December 18: We’ve updated this post.
Congress should reject efforts to attach, to end-of-year spending legislation, a bill from the Senate Budget Committee’s Chairman Mike Enzi and member Sheldon Whitehouse that would change the budget process in a highly problematic way and threaten large cuts in Medicare, Medicaid, and other mandatory programs. (Our new paper has a full description and analysis.)
The proposal, which the Senate Budget Committee recently approved, has positive elements, but it includes one very dangerous provision — requiring Congress to craft and then consider deficit reduction legislation under fast-track “reconciliation” procedures if the Congressional Budget Office (CBO) finds that the projected debt (as a percentage of gross domestic product, or GDP) exceeds Congress’s earlier projection in its budget resolution.
Under Enzi-Whitehouse, Congress would adopt a budget resolution in the first year of a Congress and, early in the second year, CBO would project the debt-to-GDP ratio for the final year that the budget resolution covers (typically the tenth year). The projected debt ratio could rise between the first and second years of a Congress for several reasons: the resolution might have projected that the economy would perform better than it did, assumed unspecified budget cuts that Congress never intended to make, or assumed spending cuts or tax increases that Congress rejected or the President vetoed. The projected debt ratio could also rise due to changes in underlying demographic and other assumptions unrelated to changes in budget policies.
If CBO found that the projected debt ratio had risen, it would have to estimate the deficit reduction needed to meet the figure in the budget resolution. The Senate Budget Committee would then choose the committees to make cuts and design a resolution assigning each a dollar target. If the Senate passed this resolution, the committees would have to write bills to achieve the directed cuts and send the bills to the Budget Committee, which would have unprecedented new authority to design and add cuts if any committee fell short.
Although the Budget Committee could direct the Finance Committee to reduce deficits by raising taxes, that likely wouldn’t occur under the current party alignment; Republicans haven’t agreed to revenue increases in a reconciliation bill since 1990.
The resulting program cuts could be very large. Enzi-Whitehouse, for example, could have triggered reconciliation cuts with each of the last three budget resolutions that Congress adopted, requiring as much as $5.5 trillion in deficit reduction in response to the 2016 budget resolution, $1 trillion in 2017, and $3 trillion in 2018. In comparison, the 2011 Budget Control Act directed the “supercommittee” that it established to achieve $1.2 trillion in deficit reduction, which it failed to do. Although the Senate Budget Committee or Congress could set a different amount of deficit reduction (smaller or larger) than CBO projects, the media and the public will presume that the CBO estimate is the appropriate amount.
Medicare, Medicaid, the Children’s Health Insurance Program, and the Affordable Care Act’s subsidies that help low- and moderate-income consumers buy health insurance would face particular risk of cuts, since they represent almost two-thirds of mandatory spending other than Social Security and interest on the debt. (Under congressional rules, lawmakers cannot use the reconciliation process to change Social Security.) Medicare alone accounts for nearly 40 percent of this category of spending and has been a major target of previous reconciliation efforts. But the proposal also threatens SNAP (food stamps), Supplemental Security Income, refundable tax credits, veterans’ pensions and compensation, and other mandatory programs assisting low- and moderate-income families.