House Funds Key Programs but Adds to Government Bloat, Waste

COMMENTARY Budget and Spending

House Funds Key Programs but Adds to Government Bloat, Waste

Dec 18th, 2019 15 min read
COMMENTARY BY
Justin Bogie

Part-Time Senior Policy Analyst in Fiscal Affairs

Justin Bogie serves as a part-time senior policy analyst in fiscal affairs at The Heritage Foundation.
The House votes on more than 2,000 pages of text within 24 hours of introducing two spending bills, a troubling symptom of Washington’s budget dysfunction. Mark Wilson / Staff / Getty Images

Key Takeaways

This is not the way that the budget process is supposed to work, and it leads to wasteful spending and other negative impacts for American taxpayers.

The federal government is projected to run a deficit of more than $1 trillion in fiscal 2020.

Lawmakers must work together to implement reforms that create a better functioning and more responsible budget process.

The House passed two spending bills totaling $1.4 trillion Tuesday to fund the federal government through the remainder of fiscal year 2020, which began Oct. 1. 

Although the first bill would provide much-needed funding and budget certainty to core constitutional responsibilities, such as national defense, the second “minibus” is a Christmas tree of bloated spending and add-ons that have no place being voted on through an appropriations bill.

The House passed the two bills, introduced late Monday afternoon, in less than 24 hours. The Senate is expected to consider the two measures later this week. 

The fact that the House voted on more than 2,000 combined pages of text within 24 hours of introducing the two bills is a troubling symptom of Washington’s budget dysfunction. This is not the way that the budget process is supposed to work, and it leads to wasteful spending and other negative impacts for American taxpayers.

Lawmakers must work together to implement reforms that create a better functioning and more responsible budget process.

The first spending bill, dubbed the “national security” minibus, provides a total of $860.3 billion in fiscal 2020. This includes $92.6 billion in funding adjustments that fall outside the Budget Control Act spending caps. The funding is divided among the Defense; Commerce, Justice, and Science; Homeland Security; and Financial Services appropriations bills.

Providing national security is one of the key responsibilities of the federal government. This package will ensure that the Department of Defense and other security agencies are properly trained and equipped so that they can continue to ensure the safety of all Americans. Passing full-year appropriations now also will enable these agencies to proceed with long-term projects.

However, the national security “minibus” is not without flaws. The bill includes $17.4 billion in disaster funding that is not constrained by the budget caps and is not paid for. This funding goes directly to the Federal Emergency Management Agency’s Disaster Relief Fund and is intended to be used to respond to disasters that have a cost of less than $500 million per event. 

As of the end of November, the Disaster Relief Fund had a carry-over balance exceeding $29 billion. Congress should not provide additional uncapped disaster relief funding when FEMA hasn’t used previously appropriated funds. 

Further, some degree of recurring natural disasters occurs every year. Lawmakers should budget for recurring disasters through FEMA’s regular appropriation, not new deficit spending.

The second spending bill, “domestic priorities,” provides a total of $539.9billion (including $19.5 billion in uncapped adjustments) to the following departments and related agencies: Labor, Health and Human Services, and Education; Agriculture; Energy and Water, Interior and Environment; Legislative Branch; Military Construction and Veterans Affairs; State and Foreign Operation; and Transportation and Housing and Urban Development.

As a result of the irresponsible Bipartisan Budget Act of 2019, nearly all areas of these departments received increased funding. Unlike the national security minibus, this bill is wrought with wasteful spending. Other funding provided by this bill falls outside the scope of the federal government and could be reduced or eliminated. 

The federal government is projected to run a deficit of more than $1 trillion in fiscal 2020. Providing additional funding for activities that don’t meet a truly national interest is irresponsible.

The domestic priorities minibus includes another $6.7 billion in “emergency” funding to help offset states’ costs for natural disasters, primarily wildfires. Much like the additional funding for FEMA’s Disaster Relief Fund, this uncapped emergency funding is inappropriate. 

Wildfires and other natural disasters happen to some degree every year. They do not meet the definition of emergency funding, and Congress should budget for these recurring events within the budget caps. 

Lawmakers must take steps now to budget for the next disaster or national emergency before it occurs. Emergency designations should be reserved for truly unforeseen events and in those cases, should be fully paid for through cuts to other areas of the federal budget.

Other add-ons included in this bill, such as a tax extenders package and a coal miners pension bailout, are discussed in more detail below by other Heritage Foundation policy analysts.

Congress must be held accountable for skirting budget rules and recklessly driving deficits ever higher. Current and future generations will pay a high price if lawmakers continue down this path.—Justin Bogie

Defense

The defense appropriations bill will provide the necessary stability to continue rebuilding our military for fiscal year 2020, after 79 new starts and 39 production increases were delayed because of the continuing budget resolutions since Oct. 1. It follows the lead of the National Defense Authorization Act and makes important investments in our national defense in the context of renewed great power competition. 

The bill provides $19.5 billion more to the Department of Defense, which will serve well to rebuild and augment our national defense. It creates the Space Force, establishing an institution focused on winning in space. 

The legislation provides a 3.1% pay raise to the military, which will help with retention and recruiting. Further, the bill appropriates for 98 F-35 aircraft, which will speed up the program as recommended by Heritage Foundation research

The bill also creates a path for the Air Force to buy back the F-35s destined for Turkey. However, the appropriators included the procurement of eight F-15EX, an unforced error

When it comes to the Navy, the appropriators wisely included 14 new ships, which will help the service get closer to its 355-ship goal and provides resources for long-lead items for the midlife refueling of the USS Harry S. Truman, a Nimitz-class aircraft carrier. 

The appropriators decided not to backfill military construction resources redirected to the southern border, which will be detrimental to the military.

Congress also continued its tradition of giving nonmilitary research tasks to the military by providing $492.5 million for cancer research, which is unfortunate.—Frederico Bartels

Health Care

After years of efforts to replace Obamacare with health care that works for all, Republicans seem to have set aside that approach and embraced deficit spending on failing entitlement schemes that mainly benefit insurance companies at the expense of patients and taxpayers.   

The bill does—rightly—repeal two Obamacare taxes that have driven up health costs by permanently repealing the medical device excise tax, effective Jan. 1 (Section 501, p. 1480) and the tax on health insurance providers, effective Jan. 1, 2021 (Section 502, p. 1480).   

These taxes make health care (and health insurance) cost more, since they are taxes on the purchase of those products.

However, the bill does not touch the underlying spending that these taxes fund—i.e., the Obamacare entitlement spending scheme. This scheme also contributes to higher health costs and greater taxpayer burdens, by giving insurance companies more money every time they raise prices.  

Rather than reform Obamacare and address these and other abuses, the bill would make it harder for the Trump administration to address how insurers game the system. Congress should take a different approach, and combine repeal of the funding source with reforms to the underlying, failed spending scheme as well.  

Finally, the bill also permanently repeals the “Cadillac” tax (Section 503, pp. 1481ff), which imposes a tax of 40% on high-cost employer medical plans. Before the enactment of Obamacare, employer-sponsored health plans were exempt from federal taxation regardless of the dollar amount of the job-based health coverage. 

This tax policy gave employers (as well as labor unions) powerful incentives to drive up health insurance spending and thus overall health insurance costs. As a way to increase compensation, tax-free health insurance increases, in comparison to taxable wages, was an attractive option for employers and employees alike. 

The Cadillac tax, for all of its faults, was designed to be a break on rising health care costs, but Congress repeatedly has delayed the tax from going into effect.   

Congress should replace this tax with a simple cap on the existing tax exclusion for employer-provided health insurance. Such an approach would mirror that used for other employer-sponsored benefits. For example, Congress caps tax-free contribution amounts to 401(k) plans.—Marie Fishpaw

Tax Extenders

The bill includes a familiar list of about 46 temporary tax subsidies and other provisions, most of which have been expired for two years. The bill retroactively extends these credits along with a list of other soon-to-expire provisions through fiscal 2020. 

Credits for biodiesel and certain railroad track maintenance get an extra lease on life, being extended through 2021 and 2022, respectively. Even potentially good reforms, such as lower alcohol excise taxes, are less effective when they are made temporary. 

As a policy tool, narrowly targeted and temporary tax preferences are always poorly designed subsidies. They introduce unnecessary complexity and ambiguity to the tax code and do a bad job of targeting the desired activity.

The myriad special interest tax provisions included in this bill are each uniquely defective, and as a whole, represent flawed policy.—Adam Michel

Pension Bailout

Lawmakers are preparing to vote on a spending package that would provide a $6 billion taxpayer bailout to one select union. That union is the United Mine Workers of America. 

For the first time in history, Congress is poised to use taxpayer dollars to fund the broken pension promises of a private-sector union and private employers. The United Mine Workers covers fewer than 1% of multiemployer pension recipients, and its roughly $6 billion in underfunding is only the tip of the iceberg.

Virtually the entire multiemployer pension system is on the path toward insolvency. Across the U.S., close to 1,400 multiemployer pension plans collectively have set aside only 43 cents on the dollar to pay promised pensions. 

In total, the Pension Benefit Guaranty Corporation estimates that multiemployer plans have $638 billion in unfunded pension promises.  

The solution to the multiemployer pension crisis is not to bail out just one of nearly 1,400 massively underfunded union pension plans without doing anything to improve the system. Neither should it be to bail out all possible underfunded pension plans—including $638 billion in private union pensions and up to $6 trillion in state and local pensions—the price tag of which could reach $52,000 for every household in the U.S. 

Instead, Congress needs to change the rules so that this never happens again, to maintain the Pension Benefit Guaranty Corporation solvency as a pension safety net, and to require plans to act sooner, rather than later, to minimize pension losses.—Rachel Greszler

Securities and Exchange Commission

Although the budget of the Securities and Exchange Commission has increased by 82% over 10 years, its effectiveness remains in question. 

Resources have flowed into unnecessary management, “support,” and ancillary functions, while core functions have been neglected. The SEC’s organizational structure is unwieldy. It spends resources poorly, especially on information technology and administrative support. Contract oversight is extremely lax.

The Consolidated Appropriations Act, 2020 (H.R. 1158) would increase funding for the SEC by nearly 11% to $1.82 billion (from a fiscal 2019 level of $1.6 billion). This is more than even the agency requested ($1.75 billion). 

Any increase in the SEC budget is unwarranted until the agency spends its existing resources better. An increase of this magnitude is profligate.

Section 634 of H.R. 1158 would stop the SEC from regulating the disclosure of political contributions, contributions to tax-exempt organizations, or dues paid to trade associations. This is positive. The SEC should be seeking corporate disclosure relevant to investment, not disclosure for political purposes.—David Burton

Energy and Water

Rather than a sober review of Energy and Water appropriations, the bill proposes to increase spending by $3.6 billion, continuing a string of such increased spending on Energy and Water for the past six years

Included in that increase is wasteful spending to expand the Office of Energy Efficiency and Renewable Energy, the Office of Science, the Land and Water Conservation Fund, the Advanced Research Projects Agency-Energy, and a nuclear reactor demonstration program in the Energy Department.

The Office of Energy Efficiency and Renewable Energy, which Congress should eliminate because it provides taxpayer dollars to subsidize development of renewable energy and energy efficiency, would receive $2.85 billion. This is a $469 million increase over fiscal 2019 levels and about $2.5 billion more than the White House’s budget request.  

The nuclear reactor demonstration program is a particularly egregious shirking of responsibility and a new program. Although the House is bent on spending taxpayer money to build demonstration reactors largely as proposed in the Nuclear Energy Leadership Act—an activity that mostly should be left to the private sector and otherwise fraught with problems—Congress should instead be addressing the problem of nuclear waste management. 

Congress’ failure to provide any policy direction on nuclear waste management is an issue that costs taxpayers over half a billion dollars annually and is entirely the fault of the federal government. 

Only Congress can fix this. That it essentially went unaddressed is irresponsible, to put it mildly.—Nick Loris and Katie Tubb

Education

Conservatives in Congress should focus their efforts on getting Washington out of the classroom. 

Rather than moving in that direction by reducing federal taxpayer spending on inappropriate and ineffective education programs, the bill increases spending at the Department of Education by $1.3 billion over fiscal 2019 levels (and over $8 billion more than the administration proposed in its budget). 

It maintains funding for ineffective programs like the 21st Century Community Learning Centers and creates a new federal program for “social emotional learning.” 

In addition to increasing discretionary K-12 spending, this proposal also would increase spending on Pell Grants while expanding access to public service loan forgiveness.

Conservative policymakers should be going in the opposite direction, eliminating these failed, duplicative, and inappropriate federal programs.—Lindsey Burke and Mary Clare Amselem

***

The “minibus” also includes a provision to increase the maximum award for Pell Grants to $5,285 per recipient. This is yet another increase that exceeds inflation, further fueling the skyrocketing growth of tuition.  

Even worse, the Pell provision will generate a spending increase of roughly $526 million outside the budget caps. This could be avoided with a simple text fix that limits the increase to a single year.—David Ditch

Trade

One provision requires the Commerce Department to release its report on the Section 232 auto case within 30 days of enactment (Section 112 of Senate Amendment to H.R. 1158). Heritage research has called for a release of the report for months. 

The Section 232 statute requires publication, but does not provide a timeline. Automobile imports are not a threat to U.S. national security and the Trump administration should have released the report long ago.

Three other provisions extend “Buy America” regulatory standards for various government procurement (Section 8026 of Senate Amendment to HR 1158 and Sections 736(a)(1), Section 421(a)(1), and Section 108 of Senate Amendment to HR 1865). These policies are extremely onerous and complex regulatory hurdles for producers

They also result in American taxpayers spending more than they would otherwise pay for government projects, and are unlikely to yield job growth in target industries such as steel.—Tori Smith

Agriculture, Rural Development, and FDA

Once again, Congress has failed to take reasonable steps to achieve significant savings in the agriculture spending bill. The fiscal 2020 spending levels are about $23.5 billion, which is $183 million above last year’s levels.

Some examples of the wasteful spending:

  • The legislation would continue funding (over $100 million in discretionary spending) for the Rural-Business Cooperative Service, which uses taxpayer dollars to help maintain financial assistance programs for rural businesses. As a result, it treats these businesses as if they are incapable of running themselves.
  • The legislation would spend about $736 million for Conservation Technical Assistance, a costly program to provide subsidized advice for landowners on issues they should be addressing on their own, such as how to enhance recreational activities on their land.
  • Instead of addressing the failure that is the new federal school meal standards, this bill would spend $30 million to help schools buy new equipment to meet the costly, one-size-fits-all requirements.

Some problematic riders also are in the bill. For example, the bill would limit the Trump administration’s ability to reorganize the Department of Agriculture (Section 789). 

And the bill fails to address the Obama administration’s Food and Drug Administration produce safety rule that seeks to regulate the growing of almost every fruit and vegetable regardless of risk. 

The bill instead creates special new exceptions for a limited number of commodities without requiring the agency to properly consider risk for all fruits and vegetables as was required by the Food Safety Modernization Act (Section 746).—Daren Bakst

Housing and Urban Development

The bill provides $175 million for the Choice Neighborhoods Initiative to “transform neighborhoods of poverty into functioning, sustainable mixed income neighborhoods with appropriate services, schools, public assets, transportation and access to jobs.”

The bill also requires an “additional period of affordability” of up to 20 years for housing constructed with these funds. This effectively requires rent control, a policy demonstrably leading to localized housing shortages and dilapidated condition.

The bill appropriates $3.4 billion for the Community Development Fund and $262 million for Community Development Financial Institutions. 

These funds often flow to politically favored housing developments and services desired by special interests. Accountability, transparency, and efficiency also pose significant concerns. Often, this approach enriches the politically connected at taxpayer expense and expands the government’s harmful interference in the housing market. 

The approval process ensures that politically connected entities are enriched at taxpayer expense. Even if funds flowed directly from the government to recipients, this would be a concern. 

The manner in which these programs operate compounds the problem. The federal government transmits the funds through intermediaries (including state governments) to the ultimate recipients, reducing transparency and accountability in the process. Often, those recipients are real estate developers or investment property owners.

Intense pockets of poverty across urban neighborhoods long have garnered public attention. Research shows that targeted development subsidies have failed to increase employment, raise wages, or advance general economic opportunity. 

In stark contrast, lifting government-imposed barriers to work, housing supply, and education choice can expand economic mobility and opportunity.—Joel Griffith

This piece originally appeared in The Daily Signal