On Monday, House Republicans unveiled their latest budget proposal. It promises to cut spending by $5.5 trillion, balance the budget in less than a decade, and still do so without “tax increases or true austerity measures, or a loss of confidence in America’s creditworthiness.”
The proposal put forth by House Budget Committee Chairman Tom Price (R-GA) also promises not to “let rhetoric take the place of real results,” and to that end says, “Real results means we do not rely on gimmicks or creative accounting tricks to balance our budget.” Yet there are at least five pieces of the budget proposal that look suspiciously like gimmicks.
Unusual accounting tricks
The budget reports that even with no extra revenue raised, it would increase the deficit by $18 billion within the first two years but then wind up with an actual surplus of $83 billion by 2025. To arrive at these numbers, it uses estimates that take into account “the positive impact of its overall deficit-reducing fiscal policy” to report an extra $147 in deficit reduction from “positive economic feedback effects,” such as an assumed increase in economic growth of 6.5 percent by 2040 thanks to reducing federal debt. This estimate uses what is called dynamic scoring: the inclusion of assumptions about changes in the economy and workforce that result from legislation when estimating its fiscal impact. This means relying on macroeconomic forecasts to come up with figures, which are incredibly uncertain and often necessitate making assumptions that can be politically charged, such as the idea that tax increases will boost growth.
The Republican budget assumes the economy won’t just benefit from its promised deficit reduction, but also from “fundamental tax reform, increasing domestic energy production, and the restoration of incentives for people to work, save, and invest,” while not necessarily outlining the details of those promises.
Unspecified spending cuts
The budget also gets to its deficit reduction by promising big savings through spending cuts on mandatory programs, the largest of which are Social Security, Medicare, and the Affordable Care Act (which it repeals and therefore counts as savings without taking into account increased deficits if the law were done away with). But other than the assumed savings from repealing Obamacare, the next largest savings in mandatory spending from a category simply called “Other Mandatory,” which it claims would be reduced by over $1 trillion by 2025. This category includes programs like food stamps, the Earned Income Tax Credit, and disability payments for veterans. The budget proposal’s cuts aren’t spelled out, and it’s not clear how these programs could be reduced by such a large number, but they’re a big chunk of the promised $5.5 trillion in promised savings.
A defense “slush fund”
Under current law, defense and non-defense spending are both capped by sequestration, or the Budget Control Act of 2011. Yet the Republican budget says it complies with that funding cap for fiscal year 2016 but then increases defense spending by $387 billion over the next decade. To get around sequestration’s cap, it diverts $94 billion in supposedly emergency funding into the Department of Defense’s Overseas Contingency Operations fund, which is not subject to sequestration’s limits. The move has even drawn pushback from Republicans in the Senate: Mike Crapo of Idaho and John McCain of Arizona both called it a “gimmick.”
Avoiding the details
The budget promises big savings by significantly reforming two programs: the Supplemental Nutrition Assistance Program (SNAP, or food stamps) and Medicaid. It would change both programs from a cost sharing model where the federal government helps pick up the tab for increases to a block grant, where states are given a flat amount of money and more leeway in administering the programs. That allows lawmakers to claim $913 billion in savings on Medicaid and unspecified savings from SNAP without having to outline exactly what would get cut. Instead, it devolves those decisions to states even as Medicaid roles are likely to increase.
A scary graph
The budget document is largely based on the argument that federal debt has to be reduced and that “America’s fiscal position is unsustainable,” which it says “will result in our nation being less secure with less opportunity. While warning of these dangers, it includes a graph that shows a huge increase in government debt between now and 2040:
In the fine print, however, it notes that the graph is based on the Congressional Budget Office’s “Alternative Fiscal Scenario.” That’s different than its baseline estimates of government debt, because the alternative scenario includes some pretty big assumptions, such as no sequestration cuts taking place between 2014 and 2021, the extension of all expiring tax provisions, and Medicare’s physician payment rates holding constant.