Wednesday, April 9, 2014

House GOP, with ConservaDem Friends, Kick Off Budget Week By Passing Two Budget Tricks

This week is Budget Week. And to start the week off, the House Republicans, with the help of some of the worst members of the Democratic caucus, passed two bills designed to make it easier for them to slash spending in the future.

Let’s take a look.

On Monday, the House passed the Budget and Accounting Transparency Act by 230 to 165.

16 Democrats joined Republicans in voting for it:

Ron Barber (AZ-02)
John Barrow (GA-12)
Jim Cooper (TN-05)
Jim Costa (CA-16)
Henry Cuellar (TX-28)
Pete Gallego (TX-23)
Alan Grayson (FL-09)
Dan Lipinski (IL-03)
Dan Maffei (NY-24)
Mike McIntyre (NC-07)
Patrick Murphy (FL-18)
Bill Owens (NY-21)
Scott Peters (CA-52)
Mike Quigley (IL-05)
Kurt Schrader (OR-05)
Kyrsten Sinema (AZ-09)

This bill would require the Congressional Budget Office (CBO) and the Office of Management and Budget (OMB) to use "fair value" estimates for the cost of all government loan programs as opposed to the direct costs themselves. "Fair value" estimates apply the same risk factors that a private business might apply to making a loan. Considering that the government is not a private business, such estimates end up overstating the cost of the programs and, thus, the size of the federal deficit.

Here is the analysis from the Center on Budget and Policy Priorities that the Democrats on the Budget Committee included in their minority view on the committee report:
The House Budget Committee may consider legislation in the near future that would change the federal accounting of direct loans and loan guarantees in ways that would overstate the federal costs of those programs. As a result, the legislation also would overstate total federal spending and deficits.
The Federal Credit Reform Act of 1990 changed the budgetary accounting of federal credit programs. Previously, the budget displayed the costs of credit programs in the years those costs actually occurred; that is, it showed federal expenditures from loans or guarantees in any particular year, offset by loan repayments in that year. Since the 1990 law, the budget displays the same total net costs of loans or guarantees but shows them up front—when the government issues the loans and loan guarantees—rather than year by year over the course of their lifetimes.
The legislation—H.R. 1872, introduced by Rep. Scott Garrett (R-NJ) and co-sponsored by House Budget Committee chair Paul Ryan (R-WI)—would significantly change the rules in place since the 1990 law. It would require the Congressional Budget Office (CBO) and the Office of Management and Budget (OMB) to add an extra amount to the budgetary cost that they show for loan and guarantee programs, based on the additional amount that private lenders would charge borrowers if they, rather than the federal government, issued the loans and loan guarantees. By overstating the federal costs of credit programs, the proposal would overstate federal deficits and force budget documents to offset these phantom costs with phantom offsets to avoid overstating the debt as well.
Overstating the federal deficit then provides Republicans a wonderful opportunity to shout about how we need to slash social spending. 
Today, the House passed the Baseline Reform Act by 230 to 185.

7 Democrats joined the GOP in voting for it:

Ron Barber (AZ-02)
John Barrow (GA-12)
Jim Matheson (UT-04)
Mike McIntyre (NC-07)
Patrick Murphy (FL-18)
Collin Peterson (MN-07)
Kyrsten Sinema (AZ-09)

The Baseline Reform Act removes the assumption that discretionary spending will increase by inflation in each year of the baseline.

What this ultimately does is allow Republicans to cut the spending on programs they don't like by stealth (aka by letting their real value erode):
This is complicated, but important. You see, when the CBO estimates future spending it must necessarily make certain assumptions. One is that when Congress creates a spending program that its intent is to maintain spending in real terms, adding spending as necessary to compensate for inflation.
Obviously, if inflation is not taken into account then real spending will fall by the rate of inflation. Every worker understands that if she doesn’t get a cost-of-living adjustment for inflation or an increase less than the rate of inflation then she is worse off. It’s the same for government programs.
Republicans have long railed against the assumption that spending should keep pace with inflation, believing that it fuels unjustified government spending. They often assert that if a program gets any increase at all, even if it’s not enough to keep pace with inflation, that this is per se an unjustified spending increase.
Republicans also argue that the only meaningful spending cut is one that reduces the literal dollar amount of spending from one year to the next. But of course, in a period of inflation that means that no nominal spending increase is in fact a cut in real terms, which is what Republicans want.
The only purpose of this legislation is to obfuscate the effect of inflation on spending so that it will be easier for Republicans to slash it without appearing to do so. They can hold constant spending for programs they don’t like, but are afraid to cut openly, and simply let inflation do their dirty work, while claiming that they haven’t cut spending at all.
Budget Week will continue as the House debates and votes on five budget proposals: 
(1) The Ryan Budget
(2) The Congressional Progressive Caucus's Better Off Budget
(3) The Congressional Black Caucus Alternative Budget
(4) The Democratic Alternative Budget (that of the House Democratic caucus)
(5) The Republican Study Committee Budget

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