What You Need to Know: Boehner’s Zombie Budget

When John Boehner announced his resignation from Speaker of the House at the end of September, he stated his intent to “clean the barn” before the arrival of the next speaker. Now, with just a few days left in his speakership, Boehner and his leadership team have bundled together the massive Bipartisan Budget Act of 2015. The bill is expected on the House floor before the leadership election later this week.

Like most massive budget deals, the act bundles together massive increases in spending and an increase of the debt limit, in exchange for token promises and minor changes. Here are a few of the problems with the act.

$1.5 Trillion Debt Limit Increase

Established in 1917, the U.S. debt limit is a legal cap on the total amount of national debt that can be issued by the U.S. Treasury. Intended to serve as a red flag for excessive federal spending, the non-partisan Congressional Research Service (CRS) notes that the debt ceiling “imposes a form of fiscal accountability that compels Congress and the President to take visible action to allow further federal borrowing when the federal government spends more than it collects in revenues.”

But in recent years, the debt limit has been “suspended” indiscriminately by a Congress that has abandoned responsible budget practices. The current debt limit sits at $18.1 trillion, though the U.S. Treasury hit the limit in March and has been employing “extraordinary measures” to continue payments on the national debt. The Treasury currently estimates that it will run out of extraordinary measures on November 3, 2015.

This deadline should provide an opportunity for lawmakers to reevaluate current spending levels and make needed financial reforms. GOP lawmakers should use the debt limit as leverage to extract significant spending concessions from Democrats, who constantly push for a “clean” debt limit raise, if not an outright abolition of a cap they call “archaic.”

But instead of pressing the fight for conservative spending reforms, this bill will further suspend the debt limit until March 2017 equal to $1.5 trillion in new debt. According to Congressional Quarterly, this was bundled with other budget provisions so Republicans could “sell the package as raising the debt limit in exchange for constraints on spending,” while Democrats tout a clean debt limit increase to their constituents.

Budget Cap Busting

Established by the Budget Control Act of 2011, the budget caps are a limit on the federal government’s discretionary spending. These caps ostensibly force fiscal responsibility by mandating sequestration cuts if Congress continues out-of-control spending and fails to accomplish its stated aims of deficit reduction. But instead, this bill raises the caps, authorizing an additional $80 billion worth of spending over the next two years. In addition to an $80 billion cap increase, the bill provides for an additional $32 billion in Overseas Contingency Operations funding which is not subject to the caps, combining for a total $112 billion spending increase over two years. The bill also allocates additional funding of $484 million over the caps for Social Security fraud enforcement over the next four years.

Social Security Disability Bailout

The SSDI program is broken and insolvent, and registered it sixth annual net deficit in 2014 – declining by $30.2 billion since 2013. Each dollar awarded was only paired with 77 cents in payroll tax contributions. Keeping the fund solvent would require either cutting benefits by 20% or increasing taxes by 17%. But the problem is worse – the $30.2 billion deficit comes despite a series of interest payments into the fund from previous loans issued to prop up other programs – payments which come out of general revenues. The deficit caused by these payments has added up to $213 billion over the past decade.

The reason for this unsustainability is a drastic increase in the number of individuals on disability. While workers are healthier and jobs are safer, the percentage of the working-age population on disability increased from 2.3% to 5.1% over the past 15 years. This increase comes as a response to perverse incentives instituted by Congress in 1978, which added non-medical, vocational factors such as age, education, and ability to speak English to the list of disability qualifications (so-called “grid factors”). Currently, about 43 percent of disability awards are based on these factors. In the 1980s, Congress further loosened standards, causing a higher portion of disability awards to be based on difficult-to-verify claims such as depression and musculoskeletal pain. These subjective standards are often arbitrary, leading to inconsistent application and an ability to game the system.

In order to keep the fund afloat, Democrats have advocated reallocating a portion of payroll taxes from Old Age and Survivor’s Insurance (OASI) – the more well-known Social Security program – to the disability fund. This raid will cause OASI to run dry sooner. This budget act embraces this policy, using OASI to bail out the disability fund for six years, in exchange for token concession that do not address the perverse incentives at the foundation of the program.

Medicare Spending Increase

Medicare is in need of serious reform at the core. The current system is built on a model of arbitrary price controls that are unresponsive to changes in the market, either causing taxpayer dollars to be wasted or payments to be set too low to justly compensate the physician. The bureaucracy that has emerged surrounding Medicare has drastically skewed the healthcare services market, causing medical costs across the board to skyrocket. The program needs to shift to a model of premium support that fosters competition in the healthcare market.

At the start of 2016, insurance premiums for 30% of seniors covered under Medicare Part B (those not living on a fixed income) are set to increase from $104.90 a month to $159.30 – a 50% increase. This increase is intended to subsidize rising costs for all seniors on Medicare (due to a provision that prevents premiums from rising for seniors who live on a fixed Social Security income). This hike should serve as a red flag and prompt reform, but Congress has instead painted it as a false choice between increasing Medicare spending or allowing medicare premiums to increase.

Predictably, this bill continues Congress’s tired old tactic of throwing money at a problem. The bill freezes premiums at $120 per month, increasing the cost of Medicare for taxpayers.

Gimmicky Offsets

The bill uses gimmicky offsets to provide some illusion of fiscal responsibility. For instance, Congress has promised to extend sequestration time for an additional two years, from 2023 to 2025, with the idea that future cuts will support current overspending. This is a gimmick meant to provide justification for spending now.

The Bipartisan Budget Act of 2015 is precisely what one would expect in a behemoth budget conglomeration – spending hikes, increased debt, and plenty of showy gimmicks to hide the expansion of government. This bill should be rejected unequivocally, and the GOP conference should get back to work, using each point of legislative leverage individually to extract meaningful conservative reforms.

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Action Alert: “NO” to the Export-Import Bank

Today a handful of Republicans are going to help Nancy Pelosi and well-connected special interest groups revive the Export-Import Bank.

In July, conservatives had a major victory when you shut down the Export-Import Bank, which was nothing more than a slush fund for corporate welfare.

Even though the bank has been expired for over 100 days, Barack Obama and big-government lobbyists worked for weeks to bully lawmakers into voting to restart the Export-Import Bank.

So what’s next? Every single House Democrat will vote to resurrect the now-defunct bank. We need to make sure as many Republicans as possible vote “NO” on the Export-Import Bank.

Make the call to your lawmakers today to make sure they are voting “NO” on the Export-Import Bank.

Heritage Action is opposed resurrecting the Export-Import Bank (H.R. 597). We are key voting against the bill and we need your help to get as many Republican “NO” votes as possible.

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House Reconciliation Bill (H.R. 3762) FAQ

First off, why is it important that we use reconciliation to repeal Obamacare this Congress?

Reconciliation is a powerful tool to get legislation through Congress, but it has no value as a law-making exercise with President Obama in the White House (i.e. any Republican bill will be vetoed; any bill he would sign would get Democrat support and 60 Senate votes and not need the reconciliation process). Therefore, reconciliation should be used on a unifying effort to create a contrast with President Obama and send a winning message to the American people. And nothing unifies Republicans and provides a better messaging opportunity than repealing Obamacare.

But that is not all: Using reconciliation this year is important because it should be a trial run for 2017, when we will hopefully have a President willing to sign a full repeal bill. If we are short of 60 votes in 2017, then we will need to use the reconciliation process to accomplish this. If we do it now and do it right, we can ensure full repeal is a fait accompli in 2017.

Doesn’t the House bill qualify as an Obamacare repeal bill?

No. The bill does not even touch Obamacare’s main two entitlement expansions: the Medicaid expansion and the exchange subsidies. The bill leaves all of Obamacare’s new insurance rules and regulations in place. It also leaves many of Obamacare’s taxes in place.

But isn’t this all that can be done under reconciliation (under the so-called “Byrd Rule”)?

No, not even close. While some continue to debate where the “red line” is on what can and can’t be repealed under reconciliation, nobody is arguing that this bill contains all of the things that we know can be repealed using reconciliation. The most obvious examples are also two of the most important pillars of Obamacare: the massive Medicaid expansion and exchange subsidies. It is universally acknowledged that those important provisions qualify for reconciliation. The bill also leaves several tax increases and Medicare cuts in place, all of which are clearly reconcilable under the Byrd Rule.

I understand this is some people’s view that we can do more under the Byrd Rule, but hasn’t the Senate ruled out doing anything more than this?

No. The Senate has not adjudicated full repeal or many of the questions involved in passing a robust repeal bill. Those suggesting that it has are misinformed.

Regardless, the Senate should not be used as a foil to convince House conservatives not to do all they can on reconciliation. The House should pass a strong repeal bill and allow the Senate to navigate the Byrd Rule if they must.

Why is it so important that this be full repeal? Why shouldn’t we just do partial repeal? Isn’t this a good ‘half-loaf’?

The Obamacare repeal movement has been successful in the last 5 years in keeping full repeal intact. It has recognized that it will be much easier to repeal Obamacare as a whole if all of the mandates and entitlement expansions are repealed at once, since we know that the law is vastly unpopular when taken as a whole. The threat is that “repeal” is defined-down to simply mean repealing a couple high-profile provisions, while allowing the main pillars of the law to continue untouched. This package threatens that very outcome: defining down “full repeal” and jeopardizing the entire repeal effort.

So is full repeal possible using reconciliation?

Under reconciliation law and precedent, Congress should absolutely be able to repeal all of Obamacare using reconciliation. One way of accomplishing that is described in detail here, though any approach that accomplishes that goal should be on the table.

Even if the House passes full repeal, I heard the Senate doesn’t have the votes to pass it.

Not true. The Senate is on record just recently on full repeal. Remember, 51 Senate Republicans voted to pass the budget, which contemplated full repeal, including a repeal of all of the entitlement spending that is not included in the House repeal package. The Senate also took a vote on a stand-alone repeal amendment offered by Majority Leader McConnell to the transportation bill. While that vote failed with 49 votes, there were 5 GOP absentees, all or almost-all of which would surely have voted for it, as they have done time and time again in the past.

Ironically, the provision in this bill that threatens Senate passage the most is the Planned Parenthood provision, which we have recently seen a handful of GOP Senators vote against in recent weeks.

As you mentioned, this bill defunds Planned Parenthood. Shouldn’t we support any bill that defunds Planned Parenthood?

All conservatives should absolutely support defunding Planned Parenthood. However, we should remember that Planned Parenthood is only included in this package as a show-vote to paper-over the fact that there was no fight to defund Planned Parenthood during the last CR debate. This bill is not going to become law. When it comes to Planned Parenthood, this particular provision has limited marginal value above the stand-alone bills the House has already passed.

I get this bill falls well short and may set back the long-term repeal effort, but how can Members actually vote against it?

Leadership should not be putting conservatives in the position of having to vote against a partial repeal bill. But there is still time: Conservatives should demand leadership pull the bill, go back to the drawing board, and get it right.

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Reconciliation: Americans deserve the full repeal of Obamacare

This week, the House will be considering the Restoring Americans’ Healthcare Freedom Reconciliation Act, which would repeal the individual and employer mandates from Obamacare, as well as place a one-year moratorium on some Planned Parenthood funding. Heritage Action has endorsed the use of the tool to repeal Obamacare in its entirety, but believes this use of reconciliation is a mistake and that the bill should be opposed.

In the Obamacare fight, reconciliation’s aim is to set a legislative precedent for a Republican president to follow. Forcing a presidential veto of a bill repealing Obamacare will cause every presidential candidate to answer a simple question – what would you have done? Every serious Republican candidate will answer that they would repeal it in a heartbeat. But if reconciliation is simply used to remove a few provisions, it does not provoke the conversation and force a Republican nominee to continue to support repealing Obamacare in its entirety.

In addition to leaving one of Planned Parenthood’s main funding sources intact, the reconciliation tool is ineffective in defunding Planned Parenthood because it does not contain sufficient leverage to succeed. The reconciliation tool can only place a standalone bill on the President’s desk, which would be promptly vetoed. But because of the recent Center for Medical Progress videos, there is sufficient political will to carry a defund effort past the finish line. Those seeking to use reconciliation for Planned Parenthood prematurely concede defeat and content themselves with “putting a bill on the President’s desk,” when a legislative rider on the continuing resolution could succeed.

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Highway Trust Fund: Congress Considers Another Highway Bailout

Status: The federal government is responsible for 40 percent of national spending on surface transportation projects (highways and mass transit) through the Highway Trust Fund (HTF). Congress is looking at a bailout of the HTF that extends the federal highway program for up to 6 years and costs up to $317 billion. As a result of an $8 billion extension passed in July, on October 29 the legal authority for the HTF to distribute federal funds will expire, though sufficient funds will remain to continue covering transportation projects until June 2016.

The fact that HTF outlays have exceeded revenues since 2001 is evidence that federal surface transportation spending is out of control and inefficient. As an alternative, conservatives have long pushed the Transportation Empowerment Act (TEA) to return responsibility and revenue for transportation funding back to the states, placing infrastructure funding on a sound long-term footing.

Background: Major federal activity in highway construction began with the 1956 Federal Aid Highway Act, and with it came the HTF. The HTF was envisioned as a self-sustaining fund. Revenue would come in, and that money would be earmarked specifically for highway construction. The primary source for that revenue was, and remains, the federal gasoline tax, which at the time was 4.3 cents per gallon. Today the tax stands at 18.3 cents per gallon.

The federal highway system was completed decades ago, but Congress, accustomed to federal transportation spending, elected to continue the operation of the HTF and the taxes that supported it. Congress also created the Mass Transit Account, diverting around 17 percent of gasoline tax revenue to fund mass transit projects.

A Broken Fund: Today, the HTF is insolvent and will once again run out of money by June 2016. More fuel efficient cars and wasteful diversions have led to periodic transfers of federal money from the general fund into the HTF to cover obligations. Since 2008, more than $70 billion in bailouts have gone into the fund. Future shortfalls are growing astronomically, totaling an estimated $180 billion over the next decade. In the past, present, and future, funding methods for the HTF have proven deeply ineffective.

Wasteful Diversions: The gap between revenue and outlays in the HTF is self-inflicted, the result of excessive spending driven by a congressional infatuation with mass transit and pork-barrel diversions. According to the Heritage Foundation, 25 percent of all gasoline tax dollars paid into the HTF are used for a purpose other than highways.

Mass transit spending is ineffective. As spending on transit has climbed, transit ridership has decreased by 20 percent from 1980 to 2012, while driving increased by the same amount. In the meantime, traffic congestion has increased, with the average auto commuter spending almost a workweek every year (38 hours) sitting in traffic.

There are other diversions from the HTF. The Transportation Alternatives Program (TAP) allows funding for bike paths, museums, and highway beautification. Last year, the federal government spent almost $900 million on TAP. The Congestion Air Quality Mitigation Program, a program intended to help states reduce pollution, cost $2.2 billion in 2014 and has had little effect on air quality.

Unequal Treatment of States: The HTF has long allocated funds based on which states possessed the most political clout rather than on the basis of true highway needs. Transit money goes disproportionately to six cities: Philadelphia, Washington, D.C., New York, San Francisco, Boston, and Chicago. 28 states pay a larger proportion of the gasoline tax revenue than the proportion of federal highway spending that they receive. Northeastern states with large union presences get a bigger percentage of HTF revenue, while fast-growing southern states are left with more limited amounts.

Transportation Empowerment Act (TEA): TEA is the conservative solution to the current system. It would reduce the federal gasoline tax in increments over a five-year period, down to 3.7 cents per gallon. Over that time frame, remaining revenue from the gas tax and other user fees would be block-granted to the states. At the end of the five-year period, state governments would become responsible for their own transportation planning and financing. States have unique transportation needs that should be met at the discretion of state officials, not distant federal lawmakers.

Under TEA, wasteful diversions would be eliminated, ensuring that highway dollars fund highways. If states wish to fund transit projects with their highway dollars they are welcome to do so. The federal government would retain a small role in maintaining connections between state transportation networks.

Bad Solutions: But current negotiations seek to continue the policy of bailing out the fund rather than establishing a sustainable transportation policy. A proposal passed by the Senate in July threatened to inject up to $317 billion into the fund for 6 years, creating bigger fiscal cliffs for Congress to deal with down the road. Of the bailout, the supposed “pay fors” are expected to only provide three years of money, at most, and involve “tax compliance” measures and “fees & receipts” changes that are covert tax increases. Additionally, it is unlikely that selling barrels of crude oil from the Strategic Petroleum Reserve will raise as much money as expected – the Senate proposes selling 101 million barrels at $89 each, while the current price hovers around $50 a barrel. Because of the gimmicky nature of these pay fors, the bailout will begin adding to the deficit immediately, with later pay fors contributing even more.

The Export-Import Threat: The charter of the Export-Import Bank, a long-time hub of cronyism and special interests, expired this June. The bank faced overwhelming opposition from conservatives, but attempts to reauthorize the bank may be made by attaching an Export-Import Amendment to a HTF bill. In addition to making a bad bill worse, an Export-Import Amendment would bundle together two different policy issues that are best dealt with separately (for more information, see our Export-Import Brief). It is quite possible that Export-Import advocates will attempt to use Boehner’s lame duck status to attach a reauthorization to the Highway Transportation Fund during the month of October. For this reason, Heritage Action would support pushing the reauthorization date into next year, as long as such a move is not accompanied by an additional bailout.

Call to Action: The House should reject any long-term reauthorization that bails out the Highway Transportation Fund, especially if it includes a reauthorization of the Export-Import bank.

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