9 Things You Need to Know About the $1.4 Trillion Fiscal Year 2021 Omnibus and $900 Billion COVID-19 Package

COMMENTARY Budget and Spending

9 Things You Need to Know About the $1.4 Trillion Fiscal Year 2021 Omnibus and $900 Billion COVID-19 Package

Dec 22nd, 2020 14 min read

Commentary By

Matthew D. Dickerson

Director, Grover M. Hermann Center for the Federal Budget

David Ditch @DavidADitch

Policy Analyst, Grover M. Hermann Center for the Federal

Senate Minority Leader Chuck Schumer, D-N.Y., listens as Speaker of the House Nancy Pelosi, D-Calif., speaks during a press conference on Capitol Hill on December 20, 2020 Tasos Katopodis / Stringer / Getty Images

Key Takeaways

The massive omnibus package is being jammed through at the last minute with little input or even time for members of Congress to review the bill.

Policymakers missed the opportunity to put forward a bill that would put the country on a better path.

In a year where a lot of things went wrong, add this omnibus to the list.

Congressional leaders introduced on Monday a fiscal year 2021 omnibus appropriations bill that would provide $1.4 trillion in spending for government agencies as well as a variety of unrelated legislative provisions.

Also included is another COVID-19 relief “stimulus” package, this one costing taxpayers nearly $1 trillion.

Congressional leaders have the enormous and oftentimes difficult responsibility of choosing the best policy decisions to present to their peers. This is a challenge under normal circumstances—even more so when they have to decide on a bundle of policy decisions, and under a tight deadline.

This was abundantly clear with Monday’s appropriations package. While the bill includes some positive provisions, it fails to meet the needs of the country in other significant respects.

Here are nine things you need to know about Monday’s omnibus package, which was passed by the House and Senate.

1. It Was Developed Behind Closed Doors in the 11th Hour

While signing the fiscal year 2018 omnibus spending bill, President Donald Trump warned Congress: “I will never sign another bill like this again. I’m not going to do it again. Nobody read it. It’s only hours old. Some people don’t even know what is in—$1.3 trillion—it’s the second largest ever.”

For the next two years, Congress heeded the president’s warning, breaking the full-year spending bills into multiple packages. The agreement for the Bipartisan Budget Act of 2019 stated that:

The President, Congressional leaders and the leadership of the Appropriations Committees shall also work together to reach bicameral and bipartisan agreement on the orderly and timely consideration of FY 2021 appropriations bills to avoid a government shutdown, and a 12-bill omnibus.

But now, Congress is back to its old ways, breaking that agreement and crossing the president’s red line by packaging all 12 of the regular appropriation bills into an all-or-nothing omnibus package, plus tacking on thousands of pages of extraneous provisions that have little to do with government funding and should be considered separately on their own merits. 

This massive omnibus package was written behind closed doors by a select few members of Congress and staffers, just before the deadline. As described by Politico, “Congressional leaders are preparing the second-largest federal rescue package in our nation’s history, and no one has seen it just days before it will get a vote. All of the power is centralized among four people and their aides.”

There is simply no way for members of Congress and the American public to fully comprehend the potential impacts of the numerous, significant policy provisions and spending that is included in the bill.

Members of Congress only have hours to review and understand 5,593 pages of complex legislative text and nearly 2,000 pages of explanatory materials—working around the clock from the time the bill and materials were made publicly available to the public until 1:46 p.m. Monday afternoon, just hours prior to the vote. Even if a member attempted to read and understand the legislation, it would not be physically possible. 

Congress has rules that are meant to prevent situations like this, such as the House’s “72-hour rule” and restrictions on legislative provisions being included on appropriations bills that are a part of the rules in both the House and the Senate. However, it may come as no surprise that the rules are selectively enforced.

The disappointing process has led to what is largely a disappointing piece of legislation.

2. The Nondefense Spending Levels Are Inflated and Gimmicked

In total, this package provides a total of $1.4 trillion in discretionary appropriations. The 12-bill appropriations omnibus uses spending levels set by the Bipartisan Budget Act of 2019. 

While this does not come as a surprise, that does not mean the spending level is appropriate. Instead, it demonstrates a refusal by members of Congress to be responsible stewards of taxpayer dollars.

The 2019 spending deal significantly increased defense and nondefense spending by a total of $153 billion above the fiscal year 2021 caps originally set by the Budget Control Act of 2011.

Worse, legislators are using accounting gimmicks to further inflate the amount of nondefense spending. The most important of these has to do with Changes in Mandatory Programs, or CHIMPs. This gimmick allows fake “savings” in mandatory programs, such as moving a payment from one year to the next, to offset more discretionary spending within the caps.

A “Democratic source” actually bragged that the gimmick “won’t actually result in meaningful spending cuts.”

This year will see a big increase in the CHIMPs gimmick, and appallingly enough, this is done for the sake of spending that Congress should be able to properly budget for: veterans care.

Specifically, a 2018 expansion of health benefits for veterans requires billions of discretionary dollars to properly implement, something that Congress should prioritize over less important programs. 

Rather than paying for the benefit by targeting wasteful spending, such as political slush funds and excessive compensation for federal bureaucrats, Congress will use fake CHIMPs cuts and further add to our $27.4 trillion national debt.

Blame for this situation falls on both parties.

In the case of paying for veterans care, both the House and the Senate appropriations bills designated the veterans’ health funding as “emergency funding,” exempting it from the spending limits. This was a blatant abuse of the system and a naked attempt to avoid making choices to prioritize funding for an important and politically popular program.

Some Republicans fought to ensure that the additional spending stayed within the overall limits and thankfully they were successful. Unfortunately, the final omnibus uses the CHIMPs gimmick to make it happen. There was no serious attempt from either party to make room for the veterans’ benefit by trimming low-priority programs.

Congress is harming the nation’s financial health by constantly placing political convenience ahead of responsible budgeting. This year’s bloated omnibus package is the latest example of Washington’s lack of concern for future generations.

3. The COVID-19 Relief Package Has Too Much Waste, Little Meaningful Response

Rather than allowing the vitally important discussion of COVID-19 response to take place as its own legislation, congressional leaders have chosen to prioritize convenience and political leverage over proper deliberation by attaching it to the “must-pass” omnibus package.

>>> What’s the best way for America to reopen and return to business? The National Coronavirus Recovery Commission, a project of The Heritage Foundation, assembled America’s top thinkers to figure that out. So far, it has made more than 260 recommendations. Learn more here.

The $900 billion COVID-19 relief section of the omnibus is badly flawed. The Heritage Foundation recently released a new report detailing many of these problems. Among them:

  • A lack of focus on COVID-19 rapid self-tests. Congress should demand urgent action from the Food and Drug Administration and the Department of Health and Human Services, starting by directing them to clear away all regulatory barriers to rapid self-tests so that individual Americans and their families can regularly and quickly get the information they need about their COVID-19 status. This, along with needed funds for such tests, would help collapse the spread of the disease and provide more help to the economy and society than other provisions that are an order of magnitude more expensive. With vaccines still months away from wide availability, and cases and deaths rising as we head into a season of expected further increases, policymakers must act urgently on this targeted action.
  • Counterproductive unemployment benefit boosts. Extended and increased unemployment benefits are not warranted nationwide given that the unemployment rate is 6% or lower in half of states, and higher benefits lead to more unemployment. Further, expanding federal unemployment benefits makes it easier for state and local governments to impose crushing restrictions that are not grounded in science, hurting businesses, schools, and communities.
  • More business loans that have proven ineffective. While the impulse to preserve jobs is understandable, the Paycheck Protection Program cost over $100,000 per job saved based on several studies. Worse, the program was not properly targeted, creating inequalities between businesses. These loans also make it easier for state and local governments to justify overly restrictive lockdowns.
  • Unnecessary handouts to school districts. Spending per student on K-12 education has exploded over the last several decades in real terms, and private schools have largely reopened without the level of expense that this package envisions.
  • Politically motivated industry bailouts. Heavily unionized industries still wield disproportionate political influence, and the COVID-19 package would give sweetheart deals to unionized industries such as airlines, transit agencies, and the Postal Service. Airlines are not the only industry hurt by the pandemic and should not receive special treatment. Transit agencies have bloated payroll costs and are already heavily subsidized. The Postal Service needs to bring costs in line with revenues, which Congress can enable through reform legislation.

In addition, the COVID-19 relief section now includes untargeted and unnecessary $600 stimulus checks. The checks will be sent without regard to unique COVID-19 impacts, including to the more than 93% of workers who are fortunate enough to still be employed.

Many Americans are saving and paying down debts at record levels. Most Americans don’t need another check from Washington. Stimulus checks also aren’t stimulative. Government can’t spend its way back to prosperity.

According to the Committee for a Responsible Federal Budget, Congress has authorized $4.1 trillion in legislative response to the outbreak of COVID-19. However, $1.6 trillion of that amount has not been disbursed or committed. 

Despite the significant amount of unspent money, Congress is rushing to pass another stimulus bill that is even larger than former President Barack Obama’s failed 2009 stimulus package.

While some level of federal response is warranted, a smaller and focused COVID-19 package would be more effective at fighting the pandemic without needlessly adding to the national debt.

4. It Gives Sweetheart-Deal Tax Extenders to Special Interests

The proposal bows to special interests by including temporary extension of about three dozen expiring tax subsidies and creating new ones. 

The majority of these are corrupt subsidies for special interests, such as alternative fuels, special types of vehicles, new solar investments, a tuna cannery in American Samoa, and certain coal owned by Indian tribes, among others.

The bill extends 11 provisions for five years, including the New Markets Tax Credit and the Work Opportunity Tax Credit, which have both been repeatedlyshown as ineffective, as well as a handful of other renewable energy subsidies. Congress has also created at least two new temporary extenders that expand deductions for charitable giving and business meals

Six previously temporary provisions are made permanent, including lower effective tax rates for small producers of beer, wine, and spirits—a welcome departure from the normal year-to-year uncertainty. The remainder of the extenders are only renewed through next year.

Attaching narrow, temporary tax changes to must-pass bills at the end of the legislative session is a failure of fiscal policy. The practice allows ineffective subsidies for special interests to persist year after year, creates economic uncertainty for those who rely on the changes to plan their business, and obscures the true cost to taxpayers.

None of the temporary provisions should be cause for passing this extenders package. This Congress should allow all the extenders to expire and let the 117th Congress debate individual provisions on their merits.

5. It Enables the Government to Interfere in the Energy Market

After several failed attempts to get an energy bill to the president’s desk, the omnibus lumps in provisions from a few different energy bills. Unsurprisingly, many of the titles use taxpayer dollars to increase the role of the federal government in energy markets.

The bill creates and expands government programs for the development of wind, solar, geothermal, hydropower, carbon capture, nuclear, and energy storage technologies. It also includes subsidies for energy efficiency programs and workforce development.

While basic research and development at the Department of Energy’s national laboratories, these programs overstep the role of the government in commercialization. The private sector should assume the risk (and reap the rewards) of investing new technologies.

Businesses also invest in workforce development to expand their operations and energy savings technologies when they believe it is the best use of their dollars. And they’ll do so without the help of the taxpayer. When the federal government steps in, it offsets money that should be spent by the private sector and influences how companies spend their money.

Much like the larger energy bills passed in 2005 and 2007, these interventionist provisions put Washington in charge rather than investors and consumers.

6. It Rightfully Ends Surprise Medical Billing—but Creates a New Class of Rate-Setting Bureaucrats

The measure would end surprise medical billing. As a result, patients who seek medical care from network doctors at network facilities, and those seen in emergency rooms, will no longer face big bills from non-network physicians.

Unfortunately, the bill also deputizes an army of federal contractors to dictate how much insurance companies must pay doctors. It requires that the health and human services secretary be notified any time a doctor who is not part of an insurance company’s network is unhappy with an insurer’s payment.

Both the doctor and the insurer would then submit their final offers to a government-contracted arbitrator, who would choose between the two offers. That decision would be final, binding on both parties, and not subject to judicial review.

Congress is right to act on surprise medical bills but wrong to force noncontracting parties into binding arbitration, effectively outsourcing medical rate-setting on an ad hoc basis to a new class of government arbiters.

7. It Wisely Winds Down the Federal Reserve’s Emergency Authority

The bill includes a provision championed by Sen. Pat Toomey, R-Penn., to wind down Federal Reserve emergency lending facilities originally authorized by the Coronavirus Aid, Relief and Economic Security Act.

Enabling the central bank to distribute hundreds of billions of dollars more to favored interests might be politically expedient, but it masks the economic misery caused by government-mandated suppression of supply and demand.

Providing the Federal Reserve emergency lending facilities furthermore allows Congress to shirk responsibility for this spending largesse. Whatever the political expediency, granting the Federal Reserve such power to further expand its balance sheet is irresponsible and further increases the risk of a monetary crisis.

8. It Will Increase Defense Stability

The funding provided in the defense section of the bill will have a positive effect on the U.S. military. Among other things, the bill provides funding for an additional Virginia-class attack submarine, 17 more F-35 jet fighters than were requested, and eight P8A Poseidon sub-hunting planes.

Further, after two continuing resolutions, finally having a final full-year defense appropriations bill will go a long way toward providing stability and predictability for the military as it continues to rebuild readiness and move toward great power competition.

Although there is a lot to unpack in the many pages of the bill, it seems most of the administration’s priorities were addressed, with the exception of a cut of 2,900 people to the administration’s initial request for the size of the U.S. Marine Corps, bringing it to 181,200.

9. It Defends Key Pro-Life Policies That the Left Have in Its Crosshairs

The omnibus legislation retains key longstanding pro-life and conscience protection riders, including the Hyde Amendment, which generally prohibits appropriated funds from paying for abortions, and the Weldon Amendment, which protects health care providers from discrimination on the basis that they refuse to provide, pay for, or refer for abortions.

But the plethora of pro-life and conscience protection items in appropriations bills—some of which, like the Hyde Amendment, have been part of spending bills for many decades—are under attack from pro-abortion policymakers.

Incoming House Appropriations Committee Chair Rep. Rosa DeLauro, D-Conn., and Speaker Nancy Pelosi have vowed that in the new Congress the Hyde Amendment will no longer be incorporated in spending bills, and during his presidential campaign, Joe Biden reversed his decades-held position to say he no longer supports the policy.

The Hyde Amendment and other pro-life riders will be under direct threat like never before in the 117th Congress, and the inclusion of pro-life protections in the fiscal year 2021 omnibus may mark the last time for the foreseeable future that these consensus policies are included without protracted negotiations and debate.

To Summarize, the Omnibus Is a Missed Opportunity

While some components of this appropriations bill are positive, Congress and the president could have chosen a different path to close out 2020. The full-year appropriations could have been at responsible levels and deprioritized low-priority, wasteful, and unwise programs and agencies. 

Likewise, the COVID-19 aid could have been targeted to help deploy a better health response anchored in rapid self-testing. 

The massive omnibus package is being jammed through at the last minute with little input or even time for members of Congress to review the bill. Instead of lumping many policies into a single “must pass” legislation, Congress should debate these items separately and consider them on their own merits.

Policymakers missed the opportunity to put forward a bill that would put the country on a better path. In a year where a lot of things went wrong, add this omnibus to the list.

Frederico BartelsJoel GriffithMelanie IsraelAdam MichelNick Loris, and Doug Badger also contributed to this commentary.

This piece originally appeared in The Daily Signal