Today, the Senate and House are expected to vote on the Bipartisan Budget Act of 2018. The agreement would raise the Budget Control Act caps by $296 billion with only a third of that being paid for, suspend the debt ceiling until March 2019, extend the unreformed Children’s Health Insurance Program (CHIP) for ten years, provide nearly $90 billion for disaster recovery, and make numerous other changes including so-called tax extenders. As Heritage Action stated yesterday, the “deal is fiscally irresponsible and creates serious long-term budget challenges.”
As The Heritage Foundation noted yesterday, there is one positive in the fiscally irresponsible package. It would provide a “much-needed investment in our military’s readiness and preparedness capabilities and would put defense funding back on the right path.” It would do so by boosting base defense spending by $165 billion over the next two years. The bill would also allow for $70 billion in Overseas Contingency Operations funds each of the next two years that are not subject to the new, though obviously meaningless, budget caps.
That much-needed investment comes at a substantial cost. Overall, the bill is likely to increase the ten-year spending baseline by $1.5 trillion. The Wall Street Journal editorial team explained, “Democrats backed up the truck for funding on everything from community health centers to billions on child-care grants to $20 billion for infrastructure. The tally comes to $131 billion more in discretionary spending over the next two years.”
The WSJ editorial also noted that “Democrats wanted dollar for dollar parity with defense spending.” In fact, congressional Democrats did significantly better than dollar-for-dollar. Justin Bogie, a senior policy analyst in fiscal affairs at The Heritage Foundation, explained, “The deal would boost base defense spending by $34 billion more than nondefense. However, when spending outside the cap is included, this is simply not the case.” For example, congressional staff suggested last month that additional domestic spending could be contained outside the budget caps to achieve the “parity” Democrats sought. Additionally, multiple reports suggest there is a “gentlemen’s agreement” to include an Obamacare reinsurance program in the March 23 omnibus spending measure.
Earlier this week, conservatives warned, “GOP leaders have been planning to pump tens of billions of dollars’ worth of new federal spending into the veins of insurance companies that are hemorrhaging red ink on the Obamacare exchanges.” That includes a provision “sponsored by Sens. Susan Collins (R-Maine) and Bill Nelson (D-Fla.), that would give insurers an additional $10 billion (and perhaps more) in federal cash.”
The $90 billion in disaster recovery spending should not be overlooked. As The Heritage Foundation explained last year, emergency spending must meet five criteria established by President George H. W. Bush’s OMB in 1991: necessary, sudden, urgent, unforeseen, and not permanent. While federal relief to victims of hurricanes and wildfires is at times warranted, the disaster relief provision in this budget deal fails the five part test after assessing the damage inflicted by Hurricane Harvey and the California wildfires last fall. At the very least, Congress should attempt to act in a fiscally responsible manner by offsetting funding that is not truly “emergency” in nature.
The plan also contains so-called tax extenders, which include: credits for certain wind energy facilities, geothermal heat pumps, fuel cell projects, and hybrid solar lighting systems; expensing rules for film, television and theater production; credits for railroad maintenance; and many others. Heritage explains that by “picking winners and losers, these corrupt policies distort efficient market outcomes” and suggests “reanimating dozens of expired tax preferences” directly contradicts the recently passed Tax Cuts and Jobs Act.
Finally, as Heritage noted, “Providing another debt limit suspension in conjunction with a massive spending increase is a mistake.” The suspension could allow America to take on more than $1 trillion in additional debt over the next 13 months. Rather than ignoring this problem, Congress should pursue mandatory reforms that are essential to controlling our nation’s long-term debt. Adding to the problem, the bill’s offsets are essentially gimmicks designed to give the perception of some fiscal restraint without actually providing any meaningful reforms.
To be clear, there is some laudable policy included in the Bipartisan Budget Act, including the much-needed defense spending increase. However, taken as a whole, the “deal is irresponsible and moves the country in the wrong direction.”