Tag: House GOP

Trade Adjustment Assistance Bill Pulled

In the face of a likely loss, the House Republican leadership pulled a trade bill from consideration late yesterday afternoon rather than face yet another embarrassing defeat. CQ has the details [$].

The bill would have reauthorized the Andean Trade Preference Act, which gives specific tariff reductions on certain products from Andean countries, for a further six months. Hardly the sort of significant trade liberalization that would justify passing the other part of the bill – a $2.4 billion per year extention of the Trade Adjustment Assistance program, about which I blogged on Friday. Stay tuned, because unfortunately I doubt we’ve heard the last of this program.

PAYGO, the CBO, and Repealing ObamaCare

One could argue that exempting ObamaCare from the PAYGO requirement is appropriate given the defects in current budget rules.

By law, the CBO must follow certain rules when doing cost estimates of legislation and projecting federal spending under current law. Under those rules, CBO projects ObamaCare will reduce the deficit. No question.

But Congress often defeats those budget rules by passing legislation with “pay fors” (i.e., spending cuts) that make the budget look better, yet are highly unlikely to be sustained because they are politically implausible. A good example of this is the “sustainable growth rate” formula, where Congress promises to ratchet down the government price controls that Medicare uses to pay physicians in future years. Congress has consistently reneged when those cuts come due. The pretense of future cuts that Congress writes into law makes 10-year budget projections/deficits look better than actual, unwritten policy would suggest.

This is a recognized problem. When the CBO believes that the law and actual policy are at variance, they actually do two types of cost projections: one based on the law as written and one based on the policy they think Congress is likely to adopt, based on past performance. They call the latter their “alternate fiscal scenario.”

ObamaCare opponents submit that this law is one of those instances where law and policy are at variance. So even though ObamaCare will reduce the deficit under existing budget rules, the spending cuts (actually, reductions in future spending growth) in the law were never going to take effect anyway. The CBO, CMS, and even the IMF have all discredited the idea that ObamaCare would reduce the deficit, because they all question the sustainability of ObamaCare’s spending “cuts.” Exempting ObamaCare repeal from PAYGO rules is appropriate if those rules have failed to protect taxpayers.

Republican $100 Billion Spending Cut

A top agenda item for the incoming House Republicans is to immediately start cutting spending. The GOP promised to reduce “nondefense” (or alternatively “nonsecurity”) spending for 2011 to the 2008 level, representing a $100 billion cut. GOP leaders are now being accused of backsliding on that promise, so let’s take a look at the numbers.

The idea is to reduce fiscal 2011 “budget authority” to the level it was in fiscal 2008. The chart shows the growth in nondefense budget authority since 2000. The spike in 2009 is from $265 billion in discretionary spending authorized in the “stimulus” bill.

Congress currently has a “continuing resolution” in place that keeps 2011 spending at about the same level as 2010, as shown in the chart. Thus, the House GOP will need to cut spending for the remainder of this fiscal year by about $55 billion to hit the 2008 level. That is less than $100 billion, but the higher cut number was based on proposed spending by Obama for 2011 that wasn’t enacted.  

The important thing is that Congress needs to start cutting all types of spending right away. We face a fiscal emergency as debt is exploding, and there are many federal spending activities that are damaging to society and the economy. The GOP should cut defense and entitlement spending as well, but nondefense discretionary cuts are a good place to start.

In considering cuts, note that about $136 billion in nondefense discretionary “stimulus” bill money is still sloshing through the government in 2011 and beyond, so spending cuts (unfortunately) won’t starve the bureaucracies as much as liberals might fear.

The chart puts proposed spending cuts in context. House GOP leaders now admit that they spent too much during the past decade, and indeed the chart shows that nondefense discretionary spending jumped $264 billion over the last decade. Much of the increase came when the GOP controlled the House, Senate, and White House, so now is the GOP’s chance to start reversing out those Bush-era increases.

Data note: current stimulus and nondefense discretionary budget authority data are available on pages 13 and 21 of CBO’s August outlook.