Off the Charts Blog | Center on Budget and Policy Priorities

The House Budget Committee will consider two bills tomorrow that, contrary to their titles, would harm the congressional budget process.  The House passed similar bills last year, and we have previously explained how they would make budget estimates less transparent and less useful.

• The “Baseline Reform Act” (H.R. 1871) would require the Congressional Budget Office (CBO) and the Office of Management and Budget (OMB), in constructing budget baselines that project future funding levels, to assume that discretionary appropriations will remain frozen indefinitely, with no adjustment for inflation.  The bill would have no effect for 2014 through 2021, since the baseline for those years assumes that appropriations conform to the levels specified in the Budget Control Act of 2011.  Beyond 2021, though, the proposal would make projections of deficits and debt unrealistic and misleading, we explained last year.

• The “Pro-Growth Budgeting Act” (H.R. 1874) would require CBO to prepare “dynamic” estimates of the budgetary impact of major legislation.  Because the effects of tax and spending changes on the overall economy are highly uncertain, trying to include these factors in budget estimates would impair the credibility of the budget process, our 2012 report explained.

The Budget Committee may also soon consider a third budget process bill that would also have unfortunate consequences.

• The “Budget and Accounting Transparency Act” (H.R. 1872) would add an extra amount to the recorded budgetary cost of federal credit programs, beyond their actual cost to the government, to reflect what private lenders would charge if they issued the loans and loan guarantees.  We have updated our in-depth analysis of this proposal and have issued a new, shorter explanation.

Debt-ceiling silly season has returned, my latest post for the US News & World Report Economic Intelligence blog warns.  By late fall, we’ll face another dangerous political showdown on raising the debt ceiling to prevent a first-ever U.S. default.

Brinksmanship in 2011 over raising the debt limit started us on the road to the harmful across-the-board sequestration cuts, and there’s no telling what bad ideas policymakers may adopt this year to secure the votes needed to raise it again.

We’d be better off scrapping the debt ceiling entirely.  But the next best move would be to copy Denmark, the only other developed country with a statutory debt limit anything like ours.  As I explain:

There’s a crucial difference, however, between our debt limit and Denmark’s: the Danes do not play politics with theirs. . . .  When the financial crisis caused a sharp increase in government debt in 2008-2009, the Danes raised their debt ceiling — a lot.  The 2010 increase doubled the existing ceiling, which was already well above the actual debt, to nearly three times the debt at the time.  As [the Peterson Institute for International Economics’ Jacob Funk Kirkegaard reports, “The explicit intent of this move — supported incidentally by all the major parties in the Danish parliament — was to ensure that the Danish debt ceiling remained far in excess of outstanding debt and would never play a role in day-to-day politics.”

Click here for the complete post.

As our loyal readers surely know, House Republicans have proposed a budget calling for up to $5.7 trillion in tax cuts as part of deficit-neutral tax reform, but they have yet to propose a single cut in tax expenditures (credits, deductions, and other tax preferences) to begin filling this huge revenue hole.

Now, Ways and Means Committee Chairman Dave Camp (R-MI) has taken a major tax expenditure off the table:  the deduction for charitable donations.  “I think it is important not to cap that area,” he said yesterday in response to a question, Tax Notes Today reports.

This isn’t the Republican plan’s first political reality check.  As we noted in April, a Ways and Means hearing examined the mortgage interest deduction, one of the largest tax expenditures (as is the charitable deduction) and considered ripe for reform across the political spectrum.  But top Republicans on the committee “made clear . . . that they plan to proceed with caution when it comes to deciding [its] fate,” according to Politico.

The mortgage interest and charitable deductions benefit a wide cross-section of American taxpayers so, not surprisingly, they enjoy broad public support.  That’s true, as well, of the other leading tax expenditures (such as the tax-free treatment of employer-provided health care) that policymakers would have to scale back significantly to have any hope of offsetting the huge proposed tax cuts.

Chairman Camp’s statement is just the latest sign of how at odds with political reality the Republican plan is.

As we’ve noted previously, the 2014 agriculture appropriations bill moving through the House underfunds WIC, the highly regarded nutrition program for low-income pregnant women, infants, and young children, and as a result could deny WIC benefits and services to eligible women and children at nutritional risk.  With the bill moving to the full House Appropriations Committee on Thursday, it’s important to understand what’s at stake.

The House bill relies on two unsound budget choices to try to avoid turning away about 140,000 eligible women and children, according to our updated estimate that’s based on new data.

• More than 98 percent of WIC funds are devoted to the core supplemental foods, nutrition education, and health care referrals for which the highly regarded program is known.  In recent years, about $100 million has been dedicated to two special purposes — an evidence-based breastfeeding peer counseling program and technology upgrades to convert the program from using paper vouchers to electronic benefit cards, which improves management and reduces costs in the long run.

  The House bill would use these funds for benefits if there is a shortfall, which the bill’s funding level is very likely to create — effectively terminating the part of the program that provides breastfeeding counseling to pregnant women and new mothers.  This would mark the first time since the breastfeeding program’s creation in 2004 — in response to medical evidence on the health benefits of breastfeeding — that policymakers have denied funding to this part of the program.

• Moreover, even with the breastfeeding funds and technology funds, the funding likely would not be adequate to serve all eligible applicants.  The bill also relies on WIC’s Contingency Fund to cover the remaining shortfall — a risky move.  The Contingency Fund is designed to cover unanticipated costs that arise after the appropriation is enacted — e.g., spikes in dairy prices, in fruit juice prices after a winter freeze, or in egg prices after an avian flu outbreak (all of which have occurred in WIC’s history), or a slowing economy that makes more people eligible for the program.  If policymakers tap the Contingency Fund to meet funding needs that we know about before the fiscal year starts, the fund may not be there for unanticipated costs during the year.

The full Appropriations Committee has an opportunity to amend the bill to adequately fund WIC.  If the Committee raises WIC funding, the breastfeeding program could stay in place, the program could continue to be modernized, the Contingency Fund could be reserved for truly unanticipated costs — and policymakers could continue their longstanding bipartisan commitment to providing WIC with enough funding to serve all eligible low-income pregnant women, infants, and young children who apply.

We commend President Obama for nominating Jason Furman as the next Chair of the President’s Council of Economic Advisers.  We know Jason’s work well — from his tenure in the White House National Economic Council under both Presidents Clinton and Obama to his two years as a Senior Fellow at the Center on Budget and Policy Priorities in 2005-2006.

Furman’s work is characterized by several traits:  (1) his insistence on rigorous analysis that looks evenhandedly at all research and evidence in examining economic, fiscal, and other issues; (2) his in-depth knowledge of federal programs and policies and their effects on families and individuals that’s unusual for someone who conducts the type of economics work described above; (3) his creativity in developing ideas for new and better ways to address longstanding policy problems and new policy challenges; and (4) his quiet but deep commitment to making ours a fairer society, especially for people who are at the bottom, on the margins, or otherwise facing what FDR called the “vicissitudes of life.”

For those interested in Furman’s work, here are just a few examples of the high-quality analyses that he produced during his years at CBPP.

Social Security Reform:  Evaluating Alternative Social Security Reforms

Social Security Facts:  Top Ten Facts on Social Security’s 70^th Anniversary

Inequality:  A Tough Recovery By Any Measure:  New Data Show Consumer Expenditures Lag for Low- and Middle-Income Families

Tax Reform and Poverty

A Short Guide to Dynamic Scoring