House and Senate negotiators reached a conference agreement on the fiscal year 2016 budget which is expected to be voted on in the House this week and in the Senate next week. Should the concurrent budget resolution pass, this would mark the first time in five years that Congress passed a budget. And it would mark the first time in a decade for a GOP-controlled Congress to pass a budget.
Here is what you need to know about the budget agreement:
Achieves balance in 2024 with undefined revenue assumptions. The conference agreement proposes to reach balance by 2024 by cutting nearly $5.3 trillion from current Congressional Budget Office spending projections. The budget includes the $141 billion deficit spending increase from Congress’s doc fix bill in the baseline. Even better would be if Congress committed to offsetting the doc fix with spending cuts.
Moreover, while vague in details regarding Congress’ tax plan, the budget agreement assumes the Congressional Budget Office baseline for tax revenue, which includes about $2 trillion in revenues from Obamacare’s taxes and the well-known tax extenders.
To assume that economic growth resulting from better tax policies will bridge the difference is being overly optimistic. According to Heritage fiscal fellow John Gray, “balancing the budgets with legitimate revenues that account honestly for the repeal of Obamacare and the extension of the tax extenders would have been a step in the right direction.”
House support for Medicare premium support, undefined Senate savings. The budget agreement retains the same savings as included in the Senate budget for Medicare. While the House included an amendment stating its support for premium support, the Senate does not endorse specific Medicare reform. Instead, the budget agreement asks the appropriate committees to develop the reforms needed to meet the savings target.
Heritage health care analyst Alyene Senger weighs in:
Savings of this magnitude could extend the balance of the Part A Hospital Insurance Trust Fund by about five years assuming the same mix of policies included in the president’s budget.
In order to achieve the savings target, [Medicare] should be transformed into a premium support program that uses a defined-contribution model of financing within five years of the budget’s enactment. This would move Medicare in a fiscally responsible and patient-centered direction, benefiting both taxpayers and seniors.
In preparation for premium support implementation, [Congress should] increase the age of Medicare eligibility, modernize the Medicare benefit and means-test Parts B and D premiums for higher-income enrollees.
Uses budget gimmicks to increase discretionary spending. The budget agreement would circumvent the Budget Control Act caps in fiscal year 2016 by exploiting loopholes to spend more on defense and domestic programs. The agreement would allocate $38 billion more for defense and related programs than requested by the president through the exempt Overseas Contingency Operations, or so-called war account.
The agreement would further allow the appropriators to use $19 billion in on-paper savings that are unlikely to ever materialize to boost domestic spending programs through “changes in mandatory program spending,” or CHIMPS.
As I wrote on this issue this week:
While there is broad agreement that defense levels are too low to sustain military capabilities at appropriate levels, increasing base defense spending above the Budget Control Act’s spending cap of $523 billion in fiscal year 2016 should be done responsibly and in accordance with the Budget Control Act’s intent of reducing the deficit. The conference agreement should [further] eliminate the use of changes in mandatory program spending to violate spending limits.
While the conference agreement would seek to reduce the use of CHIMPS in future years, it falls short compared to the Senate budget that passed in March which would have phased out the use of CHIMPS.
Repeals Obamacare using reconciliation. The budget agreement proposes to evoke the reconciliation process to repeal Obamacare. Reconciliation is useful because it allows Congress to pass legislation in the Senate without being subjected to a filibuster and with a simple majority vote.
As spending on health care entitlements, including Obamacare, Medicaid, Medicare and others, is driving about one-third of the projected spending increase over the next decade, using reconciliation to address health care programs, starting with Obamacare, is critical.
While full Obamacare repeal is an essential first step towards controlling growing health care entitlement spending and would pave the way for market-based and patient-centered health care reform that empowers individuals, it alone cannot balance the budget.
This budget agreement is a blueprint that includes several important reforms to balance the budget, but it also falls short in several areas.
Unless Congress enacts laws that implement its savings instructions, the budget won’t actually balance in 2024. Congress’s budget blueprint is an important start, but the country needs real legislative action from Congress to control growing spending and debt.
