Well… it’s been an interesting week. Interesting, but not altogether surprising.
First up, the budget deal. As has been customary these last few years, a budget deal worth trillions of dollars was negotiated in secret and unveiled at the very last moment possible. There were no committee hearings, no amendments, no input, and scant details provided. In fact, it was so bad this time that after personally asking for detailed cost estimates for each of the provisions, we only started getting them via the press after the bill was passed.
Some people vote for multi-trillion dollar bills without seeing the fine print first. I am not one of those people.
Nevertheless, here’s the basic background on the bill so you can make up your own mind. The “Bipartisan Budget Act” will raise the current spending caps on both defense and non-defense spending (a priority for the Democrats) by a little over $80 billion. The deal will suspend the debt ceiling through March of 2017 (which contrary to some rumors, does not in fact give the President a blank check – the debt only goes up according to the spending and tax provisions that Congress authorizes). And finally, in exchange for the spending increases and debt limit suspension, the deal included a great many reforms. Some of those reforms are real and some are a little less than real. In fact, some are just nonsense.
On the good side, compliance efforts to go after tax and disability fraud will be improved – that means more money for taxpayer priorities. The imminent threat of the automatic Medicare Part B premium explosion has been dealt with. And the Social Security Disability Trust Fund (which was supposed to run out of cash by the fall of next year) has been propped up for at least a few more years.
That brings me to the not-so-good parts. For starters, they prop up the Soc. Sec. Disability Trust Fund by reallocating a portion of the payroll tax away from the main Social Security Trust Fund and into the Disability Fund. Robbing Peter to pay Paul. The problem is that the main trust fund is also going to go bankrupt and Congress has just hastened its demise, if only by a bit. That to me is an issue of principle as much as sound fiscal management.
Consider also just a couple of examples using the “ten year budget window” rules to create imaginary savings out of thin air. As many of you may already know, the Congressional Budget Office (CBO) is the official scorekeeper which creates the budget estimates for legislation. They are an independent agency within Congress and per our own rules, what they say goes. CBO is instructed by Congress to consider the budget impact of any new proposal on the deficit for the immediate next ten years – no more, no less. Just the next ten years.
In simple terms, Congress has a bad habit of exploiting the massive blind spot (everything outside the ten year window). When President Bush passed his famous / infamous tax cuts, he scheduled them to expire before the end of the ten year window so the full ten year score would record as deficit neutral. There was no intention for those tax cuts to ever expire. When President Obama passed his healthcare law, he played a similar game by setting the bill up to start the tax increases immediately, but delay the spending portions of the bill for four years after passage. As it turned out, ten years of taxes and only six years of spending would be seen as “deficit neutral” inside the ten year window CBO is limited to considering. Outside that first ten years…? It’s anybody’s guess.
It’s an easy system to rig and Congress frequently rigs it. Rigging, it would appear, is easier than actually making sufficient cuts to get things to be deficit neutral.
How does this apply to the budget deal? Pick a page, any page. I’m exaggerating there, but only a little bit. Consider a commonly used accounting gimmick involving pensions they included in this deal. In current law, pensions are recorded for tax purposes in the tenth month of the year. Since the federal government’s fiscal year ends on September 30th and the next fiscal year begins on the first day of the tenth month (October 1st), pension reporting occurs every year at the beginning of the fiscal year. That means ten years worth of pension related tax revenue during ten fiscal years.
A clever (but nonsense) provision in the debt deal switches the reporting date in the final year of the window to the “ninth month” instead of the “tenth month”. All of a sudden you can “pull” the 11th year tax revenue forward and into the ten-year budget window. Presto-chango, you have extra money to play with. Now, of course, this doesn’t mean the government will actually collect one extra nickel or spend one less nickel, but as far as CBO’s strict scorekeeping rules are concerned, Congress has magically reduced the ten year deficit projection by bringing new revenue into the picture. It’s complete and utter nonsense, but if all you care about is making it look like the budget deal saves money on paper, this kind of gimmick “works”.
Consider another provision. Following the oil embargo in the 70s, Congress created the Strategic Petroleum Reserve (SPR)to ensure that in the event of a major supply disruption, America would always have a ready supply in reserve. One provision in the budget deal calls for selling 58 million barrels of oil out of the SPR to fund spending this year and next. As I found out after I voted against the bill, the CBO estimates that this will earn us $5.05 billion in cash. Now, as the article went on to explain, that assumes a sales price of roughly $87 per barrel. The trading price right now is $49 per barrel.
Now many of us question the wisdom of selling strategic emergency assets to pay for every day operating expenses and we certainly question the wisdom of selling those assets at historically low prices… But to assume for budget purposes that we can sell those assets for 80% higher than the going rate is beyond any kind of questioning. That’s just lunacy. Do you all know what the price of oil is going to be a year from now? I sure don’t. And if you can find any oil trading experts out there who can quote you $87 with any degree of certainty, I’d like to meet them.
I could give you ten pages worth of the nonsense, but I think you get the picture. At the end of the day, the American people know that Congress is up to shenanigans. They may not be able to articulate exactly why, but as a whole, the American people have a very well-tuned sense of smell and they can tell when something doesn’t smell quite right. This bill doesn’t smell right. In fact, it stinks.
We knew these deadlines were coming for months. As I feel like I’ve said a hundred times before, there is no reason to leave this stuff to the last minute other than trying to jam a crummy bill through. At the last minute, there is precious little time to ask serious questions or to reevaluate any alternatives. It’s a take it or leave it proposition.
When the final vote came down, the striking thing to me was how many of the various committee chairmen voted against the bill. Normally, if you wield a gavel, you are expected to take one for the team and vote with your leadership. So to have the chairman of the House Budget Committee (among others) publicly voting against the Speaker’s budget deal says an awful lot. This is the way the House has been run for years and there are an awful lot of us who think that needs to change.
John Boehner is a conservative guy. His lifetime conservative rating ranks him something like 8th most conservative overall in the House. I didn’t vote against him back in January because he failed some ideological test. I voted against him because way too many bills like this moved across the floor under his leadership.
…Which brings me to the other news of the week. Speaker Boehner is now officially “former House Speaker John Boehner”. The young, bright, aggressive Paul Ryan is the newly sworn in Speaker of the House. Before the vote had even happened, some radio commentators and others started stirring up a storm saying Ryan is a squish and he can’t be trusted. Ryan, I can tell you, is at the very least a strong conservative when it comes to the budget. If we have disagreements on other stuff, so be it. The reality is that if we don’t get this budget situation sorted, nothing else is going to matter because we aren’t going to have a country anymore. In the end, all but nine of the two hundred and forty-seven House Republicans voted to give him a shot. It’s a trial run. An audition. He gave a very nice speech saying we’re done with these last minute bills and that we’re going to get back to “regular order” (doing the due diligence in committee first and then opening things up for amendment on the floor). He said a lot of nice things that made a lot of us happy. But words don’t mean much in the final analysis. If he can’t live up to those promises or if the conservatives who backed him feel like they were sold a bill of goods, he’s out. I guarantee it.
U.S. Rep. Rich Nugent represents The Villages in Congress.
