House GOP tempts fall government shutdown with longshot spending demands

“In addition to Republicans’ pledge to slice $130 billion from the $1.7 trillion government funding package that passed in December, conservatives want to take the process old-school. Rather than passing one massive bill, they’re calling for individual votes on the dozen appropriations bills that set annual budgets for different agencies, a more time-consuming but transparent procedure that recent Congresses have struggled to complete.
They’re also planning to allow an amendment free-for-all, which is all but certain to further drag out or trip things up.

Additionally, House Republicans say they’ll refuse to negotiate with the Senate until the upper chamber passes its own spending bills, which hasn’t happened in years. Typically, Senate appropriators have instead entered into bipartisan talks with their House counterparts, only burning valuable floor time on a package they’re certain would pass both chambers.

And GOP demands expand beyond funding the government. Republicans say they won’t back a debt limit increase unless they get their way on spending cuts or measures to reign in the ever-increasing $31 trillion debt. The timing of that could be tricky, however, as the Treasury Department could hit its credit card limit this summer, while federal cash expires on Sept. 30.

A debt ceiling hike will arguably make for a much bigger battle in Congress, leaving even less time and patience for bipartisan talks on funding the government.”

The GOP’s Current Plan To Cut Spending Is a Political Failure

“According to the Manhattan Institute’s Brian Riedl, the GOP plan so far is to cut $130 billion from discretionary appropriations. Unfortunately, the defense budget and veterans health funds are excluded from cuts, despite making up $993 billion out of $1,602 billion discretionary budget. As Riedl notes, their plan will require “freezing those two items and cutting everything else by 21% immediately.”
This maneuver guarantees political failure for the Republicans’ plan.”

“imposing cuts on only a small share of the discretionary budget excludes trillions of dollars from scrutiny and is a political nonstarter.”

“while limiting discretionary spending is a good start, fiscal sustainability requires that Congress also cut the mandatory side of the budget. Indeed, Social Security, Medicare, and Medicaid—not defense or education—are still the chief drivers of our future debt, just as they have been in the past. Along with the interest the Treasury must pay on the debt, these three programs will be responsible for 86 percent of federal spending between 2008 and 2032, says Riedl. In other words, no level of discretionary spending cuts will ever be enough to control the upcoming debt explosion.”

Congress Can Reduce the Deficit by $7.7 Trillion in 10 Years

“the CBO published its report on budget options. The two-volume document highlights options for deficit reduction. One volume details large possible spending reductions while the other lays out small ones—so the options are plenty. They include important reforms of some of the major drivers of future debt: Medicare, Medicaid, and Social Security.

All told, it’s possible to achieve deficit reduction of $7.7 trillion over 10 years. That’s enough to accomplish what some people mistakenly believe to be out of reach: balancing the budget without raising taxes. There are also a few options to simplify the tax code by removing or reducing unfair individual tax deductions and by cutting corporate welfare.

For instance, it’s high time for Congress to end tax deductions for employer-paid health insurance. This tax deduction is one of the biggest of what we wrongly call “tax expenditures.” It’s responsible for many of the gargantuan distortions in the health care market and the resulting enormous rise in health care costs. The CBO report doesn’t eliminate this deduction; instead, it limits the income and payroll tax exclusion to the 50th percentile of premiums (i.e. annual contributions exceeding $8,900 for individual coverage and $21,600 a year for family coverage). The savings from this reform alone would reduce the deficit by roughly $900 billion.

A second good option is to cap the federal contribution to state-administered Medicaid programs. That federal block grant encourages states to expand the program’s benefits and eligibility standards—unreasonably in some cases—since they don’t have to shoulder the full bill. CBO estimates that this reform would save $871 billion.

CBO also projects that Uncle Sam could reduce the budget deficit by $121 billion by raising the federal retirement age. CBO’s option would up this age “from 67 by two months per birth year for workers born between 1962 and 1978. As a result, for all workers born in 1978 or later, the FRA would be 70.” Considering that seniors today live much longer than in the past and can work for many more years, this reform is a low-hanging fruit.

Congress could save another $184 billion by reducing Social Security benefits for high-income earners. I support a move away from an age-based program altogether since seniors are overrepresented in the top income quintile. Social Security should be transformed into a need-based program (akin to welfare). Nevertheless, the CBO’s option would be a step in the right direction.”

Five ways lawmakers smacked down Biden’s Pentagon plans

“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.”

“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.”

“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.”

“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.”

“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.”

“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 Spending Spree Is Unprecedented

“Despite campaigning as a moderate, President Biden has dramatically accelerated federal spending during his time in office. He has now spent more in his first two years than President Trump did during his last two years at the height of the pandemic.
Official estimates from the Congressional Budget Office (CBO) show that, since January 2021, legislation signed by President Biden has set in motion a record $3.37 trillion in new spending, surpassing Trump’s previous record of $3.28 trillion during the 116th Congress.

Like Trump, Biden has overseen significant pandemic-related relief, but he also has ramped up spending on priorities well beyond COVID-19. The American Rescue Plan Act (ARPA), passed in March 2021, cost $1.8 trillion, more than half of the new spending enacted during Biden’s time in office.

But it’s the other expensive legislation Biden has signed that pushed him past Trump. The much-vaunted Infrastructure Investment and Jobs Act spent another $765 billion, though the infrastructure expenditures will occur over the course of the next five years. The Jon Stewart-promoted Promise to Address Comprehensive Toxics (PACT) Act contributed another $278 billion, while the recently passed CHIPS Act “chipped” in $255 billion more. And though congressional Democrats failed to pass Biden’s Build Back Better legislation earlier this year, its eventual successor, the Inflation Reduction Act, is still estimated by the CBO to add another $51 billion to the federal ledger.”

“the CBO estimated in June that a number of the president’s executive actions total another $532 billion, including interest expenses. The list of actions reviewed by the CBO include $300 billion for an expansion of the Supplemental Nutrition Assistance Program, $34 billion for the extension of various healthcare subsidies, and $85 billion for pauses in student loan repayment.

What’s more, on the topic of student loans, Biden has since taken even greater actions. One estimate puts his most recent pause at another $40 billion, while the cost of fuller loan forgiveness would be more than $400 billion. Taken together, these add more than another $1 trillion in spending to Biden’s legislative impact, and help explain how the administration racked up a whopping $4.8 trillion in new borrowing in just the last two years.”

Is the stimulus to blame for high inflation?

“The American Rescue Plan, intended to stimulate the economy from the effects of the pandemic, was a massive spending package that passed in March 2021. The legislation included $1,400 checks for individuals, expansions to unemployment insurance and child tax credit benefits, and hundreds of billions in aid to state and local governments.

For months, economists have debated the American Rescue Plan’s impact on inflation. While many economists agree that the stimulus law did worsen inflation by giving people more money to spend, they continue to disagree about the extent. The debate is, in part, about what else might be to blame in the United States and globally. Inflation started shooting up in early 2021 after the package passed and has remained stubbornly high since. But even without the stimulus, inflation would have increased. The coronavirus led to factory shutdowns around the world, shipping backlogs, and labor shortages, all of which have strained supply chains and pushed prices higher.

The disagreement essentially boils down to economists’ views on how pandemic-related factors independent of the stimulus, such as a shift to working from home, have contributed to inflation and how unique inflation has been in the United States compared to other countries.”

“Increased housing costs have been a big driver of inflation — shelter is the largest component of the Consumer Price Index and makes up about 30 percent of overall inflation as measured by the index. Dean Baker, a senior economist and co-founder of the liberal-leaning Center for Economic and Policy Research, argued that new research on housing inflation helped support the idea that price gains were mostly driven by a mass shift to remote work and not the stimulus package. As people shifted to remote work, housing prices went up, and those prices in turn pushed overall inflation higher.
An analysis published by the Federal Reserve Bank of San Francisco on September 26 examined the rapid rise in housing prices and whether remote work, or other factors like fiscal stimulus, led to the increase. The authors — Augustus Kmetz, John Mondragon, and Johannes Wieland — wrote that as more people started working remotely, they sought out additional space at home. That resulted in a spike in housing demand and helped lead to a surge in prices.

The researchers estimated that remote work resulted in house prices rising by about 15 percent from November 2019 to November 2021, which accounts for more than 60 percent of the overall increase in house prices.

“It means we can’t blame the stimulus. Clearly that added to it,” Baker said. “But the main story there is this big switch to working from home.””

“Holtz-Eakin said it was clear that the package significantly drove up inflation and pointed to research from the Federal Reserve Bank of San Francisco, which published an analysis in March that found that “fiscal support measures designed to counteract the severity of the pandemic’s economic effect” could have “contributed to about 3 percentage points of the rise in U.S. inflation through the end of 2021.”

The analysis — which was written by Òscar Jordà, Celeste Liu, Fernanda Nechio, and Fabián Rivera-Reyes — found that the United States’ “core” inflation, which strips out volatile food and energy prices, rose more quickly in 2021 compared to the average rate of core inflation of other wealthy countries. Compared to the other countries — Canada, Denmark, Finland, France, Germany, Netherlands, Norway, Sweden, and the United Kingdom — the United States injected more fiscal stimulus into its economy.

“The difference is really the stimulus in the US,” Holtz-Eakin said.

But Josh Bivens, the director of research at the left-leaning Economic Policy Institute, said that inflation has been ubiquitous “across every advanced economy” since the pandemic began and he didn’t believe the American Rescue Plan was a major contributor to inflation. An analysis published in August by Bivens, Asha Banerjee, and Mariia Dzholos examined the United States’ core inflation from December 2020 to May 2022 and compared it to core inflation in other Organization for Economic Cooperation and Development (OECD) countries. To calculate the rate of acceleration in each country, the researchers took the difference between the “post-pandemic” core inflation and the “pre-pandemic” core inflation using data from 2018 and 2019.

The researchers found that the acceleration in the United States’ core inflation was “on the higher side” but was “far from the top” and not that far above the average for all other OECD countries. All but one OECD country saw an acceleration in core inflation, the researchers found. For example, Canada’s core inflation grew at a slightly slower rate compared to the United States, but Portugal’s sped up faster, according to the analysis.”

“Bivens also pointed to the Federal Reserve Bank of San Francisco’s research on housing inflation and said that price gains in the United States were mostly driven by pandemic-related events that would have occurred without the stimulus — like supply chain disruptions and increased demand for housing. And although he said he believed the American Rescue Plan had inflationary impacts, the trade-off was necessary to stave off higher unemployment numbers.”

Where Did Puerto Rico’s Disaster Relief Go?

“Billions of dollars were allocated by the federal government to rebuild Puerto Rico following Hurricane Maria and recovery efforts are projected to cost U.S. taxpayers another $50 billion, according to Federal Emergency Management Agency (FEMA) estimates. But corruption by FEMA officials in Puerto Rico has slowed down progress dramatically. Back in 2019, FEMA’s deputy regional administrator in charge of Maria recovery was indicted as part of a $1.8 billion bribery scheme involving an Oklahoma-based electric company. Officials on the island were also indicted for allegedly steering $15 million in federal rebuilding contracts to preferred contractors. And the Jones Act shares some of the blame since its restrictions on shipping to U.S. territories like Puerto Rico drive up costs for imported products significantly and delay the arrival of necessary supplies during emergency situations.
Congress has begun to ask questions about how exactly that money has been spent over the last five years.”

Inflation Hits 8.2 Percent After Another Month of Sharply Rising Prices

“Inflation continued burning a hole in Americans’ wallets last month.
Prices rose by an average of 0.4 percent overall, driven primarily by rising costs for housing, food, and medical care. According to the newly released data from the Bureau of Labor Statistics, prices rose by 8.2 percent overall during the last 12 months ending in September. Food prices have climbed by 11.2 percent in the past year, while energy prices are up by a whopping 19.7 percent despite falling by about 2 percent in September.”

“Particularly worrying is that so-called core CPI, which filters out more volatile categories like food and energy prices, rose by 0.6 percent last month. In other words, inflation is widespread throughout the economy and no longer contained to the categories that were driving the phenomenon a year ago. Far from being transitory, inflation now seems to be a deeply rooted problem.”

“rising interest rates needed to combat inflation will rebound onto the federal balance sheet by making the federal debt more expensive. Even when interest rates were at or near historical lows, interest payments on the national debt were on course to become one of the largest segments of the federal budget within the coming decade. Higher interest rates mean the government will have to spend a significantly larger amount of revenue on simply managing the existing debt—a nasty feedback loop that makes the government’s already untenable fiscal situation considerably worse.”

Selling a Home? The D.C. Down Payment Assistance Program Will Give You Up to $202,000.

“the mayor urged residents to take advantage of the city’s newly expanded Home Purchase Assistance Program (HPAP). Starting October 1, the program will provide residents with up to $202,000 in interest-free loans to help cover the costs of a first-time home purchase, plus an additional $4,000 to help cover closing costs.
The decades-old program previously provided home purchasers with $80,000 in interest-free loans. The increase is justified, officials argue, by today’s hot housing market.

“We knew we had to do something to make the program more viable for potential home buyers,” Deputy Mayor John Falcicchio told The Washington Post last week. “We wanted our residents to be the most prepared as they go into this hot housing market.”

D.C. is certainly an expensive place to buy a home.

The real estate listing company Zillow says the typical D.C. home is worth $707,747—roughly twice the typical home cost nationally. Prices have increased 9 percent so far this year, according to the Case-Shiller home price index. That’s slightly more than the national increase in prices but far less than the 20-plus percent increases in such cities as Atlanta and Tampa.

These interest-free loans will probably increase those prices further. Indeed, the value of that subsidy is more likely to be captured by home sellers than by homebuyers.

The whole purpose of down payment assistance is to get more people to buy homes. That’s another way of saying that it is increasing the demand for home purchases. Economics 101 tells you that increasing demand, all else being equal, will increase prices. Homebuyers with more money can be less price-sensitive, and home sellers can be choosier about purchasers. All that encourages those sellers to increase prices.”

“In a normal market, you’d expect price increases to induce a supply effect. More demand encourages suppliers to enter a market, which helps moderate price increases.

But don’t expect to see much of that in D.C.’s housing market. For starters, the city has only so many vacant or redevelopable plots of land where new housing could go. Redeveloping existing housing into more units is constrained by the city’s zoning laws and historic preservation rules. Meanwhile, rising inflation and persistent supply-chain issues have caused new home construction to plummet, as high material costs make builders less willing to take on new projects.”