budget – R&R – Reachout and Rebuild

House Passes Historic Debt Increase

David Posnett — Thu, 16 Nov 2017 19:47:31 +0000

http://www.crfb.org/press-releases/house-passes-historic-debt-increase

As per the Committee for a Responsible Federal Budget, this experiment has been tried and it failed:

“The last time Congress added 10-figures worth of tax cuts to the debt in 2001, it blew a hole in the budget and helped erase our surpluses — despite claims that economic growth would cover the cost. The growth fairy did not appear then, and it would be unwise to assume she will this time around.”

Today however, the experiment could be ruinous:

“When the tax cuts of 2001 were passed, debt was 31 percent of GDP, the nation was running budget surpluses, and we were on track to pay off our debt. Today, debt is 77 percent of GDP — higher than any time in history other than just after World War II.”

What should we expect?

“Instead of trickling down economic growth, the House plan will unleash a tidal wave of debt that will ultimately slow wage growth and hurt the economy.”

Reality show 2018: Mr. Trump and your Rep. followers ‘YOU ARE FIRED’

Your Coming Tax Increase

David Posnett — Thu, 14 Sep 2017 17:58:28 +0000

Your Coming Tax Increase

By David LeonhardtSEPT. 7, 2017

President Trump speaking about tax reform at an event in North Dakota on Wednesday. Credit Doug Mills/The New York Times

A 19th-century economist named Adolph Wagner made a prediction that came to be known as Wagner’s Law: As societies became wealthier, their taxes would rise. They would rise because people would want more of the services that government tended to provide better than the private market, like national security, education, medical care and a guaranteed retirement.

Wagner’s Law has proven truer than not, but there are still many people who would like to pretend otherwise. Specifically, they wish we could summon a country with a strong military, good schools, health care and comfortable retirements — but falling taxes. It’s a nice fantasy.

Yesterday, Larry Summers, the economist and former Treasury secretary, gave a lunchtime presentation in Washington laying out the statistics that debunk the falling-taxes fantasy. He effectively updated Wagner’s Law for the United States in 2017.

“With the same values and preferences, and the same basic attitude about government activity versus private activity,” Summers said, “you should expect government to be larger in the future than it has been in the past.”

There are four main reasons, he argued:

• One, society is aging, which calls for greater spending on retirees. The ratio of elderly Americans — those expected to be in the last 15 years of their lives — to all other Americans will rise about 50 percent from 2010 to 2030.

• Two, inequality has soared, with living standards stagnating for the middle class and poor. Taxes push back against inequality.

• Three, labor-intensive services, like education and medical care, have become more expensive, and they also tend to be the areas where the government spends money.

• Four, American military spending has not kept up recently with the spending by our main rivals, including China, Iran and Russia. This trend shouldn’t continue forever, Summers said.

I find his case compelling. Even if you disagree in one particular area — say, you favor more private-sector education, or a weaker military — the combined costs are so large that the argument holds up. That’s part of the reason that taxes on the wealthy should rise, and big tax breaks — like those for home ownership and employer health insurance — should be reduced.

I don’t mean to suggest that taxes should always be rising and that government will eventually take over the economy. Capitalism clearly has worked much better than any alternative. And there are times — for example, after a war or when a population is becoming younger — that taxes should fall. It’s also important to cut government where it’s wasteful.

But believing in capitalism is different from believing that government cannot grow. Modern capitalism depends on a well-functioning government. Capitalism has already grown a lot over the last century, across this country and much of the world, and the world is a vastly richer place than a century ago.

“If we want to maintain traditional American values,” as Summers said, “government will need to be significantly larger.”

For more details on the numbers, I recommend a new paper by Paul van de Water of the Center on Budget and Policy Priorities, which hosted Summers’s presentation. I first learned of Wagner’s Law from the writer Matt Miller.

In North Dakota yesterday, President Trump tried his best to summon a magical world in which life keeps getting better and taxes keep falling. His pitch “is divorced from reality,” Katrina vanden Heuvel says in The Washington Post. Richard Rubin of The Wall Street Journal called the speech a big step away from tax reform and toward a simple tax cut.

Remember: If Trump succeeds in cutting taxes for the wealthy, taxes for everyone else will eventually need to rise even more.

Trump’s Budget Could Create Chaos in the States

David Posnett — Fri, 16 Jun 2017 14:19:29 +0000

President Trump’s proposed 2018 budget would result in deep cuts to federal payments to states. Federal funds currently account for nearly a third of state expenditures, so if enacted, Trump’s budget would kick huge decisions to statehouses: raise taxes, reduce benefits, or eliminate services.

Start with state government’s largest expenditure, Medicaid (nearly 30 percent). The Trump budget, combined with proposals in the House-passed American Health Care Act (AHCA), could cut the federal contribution to Medicaid more than $1 trillion over the next decade.

The AHCA would gradually eliminate the Affordable Care Act’s Medicaid expansion and change the federal match rate to a per-capita cap, which would grow at a slower rate than current Medicaid spending. In total, the Congressional Budget Office (CBO) estimates the AHCA changes would reduce federal Medicaid spending $834 billion over 10 years. The president’s budget includes another $600 billion in cuts, which appear to be in addition to the AHCA’s cuts. However, in line with the rest of this “black box” budget, even the White House doesn’t know for sure (or won’t say). But if they are combined, they would cut federal Medicaid funding nearly in half by 2026.

In its typical understated way, the CBO describes what comes next. Its March score of the AHCA (which looked a lot like the new CBO score), said, “How individual states would ultimately respond [to Medicaid cuts] is highly uncertain.”

That’s because Trump and the House Republicans are offering states a trade-off that would fundamentally change the way the half-century old program works. Under the current funding mechanism, the federal government pays a percentage of program costs no matter how fast they grow. The Trump-House GOP replacement would cap federal contributions based on each state’s number of enrollees (per-capita cap), or offer funds in a block grant. States would get far more control over how they run the program—but with far less money to do so.

So would states raise taxes to fill the funding gap or drop people from health care? Connecticut and New Jersey established task forces to prepare responses to Medicaid cuts. But Texas Gov. Gregg Abbot cheered Obamacare’s “spiraling to a hasty death.” Regardless, even states that want to maintain current coverage levels would need billions in new dollars every year. That’s a huge lift for states and why CBO estimated 14 million would lose Medicaid if AHCA became law.

Then there’s the rest of Trump’s budget. Along with some budget tricks, the administration finds balance by reducing non-defense discretionary spending 2 percent each year—totaling $1.4 trillion over 10 years.

Specifically, it proposes double-digit percentage cuts to the departments of Agriculture, Commerce, Education, Health and Human Services, Housing and Urban Development, and Transportation, all of which send money to states. Some examples of program cuts over the 10-year period:

$200 billion cut from the SNAP (i.e., food stamps); currently completely federally funded, the budget also proposes requiring states to chip in a quarter of funds.
$100 billion cut from the Highway Trust Fund, which sends money to states for highway and mass transit projects.
$20 billion from Temporary Assistance for Needy Families, a joint federal-state funded program that provides welfare cash.

The National Association of State Budget Officers has a good roundup of the numerous other state administered programs cut or eliminated in the budget, including EPA grants, community development block grants, rental assistance programs, low income home energy assistance programs, and more. And what about the administration’s new social program, paid parental leave? The budget forces states to raise their unemployment taxes to pay for it.

Would states raise taxes to keep these programs? Does the equation change if the state and local tax deduction is repealed?

There are a lot of unknowns, but we know the administration and Congress are both interested in cutting federal payments to states, and that states don’t have enough money to replace those funds. As with health care, the federal budget cuts would probably reduce services and beneficiaries. But because they’re state programs, what each state does is highly uncertain.

Posts and Comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.

What the Federal Government is Telling States: Statements from the President’s 2018 Budget Proposal

David Posnett — Fri, 16 Jun 2017 14:15:26 +0000

By John Hicks posted 14 days ago

The President’s fiscal year 2018 budget request to Congress includes many elements that shift more responsibility to state and local governments or modify some longstanding fiscal federalism practices through funding eliminations or major reductions.

Below are statements pulled directly from the Administration’s budget documents produced by the Office of Management and Budget and the individual Departments, and written testimony on the budget from Administration officials.

New State Financial Requirements

SNAP – First-time State Funding Match
Shift to States – $191 billion from 2020-2023

The Budget also proposes to re-balance the Federal/State partnership in SNAP benefits to low-income households by gradually establishing a State match for benefit costs, phasing in from a national average of 10 percent in 2020 to 25 percent, on average, by 2023. To help States manage their costs, new flexibility regarding benefit levels would be provided. This proposal allows States to determine their level of SNAP benefits…and gives States options that can mitigate the effects of the funding shift…By giving States a financial stake in the cost of providing these benefits, rather than relying entirely on Federal funds, it would increase State incentives to create economic paths to self-sufficiency.

FEMA – State Homeland Security Grant and Urban Area Security Initiative – First-time State Funding Match
Shift to States – $267 million

The Budget proposes a 25 percent non-Federal cost match for grant dollars with State and local partners. General Kelly, May 24, 2017 written testimony to Congressional committee: By using a cost-sharing approach, Federal dollars are spent on activities that our non-Federal partners themselves would invest in, providing clear results in priority areas.

Parental Leave – Funded by State Unemployment Insurance (UI) Taxes

The Budget also includes a proposal to provide six weeks of paid parental leave, which is paid for with a package of mandatory savings proposals to improve Unemployment Insurance (UI) program integrity and solvency. Using the UI system as a base, the proposal will allow States to establish paid parental leave programs in a way that is most appropriate for their workforce and economy. States would be required to provide six weeks of parental leave and the proposal gives States broad latitude to design and finance the program. The proposal is fully offset by a package of sensible reforms to the UI system—including reforms to reduce improper payments, help unemployed workers find jobs more quickly, and encourage States to maintain reserves in their Unemployment Trust Fund accounts.

Better Done At The State And Local Level

Labor – Workforce Investment and Opportunity Act (WIOA) Adult Employment and Training, Youth Activities and Dislocated Workers and Employment Service
Reduced – $1.3 billion or 39%

The Budget would decrease funding for WIOA Title I and III formula programs by $1.3 billion, shifting more responsibility for funding these programs and training American workers to States, localities, and employers and giving them more freedom to design their programs. The Budget also provides States and localities with new flexibility and discretion to serve workers based on the specific training needs of their workforce.

Education – 21^st Century Community Learning Centers
Eliminated – $1.16 billion

The provision of before- and after-school academic enrichment opportunities may be better supported with other Federal, State, local or private funds, including the $15 billion Title I Grants to Local Educational Agencies program.

Education – Student Support and Academic Enrichment Grants
Eliminated – $277 million

Also, the activities authorized under this program generally can be supported with funds from other Federal, State, local or private sources, including the $15 billion Title I Grants to Local Educational Agencies program.

Transportation – Transit Capital Investment Program (New Starts)-Future Grants
Eliminated – $928 million

Future investments in new transit projects would be funded by the localities that use and benefit from these localized projects. Several major metropolitan regions have recently passed multi-billion revenue measures to fund transit projects, and the Administration believes that is the most appropriate way to fund transit expansion and maintenance efforts. These regions realize waiting for Federal grant funding is not the most efficient way to meet their local transportation needs.

HUD – Community Development Block Grant (CDBG)
Eliminated – $2.9 billion

The Budget recognizes that State and local governments are better positioned to address local community and economic development needs.

Regional Commissions
Eliminated – $156 million

The Appalachian Regional Commission (ARC), the Delta Regional Authority (DRA), the Denali Commission and the Northern Border Regional Commission (NBRC) are independent agencies that award Federal grants for regional development. The proposed elimination of the regional commissions reflects the need to reduce unnecessary Federal spending and streamline the Federal Government’s role, while encouraging States and localities to partner with the private sector to develop local-tailored solutions to local problems.

EPA – Geographic Programs
Eliminated – $427 million

These programs perform local ecosystem protection and restoration activities, which are best handled by local and State entities. The EPA will encourage (the six Chesapeake Bay states and Washington D.C., five Gulf of Mexico states, New York and Vermont, Long Island Sound states and local entities, state, tribal, and local entities, the state of California and local entities, the eight Great Lakes states and tribal and local entities) to continue to make progress from within core water programs in (restoring the Bay, restoring the Gulf of Mexico, restoring Lake Champlain, restoring the Sound, restoring the Puget Sound, restoring the San Francisco Bay, protecting and restoring sensitive aquatic ecosystems in South Florida, restoring the Great Lakes).

HUD – Choice Neighborhoods
Eliminated – $125 million

State and local governments may be better positioned to fund locally-driven strategies for neighborhood revitalization. Moreover, local government’s commitment to policy changes and interagency coordination are critical to achieving the educational and public safety goals associated with the program, and to achieve the necessary scale to impact entire neighborhoods.

HUD – Home Investment Partnerships Program
Eliminated – $948 million

The Administration devolves affordable housing activities to State and local governments who are better positioned to comprehensively address the array of unique market challenges, local policies, and impediments that lead to housing affordability problems.

HUD – Housing Trust Fund and Capital Magnet Fund
Eliminated – $194 million

The Budget would devolve some affordable housing activities to State and local governments who are better positioned to comprehensively address the array of unique market challenges, local policies, and impediments that lead to housing affordability problems.

Legal Services Corporation
Eliminated – $351 million

The proposal also puts more control in the hands of State and local governments which better understand the needs of their communities.

You’re Doing Too Much

EPA – Categorical Grants
Reduced – $482 million

Many States have been delegated authority to implement and enforce Federal environmental laws including the Clean Air Act, Clean Water Act, and Safe Drinking Water Act. The Budget proposes to eliminate or substantially reduce Federal investment in State environmental activities that go beyond EPA’s statutory requirements. States may be able to adjust to reduced funding levels by reducing or eliminating additional activities not required under Federal law, prioritizing programs, and seeking other funding sources including fees. Grants proposed for elimination include Beaches Protection, Lead, Multipurpose Grants, Nonpoint Source, Pollution Prevention, Radon and Underground Storage Tanks. Grants proposed for reductions include Hazardous Waste Financial Assistance, Pollution Control, Public Water System Supervision, and State and Local Air Quality Management.

You’re Not Doing Enough

HUD – Rental Assistance Programs
Reduced – $1.9 billion

The Budget also recognizes the need for greater contribution from State and local governments and the private sector to help address affordable housing needs among low-income households.

You’re Already Doing It

DHS – Transportation Security Administration Law Enforcement Grants
Eliminated – $45 millionThe amount of financial support offered by this program has waned in recent years, declining below 50 percent of total State and local law enforcement costs in fiscal year 2016 and continuing to decline. As such, State and local jurisdictions are supporting more of the cost of providing law enforcement presence at airports. Discontinuing this program should not place an undue burden on State and local jurisdictions, since they already pay the majority of law enforcement costs.

You Have Other Funds You Can Use

EPA – Water Quality Research and Support Grants
Eliminated – $26.8 million

States have the ability to develop technical assistance plans for their water systems using Public Water System Supervision funds and set-asides from the Drinking Water State Revolving Fund (DWSRF).

HHS – Social Services Block Grant (SSBG)
Eliminated – $1.4 billion

SSBG is a permanently authorized program, which funds a wide variety of services. There are 29 broad service categories within SSBG (including “other”). However, better targeted State and Federal programs currently fund most of these services. SSBG lacks strong performance metrics and the means to hold States accountable for spending SSBG funds effectively.

You’re Not Doing It Right

HHS – Temporary Assistance for Needy Families (TANF) Reduction and TANF Contingency Fund
Reduced TANF by 10% – $1.2 billion
Eliminated Contingency Fund – $567 million

While the proposal would reduce the amount available to States for cash assistance and other benefits that promote self-sufficiency, the proposal also recognizes that TANF’s flexible spending rules have resulted in States using a large portion of TANF funds for benefits and services that do not directly serve the core intent of the program – to help low-income families meet their basic needs and move them toward self-sufficiency.

While the intent of the Contingency Fund has been to assist States experiencing increased demand for cash assistance during economic downturns, States may use contingency funds for any TANF purpose, many of which have no direct relationship to helping families meet needs in hard economic times. Some States have used contingency funds to simply replace existing block grant funds, without spending more to address increased need.

Labor – Unemployment Insurance Solvency Standard

Despite several years of recovery since the recession, State Unemployment Insurance (UI) programs are still not adequately financed. Fewer than half the States have sufficient reserves to weather a single year of recession, the common measure of trust fund solvency. The Budget proposes to add a minimum solvency standard to address the challenge States face in maintaining sufficient reserves in their Unemployment Trust Fund accounts to weather future recessions. This proposal would impose credit reductions on States that fail to meet the solvency standard for two consecutive years.

It’s Yours Anyhow

FEMA – Continuing Training Grants, National Domestic Preparedness Consortium, Countering Violent Extremism/Complex Coordinated Terrorist Attack Grants, and Emergency Food and Shelter Program
Eliminated – $279 million

These programs are eliminated because they are duplicative of other Federal programs and are primarily State and local responsibilities.

Justice – State Criminal Alien Assistance Program
Eliminated – $210 million

This program represents a general revenue transfer to States that neither focuses resources on immigration enforcement nor fully reimburses their detention costs.

You No Longer Need It

HHS – Low Income Home Energy Assistance Program (LI-HEAP)
Eliminated – $3.38 billion

Perhaps more notably, the Budget recognizes the program is no longer a necessity as States have adopted their own policies to protect constituents against energy concerns.

EPA – Leaking Underground Storage Tanks (LUST) Cooperative Agreements
Reduced – $16.1 million

Reduction reflects success of LUST cooperative agreement funding over the past decade to a position where states can now undertake a more primary responsibility.

Education – Impact Aid Payments to Local Education Agencies (LEAs) for Federal Property
Eliminated – $67 million

The Administration believes that the majority of LEAs receiving assistance under this program have now had sufficient time to adjust to the removal of the property from their tax rolls.

Sources

Trump’s Budget from Hell

David Posnett — Tue, 23 May 2017 16:20:49 +0000

This is a budget from hell. Increases for defense and the wall that will ultimately raise the total expenditures, despite the ill-advised cuts. So, Mr. Zeldin, are you going to say something now, or tow the party line?

Trump wants to cut billions from the departments that regulate drugs, stop infections, and research cancer
Business Insider, By Rebecca Robbins, May 22, 2017

U.S. President Donald Trump listens to a question during a joint news conference with Colombia’s President Juan Manuel Santos (not pictured) at the White House in Washington, U.S. Kevin Lamarque/Reuters The Trump administration’s proposed budget for 2018 would make sweeping cuts to Medicaid as well as to the agencies and programs that propel the nation’s engines of science and biomedical research. The administration released a “skinny budget” in March that included sharp proposed cuts to Read the full story

“School Voucher” for the Trump Family: 183 Mio

David Posnett — Sat, 18 Mar 2017 00:54:00 +0000

Posted on FB by Barbara Zack earlier today:

Immediately after the election, Trump transition spokesman Jason Miller explained that Melania would be staying in New York because there was “obviously a sensitivity to pulling out a 10-year-old in the middle of the school year”.

We have since learned that the cost of security for Melania and Barron to remain at Trump Tower is $183 million/year. There is also no indication that they will actually move to DC this summer. So in essence the Federal government is giving the Trump family a $183 million annual voucher so Barron can attend the elite private prep school of his choice.

Meanwhile, we learned last night that Trump’s budget would completely eliminate funding for the National Endowment for the Arts. The NEA, with an annual budget of only $148 million, is able to provide seed money for arts programming in literally every Congressional district in the country.

So, on the one hand you have a $183 million “school voucher” for a single 10-year-old at an elite private school. On the other hand, you have a program that impacts arts and cultural programming throughout the entire nation.

NOT NORMAL.