Beware the Budget Busters in the Lame Duck
The lame duck Congress will return to Washington with an important to-do list that includes either finishing the seven unfinished appropriation bills or extending the continuing resolution (CR) to avoid a shutdown on December 7. But press reports suggest there may be another half-dozen issues that could arise in the lame duck. Congress should fully offset all this legislation to avoid adding to deficits even more than the $2.4 trillion that has already been added this past fiscal year.
See the list of upcoming fiscal deadlines here.
Some of the issues that Congress may address in the lame duck:
- Disaster Relief from Hurricane Michael – While disaster relief certainly fits the definition of an emergency – sudden, unforeseen, urgent – it would be better if such legislation were offset so as not to add even more to the debt. Congress’ inability to find a way to address these large-scale natural disasters in a fiscally prudent way means they may be tempted to let business as usual prevail and place the cost of these relief efforts once again on the nation’s credit card. No exact dollar amount has yet been requested, but similar hurricane relief efforts have cost tens of billions of dollars. Last year, we proposed $100 billion in offsets lawmakers could consider to pay for hurricanes.
- Tax Cuts 2.0+ – The House approved in September another $657 billion of tax cuts without offsets, extending expiring provisions of the 2017 tax bill. In addition, President Trump recently announced a new effort to provide middle-class tax cuts, though a later press release clarified no action would be taken this Congress. Encouragingly, Trump also suggested these tax cuts will be revenue-neutral. No details are currently available regarding the scope of these middle-class tax cuts or what those pay-fors may be. Lawmakers could consider our offset ideas from Five Ways to Improve the Senate Tax Bill.
- Tax Extenders and Technical Corrections – The end of the year is the traditional deadline for Congress to act on tax provisions that expired in 2017, retroactively renewing them for another year. In addition, the first provision of last year’s tax cuts expire: an expanded deduction for medical expenses. The cost of such an effort could range from approximately $12 billion for a one-year extension to more than $100 billion over ten years if the extensions are made permanent. Congress may also consider technical corrections to last December’s tax cuts, which may also have a cost. Lawmakers could consider the offsets we proposed in our 2015 PREP Plan.
- Reauthorize the National Flood Insurance Program – Efforts to reform or privatize the National Flood Insurance Program (NFIP) have been ongoing for some time. When the program is due to expire, Congress typically provides temporary funding to delay again making any final determination as to how the program should operate in the future. The current program expiration date is November 30. With the program currently $20.5 billion in debt to the U.S. Treasury, Congress is rapidly running out of time again to enact needed reforms to ensure the program is fiscally responsible. We discussed some prominent reform options here.
- Pension Reform for Multiemployer Programs – In February, Congress created a Joint Select Committee on Solvency of Multiemployer Pension Plans. The Committee conducted numerous hearings over the past eight months to review the problems and conditions which resulted in a number of these pension plans, as well as the Pension Benefit Guarantee Corporation (PBGC), being in serious financial straits. In 2015, according to the PBGC, these multi-employer pension programs were underfunded by more than $630 billion with 95 percent of these plans’ participants being in plans that are less than 60 percent funded. The select committee is required to report its recommendations to Congress prior to November 30 and various options are still under review. In a preliminary analysis, CBO estimated that proposed reform legislation sponsored by Committee Co-Chair Sherrod Brown (D-OH) could cost over $100 billion over ten years, though the costs could be less under different interpretations of the bill’s language. We described the situation in more detail here and listed some commonly discussed options for the committee to consider.
- “Donut Hole” Fix in the Medicare Part D Program – Congress is also reportedly considering reversing a provision enacted last February that increased the discount drug companies are required to provide to seniors to fill in the "donut hole" in the Medicare Part D program. The cost of a reversal is approximately $12 billion based on a revised estimate of the policy CBO put out after it was enacted, or a smaller effort to scale back the policy to its original savings estimate could cost $4 billion. Efforts failed to add this reversal to an opioid addiction prevention bill in late September, and a renewed effort will likely be made in one of the must-pass end of year appropriations bills. The President's budget included many health savings options which could be used to pay for this proposal, and the Administration has also been pursuing administrative savings. It is particularly concerning that policymakers are considering reversing one of the few offsets included in the Bipartisan Budget Act of 2018. After lawmakers enact deficit reduction proposals, they should not reverse them in the same year, especially not without alternative offsets.
At a time when the 2018 budget deficit increased by 17 percent from the previous year and the 2019 deficit is projected to be close to $1 trillion, Congress must put the brakes on additional deficit-increasing legislation. Failure to do so will push our national debt even higher, make higher interest rates more likely, and slow long-term economic growth.