On Wednesday, the House Budget Committee released a proposal to overhaul the 1974 Congressional Budget Act. You can read the full discussion draft by clicking here or a still fairly detailed summary here. But if you are short on time, here is a quick breakdown.
1. Many things came out of the 1970s that have only gotten better with time - like Apple, Email, and some great entertainment.
2. Far out. But some things born in the 70s haven’t stood the test of time - like the 1974 Budget Act.
3. This outdated act is cumbersome, complex, and encourages Washington to spend more money.
4. The good news is: the House Budget Committee is developing a new proposal that throws out what’s not working and puts in place a process that’s more efficient, effective, and accountable.
5. Pretty groovy. We are going to overhaul the 1974 Budget Act to protect Congress’ Constitutional authority, control spending, increase transparency, and enforce a sustainable budget.
6. Republicans are fighting to fix a broken Washington.
7. Learn more about Budget Process Reform here. Can you dig it?
Remarks as prepared for delivery
Thank you to the Brookings Institution for hosting today’s event and thank you to the Committee for a Responsible Federal Budget for agreeing to co-sponsor as well. Scholars at Brookings and CRFB, as well as the National Budgeting Roundtable, have been part of a driving force behind an effort to reform the Congressional budget process. I want to thank you for lending your time, your expertise, and your passion to this issue.
We meet today less than a month after one of the most momentous presidential election outcomes likely any of us have seen in our lifetimes. A lot was said during the campaign and a lot has been said about the campaign, but one of the biggest takeaways I see is this: Americans want real change. The American people are fully aware that government as we know it is not working well and they want to shake up the system. There are many reasons why and no one person or party is responsible for the good, the bad, or the ugly we see coming out of Washington.
Let me submit, however, that a large portion of the gridlock we see in Congress – between the legislative and executive branches of government – comes squarely from a broken budget process. The work is not getting done, not on time, and not in anything approaching an orderly, efficient, and accountable manner.
In the last five years, only one out of sixty appropriations bills has been passed on time, before the end of the fiscal year. The government has been fully funded on time only once in the past twenty years. To keep funding the government in eighteen of the past twenty years, we have relied upon either a year-long continuing resolution – basically a stopgap measure – or Congress has adopted and the president has signed omnibus bills. This is when Washington throws all of government spending into a giant package that is, by design, incredibly dense, challenging to comprehend in any expedient manner, and generally devoid of the level of transparency the American people desire or expect.
In short, this is no way to run a government – and it has occurred under Republican control, Democrat control, and divided government. It does not matter who controls the levers of power when the system itself is flawed.
Two years ago, when I sought the chairmanship of the House Budget Committee, I made it known to my colleagues that an overhaul of the 1974 Congressional Budget Act was an absolute priority. To that end, over these past two years, our committee has held as many as nine hearings on this issue. We have received testimony from over 30 witnesses and have produced numerous working papers that document the challenges we face and potential solutions. As members have become familiar with the process as it stands today – through the development of two budget resolutions and the on-going appropriations process – there’s been a near universal recognition that something has to change.
At the core of our efforts have been six principles which speak to not only the failures of the current system we aim to fix but also to the additional successes we aim to achieve under a new and improved budget process. Our principles are:
• Enhance Constitutional Authority
• Strengthen Budget Enforcement
• Reverse the Bias Toward Higher Spending
• Control Automatic Spending
• Increase Transparency; and
• Ensure Fiscal Sustainability
Today, I’m excited to provide an update on the progress made toward achieving a substantial overhaul of the budget process, and to ask all of my colleagues in congress, our friends in the policy realm who have thought long and hard on these issues and the American people at large to review the work we’ve done and provide your feedback and ideas.
ENHANCE CONSTITUTIONAL AUTHORITY
Fittingly, we must begin any discussion on budget process reform where it all began – our Constitution. Article I of the Constitution gives Congress the power of the purse – the authority to determine the federal government’s level of taxation and spending.
Over the course of many years and many congresses, the Legislative Branch has ceded too much of its budgetary authority to the Executive Branch. We have given the president and his regime of regulators too much power which has weakened the representative framework of our democracy.
This has to stop. First and foremost, when it comes to the budget of the United States, congress should go first with its proposal. Under the budget process reforms we envision, lawmakers will consider a Congressional budget resolution with information gained from a current-services account estimate from the executive branch prior to the president submitting his budget. Timing may seem like a small distinction but the current scenario – where Congress is essentially responding to the President’s budget – is completely backward and antithetical to the Constitution’s goal and framework.
Speaking of timing, we ought to align the fiscal year with the calendar year – meaning January 1st is when it all will begin. That will better reflect the schedule of Congress and provide policymakers with more time to get their work done.
Further, we propose putting in place a plan to reduce spending on unauthorized programs. A substantial portion of federal spending goes to programs and agencies that Congress has failed to authorize for years – sometimes decades. That’s a fundamental failure of oversight. If Congress wants to spend money on an idea, an agency or program, it ought to explicitly and in a timely manner declare and justify its intention to do so.
Within this same framework falls the annual appropriations process and changes to the timing and design of how we keep the government regularly funded. Passing twelve individual appropriations bills all the way through Congress has – as stated earlier – failed to occur rather consistently for quite some time. One solution that has garnered rather popular acclaim is the idea of biennial budgeting – dropping the goal of approving twelve appropriations bills each year and instead spending the first year of a Congress dealing with budget matters and authorizing spending over two years so that Congress can spend more time on oversight in the latter half of the two year cycle.
Biennial budgeting – while a popular concept – will not solve, in and of itself, our budgetary woes. However, the concept has received broad bipartisan support. What we propose is dividing the twelve appropriations bills into two tranches of six each in the first and second year of a Congress – each funding government functions in their areas on a biennial basis.
We should see how it works and reevaluate at a later date. That review process should include a requirement that the Government Accountability Office prepare a report on the effectiveness of the biennial budget process.
Meanwhile, a prohibition on long-term continuing resolutions is a must. Congress should never forfeit its budget responsibilities by passing a stop-gap measure that covers more than a year of government activity.
At the same time, Congress should expand the use of its budget authority by allowing for multiple reconciliation bills to be considered under a single budget resolution – increasing the opportunity for policymakers to pursue multiple major reforms within each of the three reconciliation categories of spending, revenue, and debt.
STRENGTHEN BUDGET ENFORCEMENT
Of course, a budget that is not enforced is worth less than the paper it is printed on. Right now, budget rules and restrictions are easily circumvented – often through gimmicks or the outright waiving of enforcement measures. We should empower policymakers to prohibit such actions. There should be unequivocal opposition to any efforts by Congress to use gimmicks to declare it has offset spending when in fact it has done little more than clever accounting.
We have to eliminate the opportunity for Congress to pursue spending and tax legislation when there is no budget in place. This not only makes sense from a budget enforcement perspective, it also helps ensure Congress is exercising its responsibility to establish broad fiscal policy in line with priorities.
However, there can be no real budget enforcement if too much of the spending is outside the purview of budgeting. Congress needs to look at the whole picture, so it has a complete understanding of the government’s spending and obligations. At the same time, we must broaden the base of programs that are subject to automatic budget enforcement procedures. And funding for an emergency should be truly for that emergency – for a defined, relatively short amount of time and not become a long-term line item in the budget.
REVERSE THE BIAS TOWARD HIGHER SPENDING
One of the more fundamental challenges we face under the current budget process is the inherent bias in the system for ever higher spending. The baseline Congress uses for its budget projections – the amount of spending against which any change is compared or measured – assumes that government programs which are scheduled to expire and automatic spending programs like Medicare which are headed for insolvency are simply a part of permanent spending obligations and therefore do not have to be accounted for or subject to the same level of scrutiny as other federal spending measures. Meanwhile, programs funded annually through the regular appropriations process are automatically assumed to be given a pay raise because of inflation.
This assumed automatic plus-up is unnecessary, and the baseline shouldn’t prejudge Congressional decision making on spending increases.
What is necessary for all lawmakers to consider is the cost of not just implementing a given program but the cost of borrowing, if need be, to fund that program. Right now, interest payments on the government’s debt is completely missing in CBO cost estimates of new legislation. We want to change that.
Additionally, committees considering legislation that will have an impact on the nation’s fiscal outlook ought to have an estimate of that impact on hand before they go to mark-up and approve or disapprove a piece of legislation. Quite often, members are not informed of the costs of potential legislation until too late in the process.
CONTROL AUTOMATIC SPENDING
For all the time and attention they receive, the appropriations bills that Congress is supposed to pass each year represent only a fraction – an increasingly smaller fraction – of the government’s annual spending. Two-thirds of current expenditures are dedicated to a relatively small number of automatic spending programs like Medicare, Medicaid, and Social Security which are not subject to annual appropriations and therefore operate largely outside the control of Congress.
In a few short years, over 75% of the annual budget will be consumed by automatic spending – meaning Congress will have less and less control. That means the American people will have less control over how their hard-earned tax dollars are being allocated.
This is unwise, irresponsible and unsustainable.
To establish control over this spending, first and foremost we should prohibit Congress from creating new automatic spending programs that are not included as part of the annual budget resolution. This does not preclude Congress from at some point agreeing to create a new automatic spending program. But, it ensures that conversation begins within the context of a budget and the nation’s fiscal health.
Right now, there exists no reputable process in place to establish enforceable spending limits.
Sure we have statutory caps on discretionary spending. But they are not part of any long-term strategy for economic growth or national security.
Meanwhile, we have uncontrolled automatic spending programs that are eating up an ever-increasing percentage of yearly tax revenues. It’s an unsustainable trajectory.
We need a system that gives Congress the opportunity to establish spending limits and put those in law – and to do so within the construct of the annual budget resolution. When Congress adopts a budget resolution to govern its appropriations process, there ought to also be the opportunity to send to the president for signature a joint resolution that would put in law limits on spending based on the parameters established in the approved budget.
One way to lessen the burden automatic spending is placing on our budget is to bring more programs back under the umbrella of the annual appropriations process. This could be done by establishing a commission – similar to the military’s Base Realignment and Closure or BRAC commission – that would evaluate which automatic spending programs ought to be transitioned over to the discretionary side of the ledger. Congress would then have the opportunity to vote for or against the commission’s recommendations.
In each of these instances, Congress – the people’s representatives – would have a say in the treatment of our automatic spending programs. That is key since many of these programs are critically important to the health and economic security of the American people.
Nothing says good government like transparency. A representative democracy must be open and accountable to the people, and that is why in our budget process reform efforts we put a premium on transparency. The American people should know where their taxpayer dollars are being spent and they should not have to be a budget analyst to figure that out. The Congress and the Executive Branch should provide a description of their budget to the general public that is easy to understand and scrutinize.
We also believe in bringing the facts to Congress so it acknowledges the reality of where our nation stands from a fiscal standpoint. That’s why the reforms we are proposing would require the Comptroller General of the United States to deliver an annual “Fiscal State of the Union” address to the Congress and the country so we are all provided regular updates on the significant challenges facing our nation.
Transparency should also flow to those that are developing and implementing regulations. Every administration relies on regulations to implement its agenda and support the legislative work of Congress. Moving forward, however, we ought to account for the impact of those regulations. That’s why we are calling for a regulatory budget to catalogue the cost of proposed regulations and the aggregate impact of the regulatory state on the health and well-being of our country.
ENSURE FISCAL SUSTAINABILITY
While the budget process is on the surface about the year-to-year funding of the federal government’s operations and agencies, the ultimate goal of any budget ought to be long-term sustainability – putting our nation on a financial trajectory that will ensure future generations inherit a country that is fiscally sound, economically confident, and globally competitive. Short-sighted thinking or short-term solutions will, by definition, fail to get us there.
That is why a new budget process ought to ensure the relative long-term fiscal health of the country by focusing on the nation’s debt obligations over the coming decades. Specifically, we ought to adopt a series of long-term, declining debt targets – enforceable by enhanced reconciliation. Should that fail, there must be an automatic enforcement mechanism – so we are putting ourselves on a path to ensure that we leave our kids and grandkids a brighter future.
The changes that are needed can be as simple as implementing a rule in law against increasing long-term spending; to the more complex reforms, like requiring risk-based discount rates when evaluating the government’s credit and insurance programs; to the revolutionary idea of changing the debt limit calculation to be not a dollar value as it is today but rather a level of debt as a percentage of our economy, a percentage of GDP.
Short-sighted thinking in Washington is one of the biggest threats to ensuring a sustainable, healthy fiscal outlook. Anything and everything we can do within the budget process to force policymakers to consider the long-term consequences of their actions and their decisions will go a long-way toward ensuring America has a vibrant economy and secure future.
For all our efforts to incorporate the input of members and policy experts from outside Congress, we recognize that there will be other solutions that could contribute greatly to improving the nation’s fiscal outlook. That is why we propose establishing a special commission tasked with reviewing different budget concepts so that we are incorporating an outsider perspective into the conversation. Specifically, such a commission would examine and report to Congress on how portfolio budgeting and capital budgeting systems could be implemented at the Federal level and how they might help ultimately foster balancing the budget.
The ideas I’ve discussed here and others are included in a discussion draft for budget process reform our committee is releasing today. We invite anyone and everyone to share their insights and input and to take part in this important initiative. There are items within our proposal that may be controversial or may elicit serious concerns. That’s fine. That’s healthy. We welcome any and all feedback.
At the end of the day, our motivation is not the process but the product. How do we create a system of checks and balances that will ensure we are producing solutions that make our government more efficient, effective, and accountable to the American people? The Congressional budget process is really just a means to an end. The end is a nation that is fiscally sound, economically healthy, safe and secure, and full of opportunity.
Today’s budget process is failing America and its people. We can and we must turn the page.
Hopefully, this proposal provides the impetus to get moving in a better direction.
Thank you to Brookings and CRFB for hosting today’s event.
WASHINGTON, D.C. — Today, the House Budget Committee released a working paper entitled Growing Risks to the Budget and the Economy. The working paper follows a hearing the Committee held on September 14th that examined America’s budget and economic outlook and how poor economic policies continue to contribute to the nation’s poor fiscal health.
The working paper focuses on three main areas:
In its opening, the paper cites a number of troubling statistics about our nation’s current and projected fiscal and economic condition – specifically:
The paper goes on to note that the answer to the nation’s spending and borrowing problem is not to spend and borrow more:
“Instead, lawmakers should pursue pro-growth policies and strive to gain control of spending and deficits. This is the most promising combination for restoring growth, raising standards of living, and achieving a sustainable budgetary path.”Read More
WASHINGTON, D.C. — In this week’s Republican address, House Budget Committee Chairman Tom Price, M.D. (R-GA) discusses our plan to repeal Obamacare and replace it with patient-centered solutions.
The address comes on the third anniversary of the rollout of Obamacare. It serves as a prebuttal to a health care speech the president will give on Wednesday in Tampa, Florida.
“House Republicans are listening, and we know it’s not enough to simply acknowledge the failures and the fallout,” Chairman Price says in the address. “It’s up to us to offer an alternative. And that’s what we have done. We’re calling it a Better Way for Health Care. And you can read the whole plan on our website: better.gop.”
NOTE: The audio of the weekly address is available here, and you can watch the video below:
Remarks of House Budget Committee Chairman Tom Price, M.D. of Georgia
Weekly Republican Address
October 1, 2016
Ever since President Obama and a Democrat-led Congress passed Obamacare six years ago, the law’s failures have been piling up. You know the stories. Premiums and deductibles going through the roof. Patients losing their doctors. Millions of people getting insurance cancellation notices in the mail. Some of the more recent fallout has been the near total collapse of the Obamacare COOPs. The law set up 23 non-profit health insurers in an attempt to provide Americans additional insurance options. But today, the coops are failing at an alarming rate – shutting their doors and dropping their customers. Only six out of the original 23 remain. Just six.
Hundreds of thousands of people have lost health coverage because of these coop failures. And the damage does not end there. Because of Obamacare’s individual mandate, those same folks are now subject to a tax penalty for not having insurance. The same law that encouraged people to sign up for these doomed coops – and did nothing while they imploded – is now penalizing folks who lost their coverage. This is ridiculous, and the American people should not have to put up with it.
That’s why we in the House of Representatives passed a bill this week that would exempt those who lost coverage due to the failure of Obamacare’s coops from the individual mandate. After all the harm Obamacare has caused, it’s the right thing to do.
Now we know that those who still defend Obamacare will come up with one excuse after another to protect the broken status quo. They’ll ignore the evidence and the voices of those who are being harmed by Obamacare. They also ignore the desires for all Americans to have a healthcare system that’s affordable for all, accessible to all, of the highest quality and one that gives patients the choices they need. Obamacare fails on each of those.
But House Republicans are listening, and we know it’s not enough to simply acknowledge the failures and the fallout. It’s up to us to offer an alternative. And that’s what we have done. We’re calling it a Better Way for Health Care. And you can read the whole plan on our website: better.gop.
Our first priority is to put you, the patient, in charge, not Washington bureaucrats. So we repeal things like the individual mandate and say, “You should be free to pick whatever insurance plan meets your needs, not one Washington forces you to buy.” We give you real protections so you never have to worry about being turned away because of your age, your income, or your health. We also clear out the bureaucracy so that our researchers and innovators can develop more life-saving treatments. We save and strengthen and secure Medicare so that it’s there for today’s seniors and future generations. We reform Medicaid so that states have the flexibility to offer the kind of coverage that best serves their communities.
Before going into public service, I practiced orthopaedic surgery for over 20 years. That firsthand experience taught me that there is nothing more sacred in health care than the doctor-patient relationship. Our Better Way plan respects and protects the doctor-patient relationship. It is the plan America needs. It is how we can turn things around – a bold vision to bring America’s health care system into the 21st century. House Republicans are offering a clean break with the past: a plan to repeal Obamacare and start over with real, patient-centered solutions – that puts patients and families and doctors in charge – not Washington DC. Thanks for listening.
WASHINGTON, D.C. - A group of bicameral Republican health care leaders are pointing to a new legal opinion issued on Obamacare’s controversial reinsurance program. The leaders urged the Comptroller General of the United States this spring to publish a legal opinion on the Centers for Medicare and Medicaid Services’ (CMS) decision to ignore federal law, and a previous CMS regulation that required taxpayers and the Treasury be paid under the Obamacare reinsurance program. To date, CMS has ignored the rule of law to divert billions of federal dollars to insurance companies at the expense of American taxpayers and the Treasury.
“…[W]e conclude that HHS lacks authority to ignore the statute’s directive to deposit amounts from collections under the transitional reinsurance program to the Treasury and instead make deposits in the Treasury only if its collections reach the amounts for reinsurance payments specified in section 1341,” wrote the GAO. “The agency is not authorized to prioritize collections in this manner. The agency must give effect to the extent possible to all of section 1341, and, to do so, is required to collect and deposit amounts for the Treasury, regardless of whether its collections fall short of the amounts specified in statute for reinsurance payments. HHS may not use amounts collected for the Treasury to make reinsurance payments.”
At question is the Transitional Reinsurance Program established in section 1341 of the Affordable Care Act. A nonpartisan analysis by the Congressional Research Service earlier this year confirmed that the Obama administration is acting in conflict with a plain reading of law.
Several lawmakers requested an independent legal opinion, referencing a recent ruling that the administration is illegally spending billions in Cost-Sharing Reduction (CSR) payments as further evidence of the White House’s disregard for the rule of law. On May 12, 2016, the U.S. District Court for the District of Columbia said the Obama administration violated Article 1, Section 8 by paying insurers for the CSR program without a congressional appropriation.
The Obama administration previously affirmed Republicans’ position on both programs, issuing rules (2014/2015), which required a portion of the contributions be deposited into the U.S. Treasury, as well as requested an annual appropriation for the cost-sharing reduction program.
“This is about fairness and respect for the rule of law clearly anchored in the Constitution,” said the lawmakers listed below. “The facts are simple – the Constitution is on our side. This new opinion from the government’s top watchdog confirms that the Obama Administration is not above the law. The Administration needs to put an end to the Great Obamacare Heist immediately.”
The request was submitted to the GAO by:
Click HERE to read the GAO’s opinion.Read More
WASHINGTON, D.C. – This week, the House Budget Committee held the fourth in a series of hearings focused on the Committee’s Restoring the Trust for All Generations initiative – an effort to raise awareness about the fiscal and policy challenges facing our nation’s health, retirement, and economic security programs. On Wednesday, the topic was Restoring the Trust for Families and Working-Age Americans – specifically how many of these automatic spending programs can have an adverse impact on families and working-age Americans by contributing to less economic opportunity and market distortions in areas like education, health care, and housing.
According to witness testimony, the undue influence and interference from certain government programs are proving that good intentions do not necessarily equal good policy. As Dr. Thomas Lindsay, Director of the Center for Higher Education at the Texas Public Policy Foundation, noted in his testimony on the impact of federal education grants and student-loan programs on the rising cost of tuition across the country:
“As you mentioned earlier, the Federal Reserve Bank has found that federally-subsidized student loans are a big part of the driver of tuition hyperinflation. Every time this body increases Pell Grants by a dollar, universities charge 55 more cents
So, government subsidies meant to make college more affordable are, in fact, making it increasingly more expensive.
But surely these programs have helped those who truly need assistance even if they have increased the tuition burden on others, right? Not so much…
“Think about the fact that today a smaller percentage of college graduates come from the bottom 25 percent of income than in 1970 when these programs started. So no one here is talking about whether we should invest or not invest in the American people. It’s let’s do it in a way that actually helps. Because when 68 percent of students either don’t graduate or graduate not having obtained the learning that a college degree is meant to signify, that constitutes a scandal.”
Unfortunately, the enormous growth in spending on education costs (a 334% increase over the past 30 years) is but one of the substantial bites that misguided Washington policies have taken out of the wallets and savings of hard-working Americans. The consistent rise in health care costs (a 314% growth in three decades) is a real strain on families all across the country. The culprit? In part, too much government interference in markets. The solution? For starters, some rational thinking. As Dr. Keith Smith, Managing Partner and Co-Founder of the Surgery Center of Oklahoma, explained:
“I also am a firm believer in that rational pricing emerges from competitive activity. The idea that prices can be dictated from on high, it’s just wrong. The prices are either too high or too low. They’re always wrong. If they’re too low, then there’s rationing – either soft or hard rationing results. And if the prices are too high, then you wind up with a bunch of stuff going on that perhaps is unnecessary.”
The failure of government’s “good intentions” rings true as well for Americans who rent, own a home, or are hoping to own. As Edward Pinto, Resident Fellow and Codirector of the International Center on Housing Risk at the American Enterprise Institute, described in his opening statement, a supply and demand imbalance is having a “host of unintended consequences”:
“In most cases these policies increase housing demand but do little or nothing about supply. When supply is increased, it drives up prices; layers of subsidies are used; and a host of unintended consequences results. First and foremost, it yields higher prices and higher rents, particularly for low-income and minority households – the very ones these programs are designed to assist. Today’s
An “economics free zone” – not particularly helpful when what’s needed right now is a
The House Budget Committee is committed to highlighting these concerns and building a consensus toward real solutions to improve the nation’s health, retirement, and economic security programs so they actually help their intended beneficiaries and stop driving up the costs for everyone else.
To learn more, go to Restore-Budget.House.Gov.Read More
For over a year, the House Budget Committee has been engaged in an initiative called Restoring the Trust for All Generations. Today’s hearing is the fourth in a series of hearings this committee has held to advance this initiative.
Restoring the Trust is an effort to raise awareness among both our colleagues in Congress and, more importantly, the American people we represent – about the serious fiscal and policy challenges facing our nation’s health, retirement, and economic security programs. These are programs that are funded automatically without any annual appropriation or, necessarily, any Congressional oversight. They’re what is known in this town as "mandatory spending". It means that the money continues to be spent, and is increasing, and will continue to increase, until Congress and the president agree to reform these programs.
The unchecked growth in spending in this area – whether on Medicare, Medicaid, and Social Security or numerous federal housing, education, and safety-net programs – is eating up a larger and larger portion of the federal budget. It is crowding out other government functions, other national priorities, and contributing substantially to the budgetary imbalance that has our national debt over $19 trillion – and climbing.
As we have discussed in this committee previously, in addition to the fiscal challenges, we know that these programs are not necessarily serving their beneficiaries all that well. At the same time – and perhaps less appreciated – is the fact that many of these programs create substantial distortions and foster perverse incentives in the private market in areas like education, health care, and housing. Those distortions drive up the cost of goods and services for all Americans. For many working-age Americans and families, they may have no direct interaction with these automatic spending programs. But these programs and government policies generally are increasing demand for services while simultaneously limiting supply, and results in prices that are outgrowing wages. That hits the middle class particularly hard.
In today’s housing market, affordability is the missing element. The fundamental problem is a supply-demand imbalance that works against families struggling to afford the mortgage or rent as home values appreciate faster than wages and inflation. The average family’s housing costs rose 63.3 percent between 1997 and 2015. According to the U.S. Census Bureau, homeownership rates are at the lowest level in over 50 years ago, and
In higher education, evidence points to federal student aid distorting demand, and it has been linked to recent rapid increases in tuition. A 2015 study conducted by the Federal Reserve Bank of New York reports a pass-through effect on college tuition from increased Federal student aid. For every additional dollar in subsidized loans, tuition increases by an estimated 65 cents – and for every additional dollar in Pell Grants, tuition increases by 55 cents. More generally, our current education system contributes to higher costs by stifling innovation – innovation that could offer flexible, customized, and more affordable education experiences catered to the lives of working students with families who are seeking to realize their full academic potential.
Washington’s current approach to health care has – under the presumption of knowing what’s best for patients across America – restricted them to health programs that are on unsustainable paths while driving up costs. According to the Kaiser Family Foundation, the average premium in America has increased by 61 percent in the past decade. Similarly, deductibles have increased more than 250 percent, meaning increased out-of-pocket expenses for individuals and families. Thanks to heavy-handed government intervention into the nation’s health care, costs for families continue to rise, without gains in quality and value. Furthermore, competition and innovation are stifled, and providers spend nearly twice as much time completing paperwork as they do caring for patients – lending itself to a paper-centered, rather than a patient-centered health care delivery system.
In short, the status quo is not working. However, positive solutions can be discovered in the private sector and successful government programs. We should work to advance free market policies that will foster competition. In order to have a well-functioning marketplace, it is necessary to allow entrepreneurs to meet the demand of consumers – creating better products for lower prices through innovation – in short, allowing America to work!
To provide their views on these issues of critical importance to so many Americans, we have as our witnesses Edward Pinto, Resident Fellow and Codirector of the International Center on Housing Risk at the American Enterprise Institute; Dr. Keith Smith, Managing Partner and Co-Founder of the Surgery Center of Oklahoma; Dr. Thomas Lindsay, Director of the Center for Higher Education at the Texas Public Policy Foundation; and Dr. William Spriggs, Chief Economist at the AFL-CIO.
Thank you all for being here and for being willing to share your insights and first-hand knowledge about how our nation’s automatic spending programs are impacting the lives and livelihoods of families and working-age Americans.And with that, I yield to the Ranking Member, Mr. Yarmuth. Read More
WASHINGTON, D.C. – The House Budget Committee in a hearing Wednesday entitled “Growing Risks to the Budget and the Economy” examined our nation’s current troubling fiscal and economic outlook, what is contributing to a forecast of slow growth and mounting debt, and how policymakers might go about correcting course.
The consensus among the witnesses was unanimous that the current trajectory of deficit spending and higher debt cannot go on forever. As Dr. Jared Bernstein, Senior Fellow at the Center on Budget and Policy Priorities, noted: “It’s an unsustainable trend when you start looking at numbers that are really in the stratosphere in the out years.”
Among the reasons America’s fiscal outlook is unsustainable is due to the unchecked growth in automatic spending on the nation’s health, retirement, and economic security programs – programs that suffer not only from a looming funding crisis but also structural challenges that mean they fail today and will certainly fail in the years to come to deliver on the promises made to beneficiaries. As Dr. Douglas Holtz-Eakin, President of the American Action Forum, testified:
“Our Social Security program is kept ‘solvent’ on the books…because we have promised to cut benefits 25 percent across the board when the trust-fund exhausts in a little under two decades. That is a horrific way to run a pension program. So, if you go through Social Security, Medicare, Medicaid, Affordable Care Act – the large drivers of the spending-increase that is our deficit problem – those programs all could be improved. They’re not delivering at sensible cost the services that we have promised.”
If nothing is done to shore up these programs and if a fiscal crisis is allowed to occur, the results will be “chaotic” according to Dr. John Cochrane, Senior Fellow at the Hoover Institution:
“What certainly will happen is a fairly chaotic cut in benefits. What happens to countries when they run out of their fiscal ability, is people who are counting on Social Security, their cuts come big and heavy and unpredicted…Health care is going to get rationed and really cheap, and people who are counting on Medicare are not going to get it. So, you want to reform those programs predictably ahead of time and not when you run out of the ability to borrow money and suddenly people who are counting on it are thrown out on their own.”
At the end of the day, the failure to get the nation’s fiscal house in order – to let the automatic spending side of the federal budget continue expanding while the discretionary portion is crowded out – is a direct threat to the ability of Congress to be responsive to the needs of the nation. As Dr. Holtz-Eakin pointed out, “there is no room for discretion”:
“If you are locked in to spending the money on interest – because you must honor those obligations – and you are locked into spending on entitlements, there is no room for discretion. And it seems quite wrong in a representative democracy to in 2016 dictate exactly what we are going to be doing in 2026, 2036, and 2046 – even in the absence of a crisis which will also then happen.”
The solution? For starters, raise the long-term rate of economic growth – which is currently projected to grow by roughly two percent over the next decade, substantially lower than the historical average of just over three percent:
“The key issue going forward is what can raise the trend long-term rate of economic growth. And that’s not a matter of stimulus or austerity. That’s a matter of what will enhance productivity; what will enhance the rate of labor force participation; and the kinds of components that go in to GDP growth. Those are issues associated with structural reforms to have better incentives – whether they are in our social safety-net or in our tax code.”Read More
The title of this hearing is the “Growing Risks to the Budget and the Economy.” Regardless of ones’ political posture – there are clearly some warning signs before us. In many ways the current budget and the current economy are in fact risks unto each other.
The Congressional Budget Office (CBO) provides all of us with some sobering information – demonstrating that policymakers have ample evidence and information revealing just how severe the risks are now and will become in the not too distant future.
Today, the nation’s total debt tops $19 trillion. At the end of the ten year budget window, over the next decade, CBO projects we will borrow another $8.6 trillion – accumulating a total level of publicly-held debt equivalent to more than 85 percent of our economy. That is twice the average level of the past half century. It is the highest our nation has had since the end of World War II.
Of course, unlike the 1940s, today’s debt is not being driven by a massive, temporary mobilization of military might. In 2016, our debt trajectory is being driven by a chronic imbalance in our nation’s budget, for which there’s no end in sight under current policy and current law.
In fact, today’s growing debt is not so much the result of defeating a threat to America’s national security – as it is the threat itself. The fiscal imbalance we face; the uncertainty that is sown into our economy by a looming fiscal crisis – this all weakens our nation.
And yet, despite all of this, there are many who are saying that because interest rates are so low that we ought to borrow even more money – run up the credit card while credit is relatively cheap.
This is horribly short-sighted thinking. Publicly held debt is over $14 trillion – more than three-fourths the size of our economy. We are already past what economists say is a sustainable debt burden – let alone advisable or fair to leave our kids and grandkids.
The fastest growing component in our budget is not national security spending; it’s not health care; not research and development; not infrastructure to repair roads and bridges; not aid for the nation’s poor. It is interest payments on our nation’s debt. Unless something is done to change course, in 2026 America will pay $712 billion in interest payments alone – just shy of what we are projected to spend on our entire national defense. And interest payments are dollars that can’t be used to pay the rent, send a kid to school, buy a house, buy a car, start or expand a business – all of the things Americans want to do with their money will be harmed by the ever increasing interest payments.
Annual deficits are projected to exceed $1 trillion in that same period of time. These deficits will come at a time when Washington will be taking in higher than average tax revenue. This means that we’ll be taking in more tax money – and going further in the hole – further into debt. Clearly, government is not being starved of revenue.
That being said, a stronger economy that creates higher revenues is the key to addressing our fiscal crisis. If our economy was growing today at just the historical average – roughly three percent instead of the two percent projected over the next decade – we would be in a better fiscal position than we are right now. According to CBO, if economic growth were just 0.1 percentage points higher per year than currently projected, annual deficits over the next 10 years would be reduced by $327 billion. Just through better economic output, we could reduce future deficits by as much as $3.3 trillion over the next decade if we were growing at our own historical average.
In short, economic growth is a vital ingredient to any coherent strategy to get the nation’s fiscal house in order. Poor economic policies contribute to the poor fiscal health of the nation, and today we are experiencing the worst economic recovery in the modern era.
The macro effects of slow economic growth, however, are only one side of the story. The uncertainty that the country as a whole is experiencing due – in part – to lackluster economic growth is also experienced by millions of individual Americans, families, and entrepreneurs in their own lives and in their own ways. Many Americans are struggling to make ends meet at a time when opportunities are fewer and the cost of basic necessities like health care and education are rising.
While the headline unemployment rate has dropped to under five percent, the “under-employment rate” – that which takes into account those who are working part-time because they cannot find full-time work and those who have given up looking for work – is currently 9.7 percent. That’s higher than where it was prior to the recession. Meanwhile, the rate of participation in America’s labor market – the percent of the population who are able to work – who are working – is at levels not seen since the late 1970s, and the rate of worker productivity has declined for three straight quarters.
At a time when over sixty percent of the country believes the nation is on the wrong track, it is time we adopted a pro-growth policy agenda – and when that is coupled with a sound budgetary strategy, it will jumpstart America’s economic engine and put us on a sustainable fiscal trajectory. House Republicans – led in part by this committee’s efforts on fiscal and economic matters – have been championing bold solutions to achieve those goals.
To further this discussion we are joined today by Dr. John Cochrane, Senior Fellow at the Hoover Institution; Dr. Jared Bernstein, Senior Fellow at the Center on Budget and Policy Priorities; and Dr. Douglas Holtz-Eakin, President of the American Action Forum.
Thank you for taking part in what I hope will be a healthy and enlightening conversation.And with that, I yield to the Ranking Member, Mr. Ryan.
WASHINGTON, D.C. – Today, the House Budget Committee released its sixth in a series of working papers focused on the Committee’s effort to overhaul the Congressional Budget Act of 1974 and reform the congressional budget process. The paper follows a hearing the Committee held on July 7th that examined how Congress can better measure, evaluate, and ultimately control the impacts of regulations by adopting a regulatory budget.
The working paper focuses on eight main areas:
In its opening, the paper notes that the proliferation of government regulations carries substantial costs both to America’s economy and our system of representative government – without an accurate means of accounting for their impact:
“In 2015, Federal agencies issued nearly 30 times as many regulations as laws that were enacted. Thus Congress cedes growing shares of its authority to an unelected fourth branch of government with ever-increasing control over Americans’ lives. The cost of regulations has been estimated at about $2 trillion a year, and one study has shown that a 10-percent increase in the quantity of Federal regulations is associated with a 0.7-percent increase in prices. The current system of cost-benefit analysis used by the administration is wildly inaccurate and prone to data manipulation. The government’s estimates, compared with the experience of those subject to regulation, paint two different pictures. In addition, regulations have effects on individual and property rights that are not readily quantifiable. Despite these facts, Congress has no systematic means of tracking, and if possible restraining, this expansion of the regulatory state.”
To learn more about the House Budget Committee’s efforts to reform the congressional budget process, visit budget.house.gov/BudgetProcessReform.
Previous budget process reform working papers:
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