April 17, 2006

April 17, 2006 | WebMemo on Federal Budget

The Senate's Deadly Sin: Larding Up Emergency Appropriations

The same Congress that expanded federal government spending by 45 percent since 2001 and enacted the most expensive agriculture, education, Medicare, energy and highway (containing the infamous "Bridge to Nowhere") bills in American history is on the verge of adding another budget-busting boondoggle to its fiscal record.

President George W. Bush requested an emergency appropriation of $92 billion for operations in Iraq and Afghanistan and another round of hurricane recovery. The House approved the request, but the Senate Appropriations Committee has loaded the measure with $14 billion in new spending, most unrelated to national security or hurricane recovery. Still not satisfied, Senators are now readying floor amendments to add as much as $10 billion more in spending, which would push the price tag to $24 billion above the President's request.[1]

This new spending is tremendously irresponsible considering the state of the budget. Congress has already boosted spending by 45 percent since 2001 to a post-war record of $23,760 per household.[2] On top of that, the Senate started this year by adding $16 billion to the President's discretionary budget request.[3] This is at a time where the new Medicare prescription drug benefit is projected to cost over $1 trillion through 2016. Entitlement programs' liabilities, public debt, and other liabilities such as veterans' and federal employee retirement costs already total $375,000 for every full time worker in America. [4] The Senate's actions show a clear disregard for this huge fiscal burden Americans already face.

The Senate should reject all additional spending proposals, strip all items not part of the President's request, and go one step further by identifying offsets to pay for the bill's new spending. The President should draw a line in the sand by promising to veto any supplemental that is either beyond the scope of his request or above its total level of funding.

The Senate Bill

Additional funding is needed for continuing operations in Iraq, but the Senate's approach is blatantly irresponsible. First, the Senate bill contains no offsets and makes no trade-offs to fund priorities like Katrina relief. Second, the Senate bill abuses the definition of "emergency" and brazenly capitalizes on the plight of Katrina's victims and the need to fund war operations to cram in billions of dollars in unrelated spending while evading budget caps established one year ago. Third, the Senate bill piles all manner of unnecessary pork projects on top of an already expensive payload.

As it now stands, the Senate's supplemental bill would provide $72 billion for the President's request for the Iraq war, $20 billion to fund fully the President's request for additional Katrina relief, and $14 billion in new, non-emergency spending across all categories, including:

  • $4 billion for farm bailouts, which comes on top of the $25 billion that will be spent this year on farm subsidies, even as farm income reaches near-record highs;
  • $700 million to re-route a rail line several miles away, reportedly to help private developers build casinos nearby its present location;
  • $1.1 billion for private fisheries;
  • $2.3 billion to prepare for the avian flu, on top of the $3.8 billion that was appropriated in December 2005;
  • $594 million for highway projects unrelated to the Gulf Coast-some as far away as Hawaii;
  • $20 million for AmeriCorps
Table 1

Source: "Making Emergency Supplemental Appropriations for the Fiscal Year Ending September 30, 2006, and For Other Purposes," Senate Committee Report 109-230, April 5, 2006.

The Senate's Deadly Sins

The $14 billion added by the Senate Appropriations Committee includes funding for seven programs that are particularly egregious:

  1. Farm Bailout: After averaging less than $14 billion during the 1990s, annual farm subsidy spending has topped $25 billion throughout the current decade, following the passage of the most expensive farm bill in American history in 2002. Yet even as net farm income in 2005 topped $72 billion for only the second time ever, Senators Byron Dorgan (D-ND) and Conrad Burns (R-MT) secured an amendment to provide $4 billion in nationwide agriculture disaster assistance. These funds were not requested by the Department of Agriculture (USDA), and many of them would be spent in areas not affected by Hurricane Katrina.

    Furthermore, many of the specific spending items are duplicative and necessary. Assistance for livestock, trees, and specialty crops are already covered by Section 32 disaster payments. Dairy assistance duplicates payments already made by dairy co-ops. Other payments may cover land already receiving Conservation Reserve Program payments. The $246 million in sugar and sugarcane subsidies could exceed that industry's losses, which may be partially covered by Section 32 and crop insurance funding, anyway. Finally, USDA will have to spend tens of millions of dollars to administer this complex law, and farmers may be required to submit large amounts of paperwork.

    It is also noteworthy that Washington is subsidizing farmers who enjoy average an income that is 17 percent above the national average and an average net worth double the national average. And two-thirds of all farm subsidies are distributed to the wealthiest 10 percent of farmers, most of whom report household income of above $135,000.[5]

  1. Mississippi's "Railroad to Nowhere": Senators Trent Lott (R-MS) and Thad Cochran (R-MS) inserted a $700 million plan for the federal government to re-route a fully operational CSX freight rail line northward.[6] Purportedly, this move is intended make room for waterfront development along Mississippi's Gulf Coast-specifically, a Las Vegas-style "centralized gaming district."[7]

    While the Senate committee report explains that "the rail line in Mississippi sustained major damages as a result of Hurricane Katrina's powerful winds and water surges,"[8] it fails to note that the rail line has already been repaired at a cost of $300 million.[9] Contrary to the committee report, this new spending is not hurricane-related. As Mississippi Governor Haley Barbour's Commission on Recovery, Rebuilding, and Renewal notes, this project has been pushed by local businesses "for decades." According to that commission, because of the steep cost, "That idea is no longer seen as practical."[10]

    According to early reports, the $700 million was to be spent tearing out the original rail line and building a new one slightly to the north. Now it appears that the original line may be converted into a trolley line for tourists, and CSX will be forced to re-route its freight traffic on other lines in the Gulf Coast region. But if no tracks will be destroyed or built, for what exactly does Mississippi need a $700 million federal railroad grant?

    CSX does not seem to be excited about re-routing its freight traffic. Spokesman Gary Sease said: "We rebuilt that line across the Gulf Coast as quickly as possible because it's a critical artery for us. It serves our purposes. It meets our customers' needs. There's absolutely nothing wrong with it."[11]

    There is no reason to spend $700 million taxpayer dollars to re-route a working rail line (especially one that recently underwent $300 million in repairs) to make room for the possible development of casinos. This extravagant expenditure is an insult to those wanting to rebuild homes and schools destroyed by Hurricane Katrina.

  1. Highway Spending: Less than one year after enacting a mammoth $286 billion highway bill, senators accepted an amendment offered by Senator Patty Murray (D-WA) to add $594 million in additional highway spending. This money has nothing to do with Iraq or the Gulf Coast. Rather, it would address the "emergency relief highway backlog" across the country. In fact, the only project specifically mentioned in the committee report-the Kuhio Highway in Kauai, Hawaii-is safely located 4,085 miles from Hurricane Katrina's destructive path. Additionally, most backlogged highway projects are not "emergencies" but have existed for years.[12] If the $286 billion recently authorized for highways is not enough to clear the backlog, perhaps senators might reprogram funding from some of the highway bill's 6,371 pork projects, which are tying up $25 billion in highway funding.

  1. Fisheries: President Bush proposed $21 million to "restore fishery resources and implement sustainable approaches to fishery redevelopment in the Gulf region" as assistance for the seafood and fisheries industries hit hard by Hurricane Katrina. The House removed this provision, but the Senate reinserted it and increased the subsidy 53-fold to a staggering $1.135 billion.

    This money would come on top of tens of billions in Federal Emergency Management Agency (FEMA) disaster-relief funds, community redevelopment funds, and Small Business Administration loans that have already been made available across the Gulf Coast-and that should be available to these industries. Furthermore, grants such as $15 million for "seafood promotion strategies" move well beyond recovering damaged boats and equipment. Lawmakers should differentiate legitimate recovery expenses from classic corporate welfare.

  1. Avian Flu: Just four months ago, lawmakers appropriated $3.8 billion to prepare for a potential avian flu outbreak. The Senate bill includes an additional $2.3 billion. Even if such spending is necessary, this supplemental bill, which is exempt from all budget caps, is not the proper vehicle for this type of expenditure. Lawmakers should first examine whether the $3.8 billion already appropriated is sufficient. If not, lawmakers should debate the issue as part of the regular budget process, subject to budget caps.

  1. AmeriCorps: This program will spend $325 million this year subsidizing "volunteer" work and, under the Senate bill, would receive an additional $20 million to subsidize its hurricane-relief efforts. Beyond the question of whether Washington should be paying "volunteers" tens of thousands of dollars annually, AmeriCorps has a history of mismanagement. Strong criticisms of AmeriCorps are widespread. "It's like Enron's gone nonprofit," said Senator Barbara Mikulski (D-MD). "The [program's] foundation continues to crack and sag," said Senator Kit Bond (R-MO). "They've been living life on the edge," reported the Government Accountability Office, the federal government's auditor.[13] Clearly, providing AmeriCorps with an additional $20 million-on top of its $325 million budget-is a poor use of money that could be used to rebuild homes and infrastructure.

What Congress Should Do

Supplemental spending should be reserved to unforeseen emergencies. Congress should offset additional spending by reducing funding for lower-priority projects elsewhere in the budget. It is unrealistic to think that all war spending would be offset, especially because there is a placeholder for some of this spending in the budget resolution. However, all non-war spending should be offset. The Administration[15] and some in the Senate-such as Senators John McCain (R-AZ), Tom Coburn (R-OK)[16] and John Ensign (R-NV)[17]-acknowledge the need to cut spending elsewhere in the budget to pay for Katrina-related expenses. Polls show that Americans strongly support this kind of fiscal restraint.[18]

Spending on the war in Iraq is an exception to reserving supplemental funding for emergencies for several reasons. First, the exact amounts needed are difficult to project so far in advance. Second, this kind of spending should be kept outside of the annual defense budget so that the military modernization and readiness are not compromised.[19] To do this responsibly, however, the budget resolution should set aside a realistic estimate of war spending so that Congress can appropriately adjust the entire budget. In fiscal year 2005, the war placeholder was $50 billion but appropriations totaled $80 billion. This year, the war placeholder is also $50 billion. That much has been already been appropriated, and the supplemental now under debate would bring total war spending to $120 billion.

Unfortunately, many of the spending items that wind up in supplementals are all too foreseeable. Because emergency supplemental bills do not count against budget caps, they are routinely loaded with additional spending that is unrelated to the original purpose of the legislation.[20] The Senate Appropriations Committee's current supplemental bill is a perfect example of this.

To repair the damage, the full Senate should do four things:

  • Reject all amendments that deviate from the purposes of the bill-to fund the war in Iraq and to provide additional hurricane relief;
  • Eliminate all pork projects that have been added to the bill;
  • Keep within the funding level requested by the President; and
  • Identify offsets to pay for new spending.

Thus far, the Senate has failed this test of fiscal responsibility.

The White House Role

The President must not allow Congress to capitalize on the war effort and the destruction of Hurricane Katrina by hijacking his emergency spending request. The President should draw an iron-clad line in the sand now, before the Senate returns to its deliberations. He should promise to veto any that legislation that is beyond the scope or amount he requested-regardless of the subject. If Congress fails to repair the damage itself, the President must bring out the veto pen. As well, the President should veto any legislation that contains wasteful earmarks.[21] Finally, the President should work with the Congress to identify lower-priority programs that can be reduced to offset this new spending.

Brian M. Riedl is Grover M. Hermann Fellow in Federal Budgetary Affairs in, and Alison Acosta Fraser is Director of, the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

About the Author

Brian M. Riedl Grover Hermann Fellow in Federal Budgetary Affairs
Thomas A. Roe Institute for Economic Policy Studies

Alison Acosta Fraser Senior Fellow and Director of Government Finance Programs
Domestic and Economic Policy

Related Issues: Federal Budget

Show references in this report

[1] Scott Cox, "Post-Recess Outlook: Senate to Begin Debate on Supplemental, House Schedule Uncertain," Gallerywatch.com, April 7, 2006.

[2] Figures are adjusted for inflation.

[3] The President's discretionary budget request of $873 billion was $7 billion over the $866 billion target set in last years joint budget resolution.

[4] United States Department of the Treasury, "Financial Report of the United States Government", page 28, /static/reportimages/D6D8A9E5931B8724E03C0F212756F832.pdf

[5] Ashok K. Mishra, Hisham S. El-Osta, Mitchell J. Morehart, James D. Johnson, and Jeffrey W. Hopkins, "Income, Wealth, and Economic Well-Being of Farm Households," U.S. Department of Agriculture, Economic Research Service, Agricultural Economic Report No. 812, July 2002, p. 52, at http://www.ers.usda.gov/publications/aer812; and Brian M. Riedl, "Another Year at the Federal Trough: Farm Subsidies for the Rich, Famous, and Elected Jumped Again in 2002," Heritage Foundation Backgrounder No. 1763, May 24, 2004, at http://www.heritage.org/Research/Budget/bg1763.cfm.

[7] Emily Ziring and Stephen Filmanowicz, "CNU Teams Return to Meet With Mississippians," Governor's Commission on Recovery, Rebuilding, and Renewal, December 3, 2005, at http://www.mississippirenewal.com/info/
dayDec-03-05.html
; "After Katrina: Building Back Better Than Ever," Governor's Commission on Recovery, Rebuilding, and Renewal, December 31, 2005, pp. 164-165, at http://www.mississippirenewal.com/documents/
Governors_Commission_Report.pdf
.

[8] "Making Emergency Supplemental Appropriations for the Fiscal Year Ending September 30, 3006 and For Other Purposes," Senate Committee Report 109-230, April 5, 2006, p. 87.

[9] Andrew Taylor, "Mississippi Lawmakers Advance State Project," Associated Press, April 4, 2006, at http://www.washingtonpost.com/wp-dyn/content/
article/2006/04/04/AR2006040401512.html
.

[10] "After Katrina: Building Back Better Than Ever," Governor's Commission on Recovery, Rebuilding, and Renewal, December 31, 2005, pp. 29-30, at http://www.mississippirenewal.com/documents/
Governors_Commission_Report.pdf
.

[11] Andrew Taylor, "Mississippi Lawmakers Advance State Project," Associated Press, April 4, 2006, at http://www.washingtonpost.com/wp-dyn/content/
article/2006/04/04/AR2006040401512.html
.

[12] See U.S. Department of Transportation, Federal Highway Administration, "Conditions and Performance Report: Chapter 7-Future Capital Investment Requirements" at http://www.fhwa.dot.gov/policy/1999cpr/
ch_07/cpm07_8.htm
.

[13] "Mismanagement Led to AmeriCorps Job Freeze," Peace Corps Online, April 10, 2003, at http://peacecorpsonline.org/messages/messages/
2629/2012999.html
.

[15] Shailagh Murray and Jim VandeHei, "Katrina's Cost May Test GOP Harmony, Some Want Bush To Give Details on How U.S. Will Pay," The Washington Post, September 21, 2005, p. A01, at at

http://www.washingtonpost.com/wp-dyn/content/
article/2005/09/20/AR2005092001704_pf.html
.

[16] Marilyn Geewax, "Conservatives Call For Cuts To Offset Katrina Spending," Cox News Service, September 16, 2005, at http://www.coxwashington.com/news/content/
reporters/stories/BC_KATRINA_SPENDING16_COX.html
.

[17] See Brian M. Riedl, "An Innovative and Bold Budget Proposal in the Senate", Heritage Foundation WebMemo No. 896, October 26, 2005, at http://www.heritage.org/Research/Budget/wm896.cfm.

[18] According to a CNN/USA Today/Gallup poll conducted in December 2005, 67 percent of Americans believe that the government should fund hurricane relief efforts by cutting spending; only 14 percent and 13 percent favor raising taxes and increasing the deficit, respectively. See "Disasters," PollingReport.com, April 2006, at http://www.pollingreport.com/disasters.htm.

[19] See, e.g., Baker Spring, "Congress Needs To Focus on the Big Picture in Defense Acquisition Reform," Heritage Foundation WebMemo No. 984, February 2, 2006, at http://www.heritage.org/Research/NationalSecurity/wm984.cfm.

[20] See Keith Miller and Alison Acosta Fraser, "Not Again! Congress Evades Its Budget Caps," Heritage Foundation WebMemo No. 576, September 28, 2004, at http://www.heritage.org/Research/Budget/wm576.cfm.

[21] See Edwin J. Feulner, Ph.D., and Alison Acosta Fraser, "A Line in the Sand for Fiscally Responsible Lawmakers",Heritage Foundation WebMemo No. 874, October 6, 2005, at http://www.heritage.org/Research/Budget/wm874.cfm.