July 7, 2016 | Issue Brief on Budget and Spending
This week, the House is expected to consider the Financial Services and General Government appropriations bill. This bill provides funding for the Treasury Department, the Justice Department, the Small Business Administration, and the Securities and Exchange Commission, among other agencies.
The fiscal year (FY) 2017 bill provides a total of $21.7 billion in discretionary budget authority. This represents a $1.5 billion decrease of the current funding level, and is $2.7 billion below the Administration’s FY 2017 budget request. The bill also includes important policy riders, such as prohibiting the use of funds for abortion in the Federal Employee Health Benefits program; prohibiting a pay increase for the Vice President and other senior political appointees; and additional prohibitions related to Cuba, among other provisions.
The Financial Services and General Government bill makes strides by cutting spending below the FY 2016 level; however, it still provides funding for programs that could be reduced further or eliminated entirely. This Issue Brief identifies additional areas where savings could be achieved as well as other policy alternatives that should be implemented.
Small Business Administration (SBA). The bill includes $883 million in funding for the Small Business Administration, an increase of $12 million over the FY 2016 enacted level, and about $6 million more than the President’s FY 2017 request. This total includes $186 million for the Disaster Loans Program.
Currently, SBA disaster loans are awarded regardless of whether the beneficiaries previously took steps to reduce their exposure to losses from natural disasters. While SBA disaster loans are intended to help applicants return their property to the same condition as before the disaster, the unintended consequence of this requirement is that borrowers are forced to rebuild in disaster-prone locations. In many cases, the loans fail to offer a long-term solution, and thus should be eliminated.
Securities and Exchange Commission (SEC). The bill provides $1.55 billion for the SEC, which is $50 million below the FY 2016 level, and $226 million below the Administration’s request. While reducing funding for the SEC is a step in the right direction, the bill could go further by freezing the budget at its inflation-adjusted FY 2015 level.
In FY 2007, the SEC had 3,567 full-time positions and a budget of $877 million. For FY 2016, it has approximately 4,621 full-time positions and a budget of $1.68 billion. Thus, over 10 years, the SEC staff has increased by 30 percent and its budget has grown 92 percent. Over that same period, overall federal spending increased 45 percent, inflation increased 15 percent, and the economy increased in size by 25 percent. Thus, the SEC budget has grown twice as rapidly as other federal spending over the past decade. For FY 2017, the agency has requested that its staff be increased an additional 5.4 percent, to 4,870 full-time positions, and that its budget be increased by 6.0 percent to $1.78 billion. The SEC budget should be frozen at its real FY 2015 level.
Community Development Financial Institutions Fund (CDFI). This bill provides $250 million for the CDFI, an increase of $16 million from the FY 2016 enacted level, and $4 million above the FY 2017 request. The CDFI provides grants to community development financial institutions, community development entities, and other private financial institutions.
The CDFI fund should be shut down because it amounts to corporate welfare. Furthermore, the grants hinder competition and distort private markets, ultimately leading to higher consumer prices and further justification for increased federal spending.
While the bill includes several meaningful policy riders, there are other important issues that should be addressed within this bill. Congress should:
The FY 2017 Financial Services and General Government appropriations bill makes progress by cutting more than a billion dollars from last year’s spending level and including several important policy riders. Bringing the CFPB under the annual appropriations process is a step in the right direction, but Americans would be better served if Congress eliminated it, and its harmful effects on the economy were reversed. Lifting the moratorium on OMB Circular No. A-76 is another important step toward restoring fairness and competition to the role of the federal government. The FY 2017 bill should take bold steps to reduce economic barriers in order to return the economy to a prosperous path.—Justin Bogie is Senior Policy Analyst in the Thomas A. Roe Institute for Economic Policy Studies, of the Institute for Economic Freedom and Opportunity, at The Heritage Foundation. David R. Burton is Senior Fellow in Economic Policy in the Roe Institute. Norbert J. Michel, PhD, is a Research Fellow in Financial Regulations in the Roe Institute.
 Many of the recommendations in this Issue Brief can be found in The Heritage Foundation, A Blueprint for Balance: A Federal Budget for 2017, February 2016, http://www.heritage.org/research/reports/2016/02/a-blueprint-for-balance-a-federal-budget-for-2017.
 David B. Muhlhausen, “Business Disaster Reform Act of 2013: Review of Impact and Effectiveness,” testimony before the Committee on Small Business and Entrepreneurship, U.S. Senate, March 14, 2013.
 U.S. Securities and Exchange Commission, “FY 2017 Congressional Budget Justification, FY 2017 Annual Performance Plan, FY 2015 Annual Performance Report,” https://www.sec.gov/about/reports/secfy17congbudgjust.pdf (accessed May 20, 2016).
 Many of the policy rider recommendations in this Issue Brief can be found in The Heritage Foundation, “Solutions 2016,” January 2016, http://solutions.heritage.org/wp-content/themes/heritage/pdf/Solutions-2016.pdf.
 Diane Katz, “The CFPB in Action: Consumer Bureau Harms Those It Claims to Protect,” Heritage Foundation Backgrounder No. 2760, January 22, 2013, http://www.heritage.org/research/reports/2013/01/the-cfpb-in-action-consumer-bureau-harms-those-it-claims-to-protect.
 Kelsey Harkness, “Find Out if Your Lawmaker Voted to End Operation Choke Point,” The Daily Signal, February 4, 2016, http://dailysignal.com/2016/02/04/find-out-if-your-lawmaker-voted-to-end-operation-choke-point/.
 Consumer Financial Protection Bureau, “Outline of Proposals Under Consideration and Alternatives Considered,” March 26, 2015, http://files.consumerfinance.gov/f/201503_cfpb_outline-of-the-proposals-from-small-business-review-panel.pdf (accessed June 20, 2016).
 Norbert J. Michel, “Dodd–Frank and the Consumer Financial Protection Bureau Put Squeeze on Private Payday Lenders,” Heritage Foundation Issue Brief No. 4479, November 4, 2015, http://www.heritage.org/research/reports/2015/11/doddfrank-and-the-consumer-financial-protection-bureau-put-squeeze-on-private-payday-lenders#_ftnref12.