” In a new report, the Government Accountability Office (GAO) found that states (including Washington, D.C.) had spent just 45 percent of the funding they had received through the Coronavirus State and Local Fiscal Recovery Funds program, a $350 billion line item within the $2 trillion American Rescue Plan Act (ARPA), which passed in March 2021. Local governments had reported spending just 38 percent of their funds received through the same program.”
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“”The new GAO study confirms that the ARPA spending was not needed,” Chris Edwards, chair of fiscal studies at the Cato Institute, tells Reason. “By the fall of 2020, it was clear that the states were in good fiscal shape and not facing Armageddon as many policymakers were claiming. They did not need federal handouts.””
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“Before the American Rescue Plan passed, there was widespread skepticism about the proposed bailout, in part because three other pandemic-era spending bills had already sent about $360 billion in aid to states and localities.”
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“In a National Bureau of Economic Research working paper published in June 2022, a trio of researchers found that pandemic-era aid distributed to state and local governments had cost taxpayers about $855,000 per job saved. The stimulus spending had only “a modest impact on government employment and has not translated into detectable gains for private businesses or for states’ overall economic recoveries,” concluded University of California, San Diego economists Jeffrey Clemens and Philip Hoxie and American Enterprise Institute senior fellow Stan Veuger, the paper’s three authors.”
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“Iowa spent $12.5 million of its $4.5 billion cut of the federal bailout on a new baseball stadium near the Field of Dreams movie set. Because that’s an essential public health issue, of course.”
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“Michigan “reported spending $25.6 million on a travel marketing and
promotional campaign,” allegedly to “respond to the impacts of COVID-19 on tourism.” Louisiana, meanwhile, reported spending $115 million to construct roads and bridges.
Tourism is nice and roads are in some ways an essential government function, but the emergency COVID spending was meant to help states address an immediate public health crisis—or to offset the costs of it. It’s not at all clear how highway construction was a victim of the pandemic ”
“Fitch Ratings..downgraded the U.S. government’s credit rating due in part to Congress’ erosion in governance. Indeed, year after year, we see the same political theater unfold: last-minute deals, deficits, and, all too often, the passage of gigantic omnibus spending bills without proper scrutiny, along with repeated debt ceiling fights and threats of shutdown.
But these are just symptoms of a budget-making process that remains in desperate need of reform. With legislators chronically delinquent about following their own rules, the change may need to be as much cultural as procedural. No matter how good the rules are, they’re useless if politicians ignore them. And in a world where politicians are rarely told no when it comes to creating or expanding programs, most simply refuse to have their hands tied or behave as responsible stewards of your dollars.”
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“What we need is a comprehensive budget process under which programs like Social Security, Medicare, and Medicaid are no longer permitted to grow without meaningful oversight. Combined with other mandatory, more-or-less automatic spending items, they make up more than 70 percent of the budget. Thus, they must be included in the regular budget process and subjected to regular review. Only then will our elected representatives be forced to stop ignoring the side of the budget that requires their attention the most.”
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“Enter a “Base Closure and Realignment Commission (BRAC)”-style fiscal commission, an idea promoted by the Cato Institute’s Romina Boccia. This commission would be staffed with independent experts appointed by the president. It would be “tasked with a clear and attainable objective, such as stabilizing the growth in the debt at no more than the GDP of the country, and empowered with fast-track authority, such that its recommendations become self-executing upon presidential approval, without Congress having to affirmatively vote on their enactment,” Boccia explains.
I’m uneasy about delegating the president power to appoint “experts.” Unfortunately, Congress has proven they will never seriously address the problem unless forced to. The idea is not unprecedented. Congress has already delegated a lot of its legislative power to administrative agencies and the executive branch. It’s also how the political class dealt with the closures of military facilities after the Cold War—another set of hard choices they refused to make on their own.
What’s more, Congress would retain some veto power. If they disapprove of the proposal, the House and Senate can reject it through a joint resolution within a specified period. Whether it’s the best solution to address our fiscal problems remains to be seen, but it’s worth considering.”
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“Making continuing appropriations automatic in case of a lapse could remove the threat of shutdowns.”
“The bipartisan Problem Solvers Caucus—made up of 31 Republicans and 32 Democrats—has reportedly crafted a debt limit proposal that calls for Congress to return to so-called regular order for the passage of annual budget bills. That means the dozen appropriation bills that make up the federal budget would go through the full congressional process, including committee hearings and individual votes for each, rather than being rolled together in the massive omnibus packages that Congress has relied upon in recent years.
According to a draft proposal from the caucus published Wednesday by Axios, a return to regular order would be one of several changes the lawmakers in the group would demand as part of a debt ceiling deal. They’re also asking for the creation of a new fiscal commission to make recommendations on stabilizing the federal government’s dangerously high levels of debt, and the adoption of budget controls (similar to those that were in place between 2011 and 2018) to limit future spending increases.
If those terms are agreed to, the group’s framework would raise the debt ceiling to a level that won’t be reached until after 2025—in other words, until after the next election.
On their own, those proposals won’t solve America’s serious fiscal challenges. But they would be a series of good first steps toward taking the mess seriously and would avert the potentially catastrophic debt default that looms over everything in Washington right now.”
“In one scenario outlined by the CBO, Congress would have to cut 86 percent of all discretionary spending if it wanted to balance the budget by 2033 without touching the military, veterans programs, or entitlements like Social Security and Medicare. In a slightly altered version of that same scenario in which the Trump tax cuts were not allowed to expire as intended in 2025, Congress would have to cut 100 percent of discretionary spending—and the country would still face a $20 billion deficit.”
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“it should be clear that any attempt at bringing the federal budget deficit under control must kill (or at least wound) the Republicans’ sacred cows of military spending, entitlements, and the recent Trump tax cuts. Right now, however, leading Republicans including former President Donald Trump and Speaker of the House Kevin McCarthy (R–Calif.) have vowed to keep Social Security out of any long-term spending deals. Rep. Jim Banks (R–Ind.) has promised to oppose any bill that cuts defense spending.
As for the tax cuts, they’re technically temporary—a gimmick that allowed Republicans to game the CBO’s scoring of the tax cut bill—but keeping the lower individual income tax rates in place past 2025 is a top priority for Republicans.”
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“the CBO’s numbers aren’t partisan and neither is the blame for America’s massive budget deficits. These latest projections only reveal how difficult the choices ahead will be. If Republicans are serious about trying to balance the budget, there can be no more sacred cows.”
“It is true that, as of right now, Medicare is projected to be unable to pay all of its bills as early as 2028. Without congressional action, a stronger economy, or more likely, both, the government could end up without enough money to cover everything it promises enrollees within five years.
That would be unprecedented and would likely provoke a political crisis. But it is not quite the same thing as Medicare going bankrupt and ceasing to exist entirely. Alarm bells have sounded about Medicare’s trust fund for decades, with the exact date of when it would run out of money moving forward and back. But, eventually, Congress will need to act.
To understand the program’s financial situation, start with how Medicare is structured. Medicare is broken down into several different parts. Part A covers hospital care, stays at skilled-nursing facilities, and home health care. Part B pays for outpatient physician care. Part D is the prescription drug benefit, which is administered by private insurance plans. Most Medicare beneficiaries — anyone over age 65 — get their insurance directly through the government. But almost half are now insured through Medicare Advantage (also known as Part C) in which patients sign up for a private plan, paid for largely by the federal government, which provides a comprehensive suite of benefits. (Those plans are also more expensive to the government and their growing enrollment is contributing to the solvency problem”
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“Different parts of Medicare are funded in different ways, but when we’re talking about a Medicare funding crisis, we’re talking about the benefits paid by Part A: hospital services. Hospital bills for Medicare enrollees are funded almost entirely through the program’s dedicated payroll taxes. If those benefits cost more than the government receives in Medicare payroll taxes in a given year, as can happen in an economic downturn, the difference comes out of a trust fund earmarked specifically for Part A. The Medicare trustees, who issue annual reports on the program’s finances, project that Medicare spending will begin outpacing revenue again in 2024, requiring the program to dip into the trust fund. The trust fund is projected to be fully depleted by 2028 without further policy changes.”
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“Part B and Part D, however, are not facing the same financial crunch. They are funded primarily by general tax revenue, instead of an earmarked payroll tax, and premiums paid by beneficiaries. Their trust funds are projected to be sufficient for the foreseeable future.”
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“Medicare Advantage plans receive funding based on the type of service provided to their customer, which means money for hospital care comes from Part A. Annual Part A payments to Medicare Advantage plans is expected to increase from about $176 billion in 2022 to $336 billion by 2030.
Separate from the new budget proposal, the White House is attempting to rein in the payments to Medicare Advantage plans (from an 8 percent increase last year to a proposed 1 percent increase in the coming year). Republicans and the health insurance industry have slammed that proposal as a cut to Medicare, an example of how it can be politically difficult to get Medicare spending under control.
Biden’s budget will likely jumpstart a new debate about Medicare solvency. But it’s only a beginning.
Congress has passed provisions to reduce Medicare spending in recent years, such as the Inflation Reduction Act’s plan for the program to negotiate some prescription drug prices. But lawmakers have also acted to avert any cuts to how much the program pays doctors, hospitals, and other medical providers.
Both tax increases and any spending reductions can be a tough sell in Congress. So can increasing the eligibility age, an oft-floated idea that still amounts to cutting benefits for seniors.
Biden is going with tax hikes in his budget plan. But it’s not yet clear if lawmakers are really willing to act on his or any proposal to improve Medicare’s finances.
They still have five years before the Part A trust fund will run out, according to the latest available projections. The Medicare trustees urged Congress to act soon to avert the crisis, in order to minimize the risks for patients and providers. But unfortunately, lawmakers have a habit of waiting until the last minute to act.”
“By signing the bill, Biden will be forced to agree to a repeal of the Pentagon’s policy requiring troops to receive the Covid vaccine or face expulsion from the military.
The repeal is a victory for Republicans who pushed to do away with the policy during negotiations on a final defense bill. Conservatives have hammered the administration for forcing out thousands of military personnel and piling onto an already rough recruiting environment.
Rescinding the August 2021 mandate is a black eye for Biden and Defense Secretary Lloyd Austin, who still back the policy as a matter of health and readiness for the armed forces.”
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“The bill, however, doesn’t prohibit a new vaccine requirement in the coming months, meaning Austin could implement a new policy when the 2021 directive is repealed. Doing so, however, would spark a battle with the Republican-controlled House next year.”
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“Both parties roundly rejected Biden’s $813 billion military spending plan as too low to meet worldwide threats and counter the impacts of inflation on the Pentagon.
Instead, Congress endorsed that hefty $45 billion increase to Biden’s budget, which already would have boosted defense by about $30 billion over last year’s level. The final bill amounts to an increase of roughly $75 billion, or nearly 10 percent, from the previous year.
The additional money went toward buying more weapons as well as efforts to blunt the effects of inflation on Pentagon programs, troops and construction.
This marks the second straight year that Congress has significantly rewritten Biden’s budget. Defense legislation approved last year authorized an increase of $25 billion to the administration’s first proposal. It’s a pattern Rep. Mike Rogers (R-Ala.), who is set to chair House Armed Services next year, chalked up to Congress and the White House rarely seeing eye to eye on federal spending.”
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“Congress foiled one of the few major changes Biden proposed to the nuclear arsenal, keeping alive a sea-launched cruise missile first proposed by the Trump administration.
Proponents of canceling the developmental program criticized it as costly, destabilizing and redundant, because Biden kept low-yield nukes fielded by the Trump administration deployed aboard ballistic missile submarines. A 2021 report by the Congressional Budget Office estimated the missile will cost $10 billion through 2030.
But lawmakers ultimately authorized $45 million to continue the program after top military brass, including Joint Chiefs Chair Gen. Mark Milley, publicly expressed support for the weapon, in a split with Austin and other top civilians who argued the missile isn’t needed.”
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“Lawmakers also voted to require the Pentagon to keep most of its inventory of B83 nuclear gravity bombs, which Biden proposed retiring. The agreement prohibits retiring or deactivating more than 25 percent of the stockpile until the Pentagon provides Congress with a study on how it will field capabilities to strike hard and buried targets.”
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“Lawmakers authorized $32.6 billion to buy new ships, boosting the budget by $4.7 billion and ordering up three new hulls the Navy didn’t ask for.
The additions include a third unrequested Arleigh Burke-class destroyer, which the White House said it “strongly opposes” when the House approved it. Navy leaders have questioned whether a strained shipbuilding base can handle a rate of three destroyers per year. The bill also set a legal floor of 31 amphibious warships for the Navy, which the administration also opposes, arguing it would “unduly constrain” military planning.
Congress also threw a wrench into Navy plans to retire two dozen ships. The move was aimed at saving money but it also drew criticism on Capitol Hill because the plans would have scrapped some troubled littoral combat ships relatively early in their service lives.
The compromise bill ultimately bars the Navy from retiring a dozen warships it had planned to decommission, including five littoral combat ships and a Ticonderoga-class cruiser.
The legislation also crimps efforts by the Pentagon to retire dozens of aircraft. It jams up the administration’s plans to retire Navy EA-18G Growler electronic warfare jets, requiring the service to maintain a fleet of at least 158 aircraft through fiscal 2027. The bill similarly blocks efforts by the Air Force to retire some F-22 fighters through fiscal 2027.
Lawmakers also limited the Air Force’s ability to reduce its fleet of E-3 Airborne Warning and Control System planes below a certain level. Those restrictions would be eased if the service submits an acquisition strategy or awards a contract for its successor, the E-7 Wedgetail.
Lawmakers, meanwhile, boosted procurement for a swath of aircraft across the military services. Most notably, Armed Services leaders approved $666 million for eight Boeing F/A-18 Super Hornets the Navy didn’t seek in its budget, keeping the production line active.”
“Biden’s plan would see the federal government spend “what amounts to nearly a quarter of the nation’s total economic output every year over the course of the next decade”—a threshold that has never been hit since World War II, with the exception of 2020 and 2021—while also collecting “tax revenues equal to just under one-fifth of the total economy,” which would also near a record high.
That really sums it up. Record levels of spending that would well exceed even a historically high share of the economy devoted to funding the government.
While Biden’s proposal does not envision budget deficits rising as high as they did last year—when the government spent $3.1 trillion more than it collected in tax revenue—his budget calls for deficits of at least $1.6 trillion for the foreseeable future, the Times reports. The national debt measured as a share of the economy’s overall size will exceed the all-time record high of 113 percent, set during World War II, by 2024. And it will keep growing.”
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“Like all presidential budgets, Biden’s is mostly aspirational; Congress will have the final say. But with Democratic majorities in both chambers, something similar to the president’s proposal is likely to be adopted.
After Republicans effectively traded away any claim to fiscal responsibility during the Trump administration by backing bigger budgets and higher deficits, Biden rode into office with the chance to spend big with fewer of the usual political impediments. In his joint address to Congress last month, Biden promised to build “a union more perfect, more prosperous, and more just.”
Apparently it will also require more spending, more taxes, and more borrowing.”
“The state, which has no income tax, pulls about a third of its budget from the federal government, a higher share than many other states, he said. That’s partly due to agricultural assistance and federal aid disbursed after natural disasters, but also because Texas has a large share of enrollees in entitlement programs like Medicaid.”