability and Training in America Act

Issue 32 - Sept 13
Local Jobs for America Act

Issue 31 - Sept 6
Temporary Stimulus Programs Beyond Max Life

Issue 30 - Aug 23
Benefits for Former Presidents