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Economy

How Piecemeal Fixes Will Make Sequestration Worse

Photo credit: The Memphis Flyer

A report out today from the Democrats on the House Appropriations Committee shows costly new flaws in Congress’ approach to fiscal policy. Beyond providing updated information on the anticipated impacts to specific programs from the across-the-board spending cuts known as sequestration, the report shows Congress’s piecemeal approach to “fixing” sequestration is more than just unfair – it’s costing the U.S. more money.

Since the threat of sequestration failed to spark a spending compromise and the haphazard slashing began, lawmakers have faced uneven amounts of pressure to replace chunks of sequestration cuts from varying groups. The success of that pressure seems to hinge on the political influence wielded by the group affected by a given cut. Unemployment beneficiaries, Head Start students and parents, 140,000 families on housing assistance, and seniors who rely on Meals on Wheels, among many other politically marginalized groups, have received no relief from sequestration.

Business travelers, on the other hand, have seen their outcry over airport delays due to sequestration yield a “fix” for the Federal Aviation Administration.

Today’s report goes beyond that unfairness to explain how the piecemeal “fix” to avert flight delays is actually raising the economic costs of aviation delays, by tens of billions of dollars:

The [Reducing Flight Delays] Act [of 2013] allowed the FAA to apply sequestration to the Airport Improvement Program (AIP), which had been exempt in the original sequestration order. […]

Cutting the AIP program slows FAA’s ability to meet construction needs. FAA estimates that development needs at eligible airports will exceed $42.5 billion over the next five years. The American Society of Civil Engineers 2013 “Report Card for America’s Infrastructure” rated our aviation system a “D,” estimating that the cost of congestion and delays to the economy will rise to $34 billion in 2020 (up from $22 billion in 2012), and that “D” grade assumes we continue to spend at current funding levels — before sequestration.

Even before Congress gave the FAA permission to halt all airport construction funding, America faced a $12 billion increase in the economic drag caused by aviation congestion. Now that cost is going to swell.

These can-kicking costs come on top of the more immediate damage sequestration will do to the economy: 700,000 fewer jobs and a 0.6 percentage-point reduction in GDP growth for the year. The Huffington Post reported several of the mechanical details of individual agency responses to the cuts contained in today’s House report, including 500 fewer firefighters at the Forest Service and a shrunken stockpile of vaccines at the Centers for Disease Control and Prevention.

Health

Four Better Ways To Spend The $55 Million Wasted On Votes To Repeal The Affordable Care Act

For the 37th time since 2011, House Republicans will hold a vote to repeal Obamacare on Thursday, bringing the total cost of all of their failed repeal votes to roughly $55 million in taxpayer money, according to one estimate.

Last year, CBS News calculated that the number of hours spent on 33 repeal votes — then roughly 80 hours, or two full work weeks — cost taxpayers an estimated $48 million. Since then, Republicans have held three more votes (another $4.5 million) and will add another $1.5 million with their latest.

At a time when lawmakers have implemented $85 billion in across-the-board cuts on top of $1.5 trillion in spending cuts over the next decade, no dollar can be spared. And the country has serious health-related needs that could use funding. Here are some better health care uses for the more than $50 million these symbolic votes against the Affordable Care Act have wasted:

1. Restore cuts from sequestration to Title X family planning programs and Title V maternal and child health services. The National Women’s Law Center calculates that a 5 percent cut to the budgets of each program will reduce them by $15 million and $32.5 million, respectively. Rather than voting to repeal a bill that expands women’s access to preventative services, the House could use the money to expand them.

2. Double the Department of Justice’s budget for sexual assault services, which has currently been authorized a $50 million budget. The program gives money to states so that they can support rape crisis centers and other nongovernmental organizations that provide direct intervention, core services, and other assistance to the victims of sexual assault. Current funding is inadequate, as some states receive less than $300,000 and many programs lack the resources to meet victims’ needs.

3. Grant a request for $50 million to train 5,000 new mental health professionals as part of a new initiative to expand mental health treatment and prevention services. This proposal came in the wake of the Sandy Hook shooting to address gaps in the mental health system.

4. Help states implement paid leave policies. President Obama included a $50 million State Paid Leave Fund in his 2011 budget to provide start-up support for states that want to enact paid leave for workers. More than 40 percent of workers don’t have access to paid sick leave, heading to work when they or their family members experience an illness, but this funding could help give them a better option.

The current Congress is on track to be the most unproductive since the 1940s, but still has time to hold votes that won’t result in actual legislative change. There are many other priorities lawmakers could focus on instead and better ways to spend taxpayer dollars.

Economy

Australia Drops Austerity In Favor Of Spending On Jobs

Credit: The Associated Press

Conservative U.S. politicians continue to press for austerity, but on the other side of the world, Australia’s government is moving in the opposite direction. That country largely escaped the economic downturn thanks to its abundant natural resources. But now Australia anticipates an economic contraction, and the government is adjusting its priorities accordingly.

Treasurer and Deputy Prime Minister Wayne Swan announced the shift from deficit reduction to economic investments in a speech to parliament, Bloomberg reports:

Australian Treasurer Wayne Swan will eschew European-style austerity as a stronger currency slows growth, wagering the government can win a Sept. 14 election fought on jobs and absorb the pain of a broken surplus promise. […]

“To those who would take us down the European road of savage austerity I say the social destruction that comes from cutting too much, too hard, too fast is not the Australian way,” Swan told parliament. “The alternative, cutting to the bone, puts Australian jobs and our economy at risk.”

Swan outlined a longer path back to the black that funds pledged spending on infrastructure, education and disability care, while saying restraint gives the Reserve Bank of Australia scope to cut record-low interest rates even further.

The reversal, forecast in December, acknowledges the economic reality that rapid austerity exacerbates economic troubles.

Meanwhile, the American fiscal policy debate has veered the other direction since 2011. Without the austerity measures Republicans have pushed and President Obama has signed over the past two years, economists say the U.S. unemployment rate would be a full percentage point lower. Obama’s American Jobs Act was projected to spur over two million new jobs when the White House proposed it in the fall of 2011, but Republicans blocked the bill. The U.S. will create 700,000 fewer jobs this year alone thanks to House Republicans’ decision to go ahead with massive “sequestration” cuts.

Congress shouldn’t need the Australian example, though. The contrast between the American recovery under fiscal stimulus and Europe’s austerity-driven return to recession is widely reported. The economic research Republicans have cited as motivation for immediate and sharp deficit reduction was proven entirely bogus just weeks ago.

Health

Over Half The Slowdown Of Health Care Costs Could Be Permanent, Saving The U.S. Over $700 Billion

One of the most important ongoing stories in the realm of budgets and health care economics is the remarkable drop in how much health care costs are projected to grow over the next decade. Back in March, David Cutler and Nikhil Sahni released some preliminary work arguing that, thanks to this slowdown, projections of government spending on health care for the next decade were overshooting by hundreds of billions of dollars. Now they’ve released a more complete paper (gated) with a specific number: if the lower growth rate continues, the federal government could save $770 billion by 2021. Furthermore, Cutler and Sahni concluded that as much as 55 percent of the slowdown has been driven by factors other than the recession.

That last point is especially important. If the slowdown in growth is due to the recession, then it’s temporary. Health care costs will once again rise at their previous rate once the economy recovers, driving health-related spending to ever greater heights and further straining the budgets of both the government and American families. But if the slowdown is due to deeper, structural changes in health care markets, then at least some portion of the slowdown may be long-term. And the government’s projections of future debt and deficits rely heavily on those previous assumptions of high health care cost growth. So if the slowdown sticks, the outlook for America’s fiscal future could improve radically, all without lawmakers cutting a dime.

Here’s Bloomberg with a nice summary:

Cutler’s research compared the U.S. government’s growth projections for health spending from 2004 to 2012 with actual increases in the period. It found that the real growth rate was about half of the government’s prediction, leading to a gap of more than $500 billion in 2012 between the projections and spending.

The paper calculates that the recession accounted for about 37 percent of the slowdown in health costs from 2003 to 2011. Declining private insurance coverage and cuts in payments byMedicare, (USBOMDCR)the government health plan for the elderly and disabled, accounted for another 8 percent and the remaining 55 percent is “unexplained,” Cutler wrote. That’s where the structural changes come in, he said.

If the current lower-than-expected rate of growth continues, the country may reap savings of as much as $770 billion through 2021, the research found.

As always, there’s a lot of uncertainty built in here. Another recent study by Kaiser, for instance, suggested that as much as 77 percent of the slowdown is a temporary result of the recession. Also, there’s a lot of complexity in the category of “structural” changes. Some of it’s improvements in the efficiency of health care delivery, quite possibly thanks to reforms in Obamacare that encourage providers to change the way they do business. Other parts of it may be one-time shifts in the market, such as the rise of generic drugs to replace more high-cost brand-name medicines.

The broader point, however, is that there are more ways to balance the budget than just slashing the aid and benefits Americans need to buy. A better-designed health care system could very well deliver lower and more efficient government spending than austerity ever could.

Climate Progress

A Price Is Right: Carbon Tax Has Very Broad, Bipartisan Support (Outside Of Congress)

The Washington Post editorial board calls a carbon tax “one of the best ideas in Washington almost no one in Congress will talk about.” It joins a very diverse group (including conservative economists, big oil companies, environmental advocates, and most Americans) that thinks pricing carbon pollution is smart policy. People are talking about it, if you know where to listen.

First, there is some activity in Congress. The Senate Finance Committee released a white paper last month which recommended a carbon tax as a way to reduce the estimated $16 billion of foregone energy tax expenditures in 2013. Back in February, Senators Bernie Sanders and Barbara Boxer introduced comprehensive climate legislation that would put a price on carbon pollution and invest in a renewable energy economy. Boxer, Chair of the Senate Environmental and Public Works Committee, said she would move the bill through her committee and hopefully to the Senate floor this summer. Rep. Henry Waxman, Rep. Earl Blumenauer, Sen. Sheldon Whitehouse, and Sen. Brian Schatz have also released a carbon price discussion draft for review.

However, given the last few years of congressional inaction, it would be surprising if the Senate passed legislation to put a price on carbon or the bill received bully pulpit support from the White House. Even more so if the House took it up. During the budget debate in March, the Senate rejected an amendment that would have made it more difficult to pass a carbon tax, though it did get majority support. The GOP House leadership, following the lead of Americans for Prosperity and the Tea Party, signed a “no climate tax” pledge along with nearly 100 other House members. And new Treasury Secretary Jack Lew said in a written statement prior to his confirmation that the administration is not planning to propose a carbon tax, though its hard to believe President Obama would veto a bill containing one if it actually arrived at his desk.

That is a lot of strikes against a proposal, even by the standards of the barely-functioning U.S. political system. 90 percent of Americans support background checks on gun sales but that could not make it out of the Senate. So is a price on carbon completely dead? Or mostly dead?

Putting a price on carbon pollution is something that finds support in across the globe, and in some very unexpected places.

Large areas of the world have already put a price on carbon:

  • 33 countries and 18 sub-national jurisdictions will price carbon in 2013. This comprises 850 million people and nearly a third of the global economy.
  • An official in the Chinese Ministry of Finance said that the country was considering a price on carbon along with a market-based cap-and-trade system. China’s emissions are the largest in the world and if the nation put a well-designed price on carbon it would have a significant impact.

Support for pricing carbon pollution is surprisingly widespread in the U.S.:

  • 67 percent of Americans would rather reduce the deficit via a carbon tax than through cutting government programs, according to a poll conducted last December. A revenue neutral carbon tax that would provide dividends back to taxpayers and invest in renewable energy received 70 percent support in the poll.
  • Another poll by YouGov found 56 percent of Americans would prefer a carbon tax to help reduce the deficit. The poll used an interesting tool that allowed participants to try to balance the budget themselves, which led to more than half concluding that a carbon tax would be a good idea. (Another poll found less support if the revenue would only be used to pay for renewable energy initiatives, so the fiscal component is key to gaining wider support.)

Many businesses prefer taxing carbon pollution:

Read more

Economy

Seven Times Senate Republicans Demanded The Budget Process They Are Now Obstructing

Senate Democrats passed a budget for the first time in four years earlier this year, a move that would seemingly please the Republicans who spent the last four years reminding everyone of the fact that the Senate hadn’t done so. But now, with the House and Senate sitting on differing budget proposals, Senate Republicans have blocked four efforts to form a conference committee that would be tasked with forming a compromise budget.

Here are seven times Republicans have chastised Senate Democrats for not passing a budget since September of last year (and assuredly, it’s not a comprehensive list), including two instances in which Senate Minority Leader Mitch McConnell (R-KY) blasted them for not moving to the type of bicameral conference committee the Republicans are now blocking:

1. Sen. Mitch McConnell (R-KY): “A second term presents the opportunity to do things differently, and in the Senate that means a return to regular order. Later this week, the House plans to send the Senate a bill to address the debt limit in a timely manner. Once we get it, the Senate should quickly respond. If the Senate version is different than the one the House sends over, send it off to conference. That’s how things are supposed to work around here. We used to call it legislating.” [Senate floor, Jan. 22, 2013]

2. McConnell, again: “Why aren’t we trying to do something about reducing spending? We know we need to do it. When are we going to do it? We don’t need to use the deadlines. We could go through the regular order. Congress could pass bills. They could have conferences between the House and Senate.” [ABC, Jan. 6, 2013]

3. Sen. Bob Corker (R-TN): “We have not had a budget in this body for 1,240 days.” [Senate floor, Sept. 20, 2012]

4. Sen. John Cornyn (R-TX): “1,387 days since the United States Senate has passed a budget.” [Senate floor, Feb. 14, 2013]

5. Sen. Dan Coats (R-IN): “It has been 1,372 days since the United States Senate passed a budget.” [Senate floor, Jan. 30, 2013]

6. Sen. Johnny Isakson (R-GA): “Let’s get back to the business of America. Let’s get a budget to the floor.” [Senate floor, Sept. 20, 2012]

7. Sen. Roy Blunt (R-MO): “These problems are big, but they are not necessarily that complicated. We just have to have the willpower to deal with them. This Congress has not done that. This Senate, more importantly, has not done that. The House has passed bills. The House has passed a budget.” [Senate floor, Sept. 20, 2012]

The reasons why the GOP doesn’t want to go to conference is clear: they don’t want to consider any compromise that may include new revenues (the Senate budget raised $975 billion) or that raises the debt ceiling, which will need to be upped before October at the latest. Previous deals to reduce the deficit have been comprised primarily of spending cuts, and any further deficit reduction would have to be 90 percent revenues to bring balance to the total package of reductions since President Obama took office.

As Brian Beutler explained, both new revenues and an early, clean debt limit increase are untenable to Republicans, who hold less popular political positions on both. So instead of going to the conference the GOP spent four years demanding, they’ve chosen to block it from forming.

Economy

Reid Blasts Cruz As ‘Schoolyard Bully’ For Blocking Budget Negotiations GOP Demanded

Sen. Ted Cruz (R-TX)

Senate Majority Leader Harry Reid (D-NV) slammed Texas Sen. Ted Cruz (R) for being a “schoolyard bully” on the Senate floor Monday, after Cruz blocked an effort to move forward on budget negotiations Republicans in the House and Senate have demanded for the past four years. The GOP, which spent those years blaming Senate Democrats for America’s supposed “runaway spending” because they hadn’t passed a budget, attached a provision to fiscal cliff negotiations requiring the passage of a budget plan.

But now that Senate Democrats have followed through and passed a budget, Republicans in both the House and Senate have rebuked efforts to form a budget conference meant to hammer out the differences between the Senate budget and the plan passed by House Republicans. Sen. Pat Toomey (R-PA) blocked Senate efforts to form a conference last month; Monday, it was Cruz who blocked Reid’s effort to go to conference because he wanted to first ensure that the committee would neither consider new revenues nor a debt ceiling increase.

“The senator from Texas was on the losing side. He had his view, and it lost. But now he wants us to agree by consent to adopt the losing side’s view or else he’s not going to let us go to conference,” Reid said, adding that Cruz was “like a schoolyard bully” who “pushes everybody around” when he is losing. “Why are my Republican colleagues so afraid?” Reid asked. “We have our differences but Democrats aren’t afraid to work out those differences.”

House Budget Committee Chairman Paul Ryan (R-WI) and Sen. Jeff Sessions (R-AL), the ranking member on the Senate Budget Committee, have both said they wouldn’t enter conference until both sides agreed on a “framework” for those negotiations. But Cruz made it clear what that framework meant: the GOP will again demand that a final budget document includes only spending reductions and no new revenue, the same demand they have made — and that Democrats have met more than once — in previous negotiations over deficits and debt. Any new deal, in fact, would have to find 90 percent of its deficit reduction from revenue to bring balance to overall reduction efforts since President Obama took office.

So after spending four years demanding a budget, Republican intransigence on revenues is now causing them to block negotiations that could actually lead to one.

Health

How Sequestration Is Holding Back Scientific Research On Important Public Health Initiatives

(Credit: PBS)

Before sequestration’s automatic budget cuts kicked in, scientists warned that the proposed 8.2 across-the-board cut to the Nation Institute of Health could set back scientific innovation for a generation. Slashing those funds from NIH, one of the agency’s former directors pointed out, could prevent scientists from doing the critical research necessary to develop new treatments for chronic conditions and rare diseases.

And now that the sequester has taken effect, some of those scenarios are beginning to play out. As the Huffington Post reports, medical researchers are already scaling back their projects in areas that could have big implications for public health. At Temple University, one team of researchers hoped to develop a more effective method of repairing the heart to help Americans better recover from heart attacks — but now, thanks to the recent budget cuts, they may have to lay off staff or test a fewer number of potential therapies. Virginia Tech researchers who are studying depression, substance abuse, and post traumatic stress disorder have already been dealt a $640,000 blow to their grant funding, and are bracing for another $1 million in cuts. At the University of Kansas, the funds for behavioral research to help educators learn how to work with children with disabilities are in limbo.

And, since it seems clear that lawmakers aren’t going to take any action to reverse the cuts, scientists are being forced to move forward under this new reality:

Like other doctors and researchers interviewed, [Charles Greenwood, a researcher at the University of Kansas] said he would look to foundations and private philanthropy to help fill the void left by sequestration. But that isn’t a satisfactory replacement, he said, in part because the money tends to have specific strings attached.

“It is a hell of a way to run science,” he says. “We have had science since World War II. In the United States we were smart enough to develop a competitive process where the best ideas out there come up through the agencies responsible. And we get the best minds in the country to compete and the best ones win. Now, if it is up to philanthropy then you are just going to get someone’s theory.

Mainly, however, Greenwood and others are worried that the budget cuts will cause irrevocable damage to science in America. Investment in research and development was already declining prior to sequestration. NIH reported that it had offered 400 fewer grants in 2012 than in 2010. And as Jonathan Links, the chief risk officer at Johns Hopkins University, told The Huffington Post, funders were cutting back even further in anticipation of sequestration taking place.

It does seem clear that program officers are now being told moving forward to behave with sequestration. It is shifting from anticipation of to actual sequestration behavior,” said Links. “It is going to be cuts to grants and contracts and other sponsored activities. And our best guess is it is going to be some combination of cuts to future years of already funded grants, cuts to new awards, and cuts in the number of grants.”

Medical research isn’t the only area where Americans’ future health is being threatened threatened by sequestration. The budget cuts could also potentially result in fewer food inspections, fewer mental health resources, fewer people getting screened for HIV, fewer government resources to provide health insurance to low-income Americans, and fewer cancer patients receiving chemotherapy treatment.

Members of the medical community have blasted lawmakers for prioritizing their own convenience over the health sector. The cuts to the Federal Aviation Administration (FAA), which resulted in long delays at airports around the country for lawmakers during their frequent travel, is the one area of sequestration that Congress has rushed to undo — likely because it personally inconvenienced them. Cancer clinic employees have argued that there are more pressing concerns facing the nation, like the funding for their patient’s life-saving treatment, than long lines at the airport. The scientific researchers who are beginning to worry about a future “brain drain,” when the U.S. may not be able to attract and retain talented scientists without enough funding to go around, likely agree with that assessment.

Economy

After Demanding Senate Pass A Budget, GOP Refuses To Enter Budget Negotiations

House Republicans spent most of their time over the last three years reminding Americans that Senate Democrats hadn’t passed a budget in two, then three, then four years. It was a regular Republican talking point, a particular favorite of House Budget Committee Chairman Paul Ryan’s. But now that the Senate has returned to regular order by passing a budget, House Republicans are refusing to come to the table to negotiate a long-term spending plan.

Republicans passed their own budget, the plan Ryan authored, in March, and since the proposal differs from the Senate budget, regular order requires the two chambers to come together in conference to iron out their differences in a compromise budget that is then taken back to the full memberships of each house. Senate Majority Leader Harry Reid (D-NV) has hinted at forming such a conference for more than a week, but Republicans have shown no willingness to join him. This morning, Senate Republicans blocked Reid from creating a conference committee, a move that led Reid to accuse them of turning “a complete 180″:

It seems House Republicans don’t want to be seen even discussing the possibility of compromise with the Democrats for fear of a Tea Party revolt,” Reid said.

He noted that Republicans have called for “regular order” for years.

“A strange thing happened: House Republicans did a complete 180 — they flipped. They’re no longer interested in regular order even though they preached that for years,” Reid said.

The GOP offered numerous excuses for why they wouldn’t approve a conference, including that certain rules need to be worked out. Ryan and Alabama Sen. Jeff Sessions (R), the ranking member on the Senate Budget Committee, have said they need to agree to “framework” for a deal to make a compromise more likely.

What that “framework” would need to be to get Republicans to agree to conference, however, is clear: a deal that cuts spending but includes no new tax revenue. That has been a consistent GOP demand throughout budget and spending fights over the last three years, a sticking point that has brought the government to the brink of both shutdown and default. It’s also a concession Democrats and President Obama are unwilling to make, given that they have already agreed to nearly $2.5 trillion in spending cuts while receiving little revenue in exchange. Any new deal, in fact, would have to achieve 90 percent of its deficit reduction from tax revenue to balance the overall reductions achieved in the last four years.

Climate Progress

New Yorker: ‘Has Obama Already Given Up On Climate Change?’

The New Yorker examines the President’s latest budget and find it “represents a major dodge on climate change.” Hence columnist Ryan Lizza poses the headline question, “Has Obama already given up on climate change?”

Sure Obama has been talking a good game on climate in the second inaugural address and State of the Union:

But the budget released this week makes it clear that Obama’s surprising appeal to Congress was an empty piece of rhetoric. The phrase “climate change” appears twenty-nine times in the new budget, but there is no new plan for Congress to take up in Obama’s otherwise ambitious legislative blueprint. There are some worthy energy initiatives that could achieve modest reductions in emissions, but the budget is silent on what Obama will do to aggressively reduce carbon pollution by the biggest emitters, like power plants and automobiles.

If rhetoric cut emissions, we’d be carbon free already. But only action does.

Still, it is not as if Obama has the power to act:

It is not as if Obama doesn’t have the power to act. On many issues the President is at the mercy of Congress. He can’t reform gun laws or the immigration system, or rewrite the tax code, without coöperation from the House and Senate. Climate change is different. Obama’s Environmental Protection Agency, backed by the force of a Supreme Court ruling, has the authority to reduce carbon pollution through regulation. In 2010, when White House negotiators were trying to pass cap and trade, they presented reluctant senators with a promise (some called it a threat): pass a comprehensive bill to deal with the problem or the E.P.A. would move forward on its own. Three years later, the Administration has still not acted on that ultimatum. And, ominously for those who care about tackling climate change, Obama’s new budget proposes to reduce funding for the E.P.A. by 3.5 per cent compared to the current year.

Oh, well, it’s not as if team Obama is delaying action:

The Environmental Protection Agency said Friday that it would delay issuance of a new rule limiting emissions of carbon dioxide and other greenhouse gases from new power plants after the electric power industry objected on legal and technical grounds…

“We are continuing to work on the rule,” said Alisha Johnson, the E.P.A. press secretary. “No timetable has been set.”

No worries. It’s not like we’re in a hurry or anything (see Study: We’re Headed To 11°F Warming And Even 7°F Requires ‘Nearly Quadrupling The Current Rate Of Decarbonisation’). It’s not like inaction is incredibly costly (see IEA warns, “The world will have to spend an extra $500 billion to cut carbon emissions for each year it delays implementing a major assault on global warming”).

It’s not like delaying the rule for limiting emissions from new power plants delays the far more important rule for limiting emissions for existing power plants. Okay, well, it is like that, but it isn’t like Obama told the nation in February “If Congress Won’t Act Soon To Protect Future Generations, I Will.” The New Yorker also cites that remark and concludes:

Nothing in his new budget follows through on that promise. And if that doesn’t, what will?

Hakuna matata.

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