Thursday, July 20, 2017
A Great Budget Idea Unfortunately With The Weak Kneed Republicans, It Will Never Pass
While Congress has fumbled the Obamacare repeal, one promise seems to be on the road to being kept within the House Budget Committee. Committee Chairwoman Diane Black (R-Tenn.) has released a budget plan for FY 2018 that details major cuts to so-called mandatory spending, presents the tax plan President Donald Trump has boasted about, and reins in government waste. Finally, Republicans in Congress have the opportunity to show the American people comprehensive change is afoot, now they must simply act on it.
The budget is comprised of two types of spending. The mandatory spending that represents the vast majority of government spending and is nearly impossible to change from year to year — it operates automatically based on eligibility for programs — without an act of Congress. Social programs such as Medicaid, Medicare and Social Security are funded here, as well as income guarantees and tax credits.
In fiscal year 2016, this accounted for $2.7 trillion or 70 percent of total government expenditures.
Conversely, discretionary spending is government money budgeted for each executive department and government branch to execute their duties. Congress is supposed to determine the budgets each year through the appropriations process.
BLACK’S PLAN CHANGES LAW, CALLING FOR AN AMBITIOUS $203 BILLION CUT TO MANDATORY SPENDING OVER THE NEXT 10 YEARS, MAKING THIS BUDGET A HISTORICAL WITH CUTS THAT HAVE NOT BEEN SEEN SINCE THE 1990S.
The Budget Committee presents a number to other committees and those groups determine how money will be appropriated to their mandatory spending. For example, Black’s budget proposes $10 billion to be cut by the House Appropriations Agriculture Subcommittee over the next ten years, it recommends these cuts through the enforcement of work requirements for Supplemental Nutrition Assistance Program, formally known as food stamps, participants. If the budget passes, the Agricultural Committee would be bound to this budget, but ultimately, they would decide how to achieve it, keeping in mind Budget Committee recommendations.
As the budget explains, “Under current law, the Congressional Budget Office [CBO] estimates that the annual budget deficit will balloon to over $1.4 trillion by 2027… Without significant reforms, deficits will continue to rise beyond the 10-year budget window, driven mostly by automatic, mandatory spending programs. The debate about spending and fiscal restraint is not simply a mathematical one. It is a moral debate about the country and government we want. It is about the burden we are willing to leave to our children and grandchildren.”
Black also discusses significant reforms to welfare programs, refocusing the goal from serving as many people as possible to lifting people out of poverty. Black encourages states to take more authority over the design and implementation of these programs, and to shift the responsibility off the federal government.
The cuts coincide with a plan to simplify the tax code by lower tax rates for individuals and consolidating the current seven individual income tax brackets, reducing the corporate tax rate, and transition the tax code from a “worldwide” system to a “territorial” system.
The switch to a territorial system would allow U.S. companies to only pay taxes on income made in the U.S. and would exempt most or all foreign income; the territorial system creates an incentive for companies to reinvest their earnings into the U.S. without paying additional taxes.
Black also targets abuse in programs most susceptible, such as the Earned Income Tax Credit (EITC) and Child Tax Credit programs. With 24 percent of EITC payments being issued improperly in FY 2016, totaling $16.8 billion, this budget would suggest changing the requirements to receive the credit, such as the presentation of a social security number to claim a child.
AS BLACK ENCOURAGES A REVALUATION OF OUR TAX CODE, SHE IS ALSO TARGETING WASTE THROUGHOUT THE GOVERNMENT.
In FY 2016, the U.S. government made a total of $144.3 billion in “improper payments”; defined as any government payment made in an incorrect amount, mostly overpayment, to the wrong individual or entity, or for the wrong reason. This is a significant increase from $107.1 billion in 2012.
According to Government Accountability Office reports, more than 75 percent of the problem lies within Medicare, Medicaid, and the EITC.
Black demands reform in these areas. Her budget calls for, “An independent commission to find tangible solutions to reduce government-wide improper payments by the end of the year. This new commission would be charged with finding ways to tangibly reduce government-wide improper payments by 50 percent within the next five years. This timeframe recognizes that this problem is complex and there is not a silver-bullet solution that could be implemented overnight. Rather, the commission should methodically solicit input from experts within government, such as GAO, and the private sector to determine the best ways to tackle this problem.”
With mandatory spending programs like Medicare and Medicaid making billions of dollars in improper payments, it is clear reform must be achieved before increases in funding can be granted.
Black also encourages agencies to use the spending cuts suggested as a floor, rather than a ceiling. With the nation sitting $20 trillion dollars in debt, she concludes, “Our budget, Building A Better America, balances within 10 years. For too long, the federal government’s excessive spending has put future generations at risk. Massive tax increases or crippling austerity measures are the natural conclusion of our current rate of spending, and future generations will pay the price. Failure to take swift and decisive action is not only inexcusable, it is immoral.”
As a bonus, the more spending cuts the committees choose to make, the bigger tax cuts the budget will be able to propose. Part of Black’s budget relies on the funding cuts associated with the repeal of Obamacare, placing pressure on the Senate to pass a repeal and replace bill. Unfortunately, that legislation is now on the rocks.
Still, Black’s budget could be a historic reduction and restructuring of the country’s excessive, so-called mandatory spending, but only if Republicans in Congress are prepared to fulfill their promises. Black’s budget balances the budget in ten years, cuts spending, restructures the tax code, reigns in government spending and all while maintaining defense spending.
Fiscal security is quickly becoming a national emergency, Republicans have had years to prepare for a conservative plan like this one, now they simply must be willing to implement it.
This is a guest post by Natalia Castro a contributing editor at Americans for Limited Government.