Warning to Washington: Stop Overspending
On Tuesday, the Congressional Budget Office (CBO) released its annual Budget and Economic Outlook. The report is a ten-year projection that maps out where the government scorekeeper thinks the economy is headed, how public spending will be affected by the still sluggish recovery, and what taxpayers can expect over the coming decade. The warnings in the report are not encouraging.
Continued Deficits: In his 2014 State of the Union (SOTU) Address, President Obama said that under his and Congress' efforts America's "deficits [have been] cut by more than half." This is true in dollar figures. The 2009 deficit of $1.4 trillion has shrunk down to $770 billion in 2013, but overspending remains for each of the next ten years. CBO forecasts that the deficit will start growing again after next year's low of $478 billion not just in dollars but also as a percentage of Gross Domestic Product (GDP). This will occur because after 2014, the growth in spending will outpace the growth in revenues.
More Debt: It follows, the increasing deficits will only pile on more to the publicly-held debt, which will increase by more than $4 trillion (to almost $17 trillion) by the end of the decade. CBO projects that the debt will grow from 72.1 percent of the economy today to 79.2 percent by 2024. Here are many implications associated with the continued increase in government borrowing, including:
- More Debt Ceiling Crises: As the Treasury Department's statutory authority to borrow expires tomorrow, President Obama and Congressional Democrats are calling for a "clean" increase in the debt ceiling while Republicans have been unable to come to a consensus on what reforms to support in exchange for a possible ceiling hike. On Friday, the Treasury will be required to take "extraordinary measures" to keep the government running by prioritizing federal spending and moving funds from other accounts to pay workers and contracts. Taxpayers should plan for these showdowns to continue without real spending reform.
- Mounting Liabilities: As the government borrows more just to remain afloat, it will be forced to dedicate more tax dollars to financial obligations and less to activities. Without additional massive tax hikes, servicing the debt's interest payments and expending more resources for runaway entitlement programs will eventually crowd out any other programs, defense or domestic discretionary.
Thus far, Congress and the President have been unable to agree on any significant, long-term reform of the federal government's entitlement programs, and the longer that they delay, the larger the expense will be. Moreover, the President's SOTU address laid out an agenda for new taxes and new spending proposals that would cost at least $40 billion a year and Congress all too frequently resorts to budgetary gimmicks to mask current spending with illusory savings down the road.
There are options that have already been introduced in Congress. As NTUF researchers have said in the past, legislators have at least $453 billion of non-overlapping spending reduction measures already introduced in Congress that could significantly cut this year's deficit. That figure is based on findings reported in our BillTally report on the first six months of the 113th Congress. Additional savings measures have been proposed since then and will be released in a pending First Session report.
Most Expensive Bill of the Week
The Bill: S. 1285, the Small Business Innovation Act of 2013
Annualized Cost: $200 million ($1 billion over five years)
Just after the recession began, economists noted that entrepreneurial activity across the U.S. increased, perhaps in response to rising unemployment. Yet according to a 2013 report from the Kauffman Foundation, business startup rates have fallen, with entrepreneurial activity varying widely across the U.S.
That report caught the attention of Senator Tammy Baldwin (D-WI), whose home state of Wisconsin had one of the lowest business startup rates in the country, according to the report. In response, she introduced the Small Business Innovation Act to provide financial support to new businesses through a new program within the Small Business Administration (SBA). S. 1285 would increase the SBA's authority to guarantee payments issued by small business investment companies (SBIC), which are privately owned venture capital funds that receive additional funding from the government.
In a press release, Senator Baldwin noted that the additional funding would be aimed at startup businesses that specialize in "growth areas" such as biotechnology, information technology, and agricultural and environmental science: "[The bill] strengthens our investment in the building blocks of an innovation economy -- science, research and technology -- and will help us create an economy built to last."
In the 111th Congress, H.R. 5297, the Small Business Jobs Act, as introduced included a program similar to Senator Baldwin's proposal but it was later struck out of the version of the bill that was signed into law. An estimate by CBO included the program before H.R. 5297 was amended and CBO scored it as a $1 billion increase in federal spending over five years. There are no offsets to the new spending included in the bill, thus it would be in addition to current spending.
In FY 2013, SBA spent $169.7 million for existing entrepreneurial development programs, such as Small Business Development and Veteran Business Outreach Centers. The Department of Commerce’s Office of Innovation and Entrepreneurship also spent $66 million last year on similar activities.
To learn more or discuss this bill visit WashingtonWatch.com.
Least Expensive Bill of the Week
The Bill: S. 1860, the Steps Toward Access and Reform (STAR) Act of 2013
Annualized Savings: $3.6 billion ($18 billion over five years)
Health care policy analysts frequently cite medical liability reform as one of the ways that lawmakers can reduce the overall cost of health care services in the United States. The argument for reforming the existing legal frameworks is that as it becomes easier to sue health care providers more often and for higher amounts of damages, doctors try to safeguard themselves against financial loss by ordering excessive or unnecessary tests and procedures.
Although additional tests might help avoid a lawsuit, the costs -- both in terms of finances and time -- to patients can add up quickly. The problem is exacerbated when, due to increased risk of damage claims, medical providers are faced with higher premiums and less access to liability insurance (which protects doctors against monetary losses in lawsuits). Congress has debated the merits of reshaping the liability system through legislative action many times, sometimes including it in bills featuring other health care reform provisions as well.
In December, Senator Dean Heller (R-NV) introduced the STAR Act. S. 1860 would limit the window during which a lawsuit could be filed to within three years of the medical damages in question. Additionally, it would limit noneconomic damage claims to $250,000 and preempt all state and local laws related to health care lawsuits.
In the 112th Congress, similar provisions were included in H.R. 5, the Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act. NTUF's estimate for the STAR Act is based on a CBO report for that bill, which determined that medical liability reforms would decrease federal spending on Medicare, Medicaid, the Children's Health Insurance Program, the Federal Employees Health Benefits program, the Defense Department's TRICARE for Life program, and subsidies for enrollees in health insurance exchanges by $12.1 billion over five years.
To learn more or discuss this bill visit WashingtonWatch.com.
The Bill: H.R. 3811, the Health Exchange Security and Transparency Act of 2014
Annualized Cost: Unknown
Number of Cosponsors: 75 House Members
It is not uncommon that new computer programs or systems are initially accompanied with various bugs or glitches. Such problems are generally anticipated, which is why software companies put their coding through vigorous testing. They try to identify and repair serious flaws before release to the general public. The national rollout of the Affordable Care Act (ACA) provided a textbook example of the inefficiencies that often crop up when the public sector takes on large-scale projects. The ACA established a network of state and federal websites designed to enroll participants into new insurance plans or Medicaid. By the end of the first day, thousands of users reported being unable to access the website or sign up for coverage through the online forms. It became readily evident that the network was rushed to completion before it was consumer-ready. The debacle led to lower-than-expected enrollment figures, and prompted several high-profile hearings on Capitol Hill featuring Kathleen Sebelius, Secretary of the Department of Health and Human Services.
Aside from the problems with the site's user interface, several experts have warned that Healthcare.gov lacks appropriate security measures to protect users' personal information. In January, private security firms testified before Congress about a number of "critical or high-risk findings to personal information" that were apparent even without any intensive hacking into the site.
In light of the security concerns, Congressman Joseph Pitts (R-PA) introduced the Health Exchange Security and Transparency Act of 2014. H.R. 3811 does not specify any changes to the site's function or underlying code, but would require the government to notify individuals within two days if it discovers a security breach that could compromise users' personal information.
In a Statement of Administration Policy, the White House said that it opposed the legislation due to "unrealistic and costly paperwork requirements" that could hamper law enforcement investigations. CBO's cost estimate of the legislation determined that it would not impact direct spending, but did not comment on its potential impact on discretionary spending for potential administrative expenses. A bill from the previous Congress, S. 1408, the Data Breach Notification Act of 2011, would have required most federal agencies "that collect, transmit, store, or use sensitive personal information to notify any individuals whose information has been unlawfully accessed." CBO determined that would have cost $3 million per year for the Federal Trade Commission and federal law enforcement agencies to specify how the required notification procedures would work, but that administrative costs to other federal agencies would be minimal. It is unclear whether that cost would apply to this more limited proposal.
All 75 cosponsors of H.R. 3811 are Republicans.
To learn more or discuss this bill visit WashingtonWatch.com.
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Missed an Issue?
Issue 4 - Jan 30
Obama's State of the Union Address Would Cost $40 Billion
Issue 3 - Jan 23
Legal Workforce Act
Issue 2 - Jan 16
Building and Repairing Infrastructure with Domestic Gains in Employment (BRIDGE) Act
Issue 1 - Jan 10
Congress Already Revisiting Its Recently Passed Budget Deal
Issue 43 - Dec 19
Where Could Congress Cut Spending?
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