Budget watchdogs howl over deficit-ballooning deals
Budget watchdogs are howling over last-minute deals that will add hundreds of billions of dollars to the deficit as part of year-end spending legislation.
Measures tacked onto government spending bills this week will amount to $426 billion in lost revenue over the next decade, adding 30 percent to the cost of annual appropriations bills, according to the Joint Committee on Taxation.
“This budget deal just keeps getting worse,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget who highlighted a package of “tax extenders” that lawmakers agreed to include in a massive spending package the night before it passed in the House.
“Passing hundreds of billions of dollars of tax cuts should not be needed just to keep the government open,” she added.
The spending legislation, which is backed by the White House, will avoid a government shutdown on Dec. 21.
Budget watchers have seethed as the deficit explodes and lawmakers make deal after deal to raise spending and cut taxes, all funded by more borrowing.
They warn that higher debt will raise interest rates, require future resources to pay off the debt and its interest and limit the government’s ability to respond to the next economic downturn.
Since President Trump took office, the national debt has risen about 15 percent, from just under $20 trillion on Inauguration Day to more than $23 trillion today. The budget deficit this year is expected to surpass $1 trillion, a high-water mark that hasn’t been hit since the four years immediately following the Great Recession.
But that has done little to dissuade lawmakers from striking deals that boost deficit spending.
Democrats and Republicans reached an agreement in July on the broad outlines of a spending deal that would lift budget caps for 2020 and 2021. For 2020 alone, spending would jump by $34 billion over existing levels, adding substantial funds for both defense and domestic priorities.
But as negotiations over the 12 annual spending bills heated up through the fall, lawmakers kept piling on their funding requests. Miners’ pensions, disaster relief, emergency spending and various medical programs all added to “off-book” spending that technically does not breach the new budget caps.
When lawmakers released the details of the spending bill on Monday, the additional spending amounted to another $24.7 billion.
But that wasn’t all.
Lawmakers also agreed to repeal several taxes meant to cover some of the costs of ObamaCare but did not include any spending cuts or other revenue measures to make up for them.
Of those three revenue raisers — the so-called Cadillac tax on premium plans, the medical device tax and the annual health insurance tax — none were in effect by the time the decision was made. The Cadillac tax has never been implemented, and the others had been suspended for long periods ever since the 2010 Affordable Care Act was signed into law.
But eliminating them entirely will end up costing the government a whopping $373 billion over the course of a decade.
Congress took a whack at other taxes as well.
Late on Monday night, just hours before the appropriations bills were set to come to the House floor, lawmakers agreed on a package of tax extenders.
Negotiators agreed to prevent a slew of tax breaks, set to expire in 2020, from fizzling out. They also retroactively extended provisions that expired over the past two years.
The extenders — from tax breaks for biodiesel to tax credits for energy efficient buildings and railroad tracks — will lower revenue by $39 billion over a decade, including a $22 billion cut in 2020.
Add in $12 billion for disaster relief, and the whole package of bills amounts to $426 billion in lost revenue over a decade, about $35 billion of which will be lost next year.
“This bill borrows, and it borrows at a time when we can’t afford to borrow more,” said Rep. Chip Roy (R-Texas) in a floor speech opposing the spending bills on Tuesday.
Roy reminded Trump that he had promised never to sign another massive omnibus spending bill after signing one into law two years ago. Congressional leaders split the package into two measures to prevent Trump from having to sign one big bill.
The House overwhelmingly passed the two bills — the first one in a 297-120 vote and the second in a 280-138 vote. Both measures now head to the Senate.
For budget hawks, the fact that a $1.37 trillion package could expand to $1.82 trillion overnight with little protestation is a worrying sign that Congress has lost interest in controlling the deficit.
Michael A. Peterson, CEO of the Peter G. Peterson Foundation, which advocates for reducing deficits and debt, noted that increasing the deficits during a time of growth ran counter to mainstream economic thinking that calls for cutting deficits until the economy needs stimulus in a downturn.
He also warned against using shutdown deadlines to ramp up government spending.
“Self-inflicted shutdown deadlines are no excuse to engage in greater fiscal irresponsibility that hurts our collective future,” he said.