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Lots of Unanswered Questions With Budget Deadline a Day Away

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There’s a growing acknowledgment among legislators that the new state budget, which is due by midnight on Tuesday, may be late.

“I can’t make that commitment to you that it will be done by April 1,” Assembly Majority Leader Crystal Peoples-Stokes said during a floor debate. “I would love to see the budget be done on time. I can’t commit to you that it will be. That’s a question for those who are at a different level than I am.”

The only legislative action on Monday took place in the Assembly, where members approved a resolution that changes the way the chamber votes during states of emergency. That measure, notably, creates the possibility of remote voting in the coming weeks. . .

Typically, people know little more than scattered pieces about what might be in the final product until moments before the voting starts. This year — with the Capitol largely on lockdown, and reporters and lobbyists no longer able to corner legislators in the hallways — they know even less. (Read more from “Lots of Unanswered Questions With Budget Deadline a Day Away” HERE)

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Bottomless Money Pit: Agencies Dealing With Coronavirus Already Have Record Funding

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Rule number one in government: Never get into a bidding war with Democrats on how much money you want to spend. They have no limit to how much they will spend and will mortgage the future of our children to do so. Trump should heed this lesson as he fights with Senate Minority Leader Chuck Schumer over the level of funding to deal with the coronavirus outbreak.

Trump’s mistake was even offering another $2.5 billion in emergency funding to the Department of Health and Human Services (HHS. Everyone is forgetting that HHS already has a record high discretionary spending budget – over and beyond the high levels of the Obama years. If that is not enough to deal with the coronavirus, then there’s something else wrong here. Yet now that Trump promised more funding, Schumer is demanding $8.5 billion in spending. Why not make it $50 billion?

In fiscal year 2018, Trump promised massive cuts to the bloated HHS. Instead, he signed a bill dramatically increasing spending on the very programs he targeted for cuts. The spending level at HHS for that year wound up being 43 percent higher than Trump’s budget request. The budget for the National Institutes of Health was supposed to be cut by 22 percent and was instead increased by 8.8 percent. The CDC was to be cut by 16.9 percent and was instead increased by 14.4 percent.

In total, the amount of spending on discretionary health programs (not including Medicare, Medicaid, SCHIP, and similar welfare and entitlements) has grown from $56 billion to $73 billion since 2016.

NIH funding for this year is $41.68 billion, an increase of $2.6 billion from FY 2019. That is a total of $11.6 billion in more funding since FY 2016, a 38.6 percent increase. CDC is also at record funding levels.

At what point is enough enough? And if all that increased funding over Obama’s profligate years is not enough to deal with infectious diseases without more emergency funding, then what exactly is the department doing with the base funding?

Aside from the over $700 billion in entitlement spending through the department, HHS gets $105 billion in discretionary funding. Is there really nothing from all their international health programs that could be cut as a way of paying for this?

Trump himself planned on cutting the HHS budget by roughly 10 percent this year. Obviously, there are a lot of places to cut. Why not demand dollar-for-dollar cuts from Democrats?

The problem is that Trump let the cat out of the bag when he said at his press conference that he’ll sign whatever they send him. “With respect to the money that’s being negotiated, they can do whatever they want,” said Trump during yesterday’s press briefing on the coronavirus task force. “We’re requesting $2.5 [billion]. Some Republicans would like us to get $4 [billion], and some Democrats would like us to get $8.5 [billion], and we’ll be satisfied whatever it is.”

This has been the problem from day one. On the one hand, Trump will propose spending cuts, but then he’ll sign spending bills that increase those very programs to record highs, plus sign endless supplemental bills, further increasing spending.

Trump needs to stop relying on congressional Republicans to negotiate for him, because both parties are on the same side when it comes to spending. As Senate Appropriations Committee Chairman Richard Shelby, R-Ala., said, “It seems to me the administration’s request is lowballing it, possibly.” He’s never seen an agency whose budget he didn’t want to increase except for that of ICE.

The issue of public health concerns is not about throwing more money at the problem. Like everything else, it’s more of a policy problem. We need to be less politically correct in dealing with outbreaks by shutting off travel from day one. Also, as Senator Josh Hawley is advocating, we need to better retain our own supply chain for vaccinations and stop relying on China and India through outsourcing and foreign labor. China now produces most of the materials that go into vaccine production. So, what do we do when the supply is shut down because the actual virus stems from China? Those issues don’t seem to bother Chuck Schumer.

Throwing another few billion dollars at hundred-billion-dollar departments won’t make us safer. And Trump will never win a bidding war accepting the Democrat premise that the way to solve a public policy crisis is with more money while doubling down on failed policies. (For more from the author of “Bottomless Money Pit: Agencies Dealing With Coronavirus Already Have Record Funding” please click HERE)

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Congressional Budget Office Projects Trillion-Dollar Deficits Indefinitely

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When Obama took office in 2009 and racked up trillion-dollar deficits, it shocked the nation and spawned the Tea Party movement to push reductions in spending. Thanks to passage of the Budget Control Act under a GOP Congress, deficits declined to roughly $400-$600 billion during Obama’s second term in office.

Fast-forward to the new decade, and despite high revenue and record low unemployment, annual deficits will forever remain above $1 trillion, barring major structural reforms to government, according to the latest budget and economic outlook from the Congressional Budget Office (CBO).

According to the 2020 budget outlook released on Tuesday, the deficit for this year is projected to reach $1.015 trillion. There will be no turning back from there, as deficits are slated to grow every year for the remainder of the 10-year budget window, topping $12.4 trillion of cumulative new deficits by the end of the decade.

Perhaps the most shocking element of this report is the fact that unemployment is so low, yet deficits are as bad as they were during the worst times of the Great Recession. “Not since World War II has the country seen deficits during times of low unemployment that are as large as those that we project — nor, in the past century, has it experienced large deficits for as long as we project,” said CBO Director Phillip L. Swagel in a press conference on Tuesday.

It’s no coincidence that since the debt has exploded over the past generation, we’ve never achieved solid economic growth, despite record low unemployment. Previously, during years in the 1960s, mid-1980s, and late 1990s, periods of low unemployment coincided with years of 4-5% GDP growth. Yet despite the lowest unemployment rate in half a century, the economy is growing right around 2%.

After missing 3% growth in 2018 by a hair, we have failed to achieve 3% annual growth since 2005 and 4% since 2000. The CBO projects gross domestic product will grow by just 2.2 percent this year and at an average pace of 1.7 percent over the next decade. At the same time, unemployment hasn’t been this low since the late 1960s, when there were years of over 6 percent growth.

What gives?

As the CBO notes, with increasing federal deficits, “crowding out of private investment occurs gradually, as interest rates and the funds available for private investment adjust in response to increased federal deficits.” Overall, the CBO projects that the accelerating level of debt, which is slated to more than double as a share of GDP over the next 30 years, will “dampen economic output over time.” It also warns that “rising interest costs associated with that debt would increase interest payments to foreign debt holders and thus reduce the income of U.S. households by increasing amounts.”

The time for growing our way out of the debt bomb seems to have long passed, as the debt itself is acting as a wet blanket on economic growth and efficient investments, even during a period of job creation.

What’s the number-one driver of the debt? While Social Security is the single biggest expenditure for an individual program, federal spending on all health care programs together tops even the price tag of America’s iconic retirement program. The CBO projects spending on health care, which largely funds third-party and fourth-party vendors who interfere between the patient and the doctor, will cost $1.3 trillion this year. By the end of the decade, the Medicare program alone is slated to pass Social Security as the most expensive cost to the federal government.

Federal spending on health care (not including state expenditures) is projected to be $19.2 trillion over the next 10 years, dwarfing the cost of Social Security and the military. By 2050, health care spending will be about 25 percent greater than the insolvent and crushing cost of Social Security. As such, health care in itself is the largest driver of the other great crisis, the mushrooming cost of the interest on the debt itself. Health care spending will be greater than all the revenue from payroll taxes and corporate income taxes combined and almost as large as individual income tax revenue.

However, as the CBO noted, the stagnation and disruption from our debt only “occurs gradually.” CBO Director Swagel noted that because other countries are doing even worse than we are financially, the U.S. is still an attractive place to invest, thereby allowing government to continue servicing debt on the cheap, which is forestalling the doomsday moment. “We’re not saying that there’s an imminent, urgent problem,” he told reporters. “The challenge is over time.”

For lawmakers in both parties, it is that grace of time that will incentivize them to continue doing nothing with no regard for the future. They subscribe to the Louis XV mentality of “after me, the deluge.” (For more from the author of “Congressional Budget Office Projects Trillion-Dollar Deficits Indefinitely” please click HERE)

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Republicans Would Be Dumb Not to Pick a Budget Fight Over Sanctuary Cities

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Very few people in America realize the extent to which Democrat-controlled areas are now harboring the worst illegal alien sex offenders and dangerous criminals. Republicans barely talk about it and never use any legislative leverage point to expose the issue and force a resolution. The latest budget deadline is a perfect opportunity for them to either end sanctuary cities or expose the open-borders supporters to the American people. They’d be dumb not to pick a budget fight over this issue right now. Case in point? Montgomery County, Maryland.

Hillary Clinton carried Montgomery County 75-19. Local Democrats couldn’t lose office if they tried. Yet a sustained focus from just a few reporters and one Trump administration official on how its sanctuary policies harbored scores of illegal alien sex offenders has brought County Executive Marc Elrich to the negotiating table.

WAMU reports that after meeting with ICE officials on Wednesday, Elrich is considering changing his policies on notifying ICE when local police release criminal aliens from local jails. Frank Madrigal, ICE’s Baltimore deputy field office director, said in a statement, “We are pleased that we were able to come together with Montgomery County officials today to speak more clearly and candidly about our goals for public safety.” While stopping short of touting any policy breakthrough, he noted that in general, “This kind of open dialogue is welcome, productive, and more supportive of our public safety practitioners and the communities they serve.”

National Republicans as well as anyone in the Trump administration not named Ken Cuccinelli (who is already aggressively fighting sanctuaries) should watch and take notes. Imagine if every elected Republican hammered the issue of criminal aliens released or harbored by sanctuary jurisdictions in their respective states every day. Democrats could never withstand a sustained public focus on refusing to turn over other countries’ criminals to ICE. It would single-handedly realign the electoral map. Yet they barely say a word even when the most egregious illegal alien crimes occur in their home states.

Take North Carolina for example. I’ve reported on numerous murders and rapes allegedly committed by illegal aliens and the fact that Mecklenburg County’s sanctuary policies resulted in the worst criminal aliens being able to reoffend. Yet not a single federally elected North Carolina Republican is pushing a national fight or an effort to defund places like Mecklenburg County.

Consider the fact that Republican Dan Bishop won the special election in the 9th District by just two points, even though Republican presidential candidates carried the district by 12 points during the past two elections. That was due to the poor showing in the portion of the district that includes part of Mecklenburg County. Imagine if Republicans had been building the case against this sanctuary for months and exposing every criminal alien case.

According to a recent Harvard/Harris poll, 72 percent of overall voters and 76 percent of suburban voters oppose granting driver’s licenses to illegal aliens. Imagine if the election were framed around the specific issue of harboring illegal aliens arrested for other crimes, allowing them to remain here to commit more serious crimes? Even Democrats elected in 75-20 blue counties do not want that sort of PR nightmare, as we see.

Which brings us to the September 30 budget deadline. Republicans have already given away the farm on the budget caps. They will spend us into oblivion. They are left with no narrative headed into the election. Why not have the Senate bring a continuing resolution to the floor that defunds cities that violate federal law and shield illegal aliens arrested for crimes from detection? Voters care a lot more about the release of illegal alien child sex offenders than a risk of a partial, temporary government shutdown. Republicans sure won’t fight on anything this time next year, right before the election, so now is the only time to do it.

Today, congressional Republicans are meeting in Maryland at their annual policy and strategy retreat to cast around for a winning agenda. The irony of the location for their retreat is likely lost on them because they almost never discuss sanctuary cities, MS-13, or the massive illegal alien crime wave. But perhaps if they peek out their hotel windows, they will be reminded that the winning agenda is staring them in the face. (For more from the author of “Republicans Would Be Dumb Not to Pick a Budget Fight Over Sanctuary Cities” please click HERE)

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House Democrats Attack Trump Budget for Spending Too Little … and Spending Too Much

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If you need further proof of how dysfunctional the D.C. conversation about our national debt is, look no further than the conversation around President Trump’s latest budget proposal, where House Budget Committee Democrats simultaneously attacked the budget for spending too little and too much.

“These cuts in the Trump budget aren’t a tightening of the belt or a trimming of the fat, or even a serious attempt at reining in spending,” committee Chair John Yarmuth, D-Ky., said in his opening statement. “They are extreme to a level that is malicious — a level that is intended to do harm.”

Ro Khanna, D-Calif., grilled acting Office of Management and Budget Director Russ Vought on proposed Medicare cuts in the budget plan. Vought pointed out that the budget increases Medicare spending every year, but that the roughly $500 billion Khanna asked about would consist of savings from “commonsense” reforms to the program.

Rep. Scott Peters, D-Calif., grilled the director about why there were proposed cuts to certain types of green energy research at the Department of Energy.

“We believe that in a time of trillion-dollar deficits,” Vought answered, “that the resources that the Department of Energy has should be devoted towards basic research that would not otherwise be done by the private sector.”

Others slammed the budget because it added too much to the debt.

Rep. Seth Moulton, D-Mass., hounded Vought on growing debt and deficits in the wake of Republicans’ 2017 tax cut bill and even managed to quote former Republican Speaker Paul Ryan in doing so. Moulton asked Vought about President Trump’s promise to get the debt under control in eight years in 2016; Vought conceded that at the end of that time frame, the current budget would still post trillion-dollar deficits.

You can watch the full hearing here:

So, to hear Democrats tell it, the proposed budget is bad because it spends too much and creates too much debt and it’s bad because it doesn’t spend enough on federal programs.

The budget proposal claims a fig leaf of fiscal responsibility by including just under $3 trillion in mandatory spending reductions in non-defense spending over the next ten years, five years after which it also is planned to balance, based on revenue increases from a jump-started economy.

But that’s up against $7.3 trillion in added total deficits with four straight projected years of trillion-dollar budget deficits.

We’re already $22 trillion in debt. Democrats can complain about the Republican tax cuts all they want, but the national debt was growing just fine before those became law, through the very programs that they don’t want to see cut. And as much as the president’s political opponents want to blame America’s current budgetary problems on the 2017 tax cuts, this problem can’t be fixed by taxation alone.

According to numbers from October, the 585 billionaires in the U.S. have a combined net worth of about 3.1 trillion. So even if some socialist scion were to take control of our fiscal policy and tax those billionaires for literally everything they were worth, we’d have enough revenue to make about a 14 percent dent in the national debt or fully fund a 4.75 trillion federal budget for 237.4 days (just under eight months). That’s it.

Furthermore, Conservative Review’s Daniel Horowitz explained last month that “this bipartisan era of debt is worse than anything we’ve seen this generation, and it is all happening with record revenue and a booming economy.”

Unless we actually want to tax our economy back to the Stone Age, the cuts are eventually going to have to come from somewhere. And because the federal leviathan is so big and its reach is so extensive, spending cuts are going to affect some people adversely no matter how they happen. But they have to happen at some point.

We need to have a conversation about how much we want the federal government to spend, and it needs to end with us spending a lot less. Yes, this would get the easy targets like quails on cocaine and other ridiculous examples. It needs to include how much we’re going to spend on entitlement programs like Medicare in the long run. And we also need to ask questions like whether or not the Pentagon ought to have an extra $4.6 million to spend on lobster and snow crab when it hasn’t yet passed an audit.

Bottom line: Until there’s a bipartisan consensus that we shouldn’t try to spend more taxpayer money than we bring in, this conversation will remain just as broken as it was Tuesday morning. (For more from the author of “House Democrats Attack Trump Budget for Spending Too Little … and Spending Too Much” please click HERE)

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Trump’s $4.7 Trillion Budget Proposal: Why Should the Third Time Be the Charm?

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Despite eye-popping debt on every page of Trump’s latest fiscal year (FY) 2020 budget proposal, some in the administration are pushing for a spending fight with Congress at least on one portion of the budget. Will they succeed this time? Only if conservatives get focused.

At the beginning of the Trump presidency in 2017, his Office of Management and Budget (OMB) immediately introduced a budget to cut spending for the remainder of FY 2017. Yet despite his party controlling both houses of Congress, the president signed a budget that spring ignoring every facet of his proposal.

Later that year, he introduced his budget proposal for FY 2018. The same thing happened. Then, the following year, the administration didn’t even pretend to cut spending and agreed with Congress to bust the budget caps by $300 billion, expanding the budget of almost every program and agency Trump promised to cut or eliminate.

Now, Trump has introduced his FY 2020 budget proposal with plans to make some modest cuts from the record high baseline of spending he and congressional Republicans have agreed to, even though Democrats now control the House. They blew through about seven budget deadlines plus a debt ceiling with control of both houses, when it would have been easier to leverage a veto threat to force McConnell to play hardball on filibusters against budgets. They failed to do so. This is just Charlie Brown with another football.

Even though the administration proposed even bigger spending cuts in past budgets, here we are today, 26 months into this administration and $2.1 trillion more added to the debt, and they are promising to cut some spending again. It could be the administration now feels that a more modest approach will somehow net better results in Congress. It is proposing a five percent across-the-board reduction in current non-defense discretionary spending levels for FY 2020 over the current year’s. That is roughly $54 billion from current high levels, although proposed disaster spending chews up about half of that savings.

Before exploring the opportunity for conservatives in the budget fight this year, it’s important to take stock of how far to the left we have all moved and how we have all become OK with it.

The proposal would spend an unconscionable $4.75 trillion next year. Remember, for all our talk about the terrible spending under Obama, his final budget request was $4.15 trillion. Despite a record $3.6 trillion in revenue, this budget would result in a trillion-dollar deficit. These numbers are actually low, because they assume nearly $4 trillion in spending cuts the president has, thus far, failed to fight for.

The budget blueprint would spend $56.3 trillion over the next 10 years. It would create $7.3 trillion in deficits. That is less than under the current baseline, but that is only because the OMB predicts three percent growth for the remainder of the decade. This is very unlikely, precisely because of all the debt we are amassing. The debt has prevented us from enjoying more than three percent growth even during the best job market. It also assumes $2.8 trillion in mandatory spending cuts, which everyone on all sides has demonstrated will never materialize.

This coming year alone will result in another $479 billion in interest payments on the debt. That is more than the entire federal share of Medicaid and the Obamacare subsidies.

In 10 years, interest on the debt will rise to $823 billion, a cost that even Medicare is not projected to reach for another five years. And this proposal assumes that the 10-year Treasury note will not rise above 3.8 percent, still well below historical averages and unlikely to occur given our projected desperation for debt servicing.

The budget creates a massive new market-distorting entitlement program for paid family leave. The White House blueprint assumes it to be essentially revenue-neutral because it would rely on individuals drawing funds from their Social Security benefits early on in life, and those funds would not be replaced. As I’ve explained before, it’s inconceivable that this program would not spiral out of control and cost a lot more.

It’s quite evident that fiscal conservatism has gone the way of, well, social conservatism and national security conservatism.

So, is there any glimmer of hope?

If the administration is actually willing to fight for the strategy put forth by acting OMB Director Russ Vought, then there are at least some discretionary spending cuts that could easily be salvaged. While most of what is driving the insane debt is entitlement spending, it’s important to remember that when we cut the discretionary spending, we are not only saving money but draining the Swamp and its policies.

The strategy to win the spending fight goes as follows: Unlike last year, the status quo in any budget stalemate at the beginning of FY 2020 in October should benefit fiscal conservatives. That is because under current law, the spending caps of the 2011 Budget Control Act automatically revert to previous levels. This means that defense and non-defense discretionary spending automatically drop $35 billion beginning in October. Then, on January 1, 2020, automatic sequestration kicks in and another $89 billion is cut. Thus, if we simply operate on a continuing resolution without anything extra tied in during the first few months of the fiscal year, it will result in $124 billion less in discretionary spending than the current year.

Until now, the administration has been too scared to play chicken with Democrats on sequestration because, in the coming year for example, it would slash $21 billion more from defense spending than non-defense spending. However, Russ Vought warned Congress last month that the administration would be willing to shoot the hostage of defense spending and allow the budget caps to relapse for everything, while seeking the extra military spending from what is known as “Overseas Contingency Operations” (OCO) accounts, which are not subject to the spending caps.

While conservatives usually detest the use of this budget gimmick because it allows Congress to spend even more, he is suggesting we use it to assuage the fears of military spending hawks so it frees us up to fight to cut spending across the board without fear of collateral damage to the military.

This is a good strategy, but it will only work if the conservative movement gets focused in the next few months and actually holds the rest of the administration and GOP leaders in Congress to this strategy. Otherwise, it will just result in the same capitulation we saw in February 2018, when Trump agreed to bust the budget caps for two years, even with Republicans in control of the House. As we get closer to September, Democrats and the media will warn of “draconian” spending cuts and threaten a government shutdown. The majority of those in the “shallow state” of this administration will then oppose this strategy and signal capitulation. Then, unless conservative media figures change their attitude, they will obsequiously follow the administration’s cues, thinking they are standing with the president but in fact standing with the Swamp in this administration against the MAGA figures.

Consequently, the importance of today’s budget is not in any numbers or figures. Either way, we are swamped in debt and will continue to be until we fundamentally alter our approach to health care. But if conservatives want to secure a single victory on spending during this entire administration, the time to defend the president’s budget is not now, when it’s just a piece of paper, but headed into the fall, when it could become a reality — if we hold the line. (For more from the author of “Trump’s $4.7 Trillion Budget Proposal: Why Should the Third Time Be the Charm?” please click HERE)

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Alaska’s Budget Crisis: We Can’t Just Kick the Can Down the Road

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The last letter to the editor I wrote was on the general principle of the Governor coming forth with the budget that he had promised the people of Alaska. In this article I want to make some specific talking points on the budget itself. This of course is knowing that smart legislators will make some deals with the Governor and conservative colleagues to payout more money working with him to get the main pieces of legislation passed that are important to Alaskans and a sustainable future. The Governor has line-item veto authority, so the intended balance of our representative system will be in full force.

Let’s start with the University, which has proposed cuts of around 17% of its current budget. There have been third-party reports that have shown in the past that the University of Alaska system has much more middle and upper management than similar universities around the country. I went to the University for thirty years, some full-time, most part-time to acquire my degrees. Every year I was there the bureaucracy increased and there was always more paperwork and unnecessary process that had to be dealt with. It’s an interesting question as to whether creating more bureaucracy requires more rules and process to justify the jobs, or whether unnecessary rules and processes force the institution to hire more people to enforce them; either way it’s a vicious circle that never stops unless there is some economic pressure brought to bear.

I’ve learned over the years through my involvement and observation of government entities that they never get lean and efficient with budget pressures, they always spend what they are given, creating the structure to spend the money. Keep that in mind with ALL of the budget issues, that years of overspending has created inefficient entities that until now had no reason to restrain themselves. One practical example of what the university could do is to combine all the campuses into one. Not physically of course, but management-wise. Currently they duplicate a lot of management running each campus as an independent entity. This would be a great first step to becoming a more efficient university and would result in the end in better education as resources would be more focused on educating instead of managing. Another easy to implement step is to move some of the satellite campuses back to the community college model.

The K-12 system is another great example of inefficiency. Currently Prince of Wales Island has four school districts that encompass it. In Fairbanks, the place I have the numbers for, the school district over the last 28 years has decreased in student count, the number of teachers has stayed pretty flat, but staff has more than doubled, and administration has gone up over 40%. So it would be nice if they didn’t use teachers as weapons to try and get more money from the State. Please remember that large pot of money that the Fairbanks North Star Borough School District has squirreled away, which came because we taxed more for them than they needed. They’re actually ashamed enough of their budgeting that they stopped the Fingertip Facts publication a few years ago that showed the public where the money came from and went in a nice simple layout. Last year they started giving the School Board an incomplete budget document, so that they don’t even have all the information they need.

There are many right now in the public sector hammering on the legislature to take most or all of Alaskan’s PFDs. Something you should know about is the presentation that economist Ed King gave to House Finance last week. He said if we didn’t cut spending and just used the POMV (Percent of Market Value) method and only paid dividends under $500, after two years the entire POMV will be entirely used by the increase that naturally occurs in the budget due to wage and other cost increases. The prior governor had attempted an income tax and found that at best it would bring in about $350 million, about a fifth of the deficit. The lesson to be learned here is that you can’t run away from the problem by taxing the PFD or any other tax, if you don’t decrease the budget you will never be sustainable. The last administration ignored that reality, and now the situation is a little more advanced. Wherever the legislature ends this year on the budget, they have to keep moving it downwards so we can one day have a sustainable budget.

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You’re welcome to use the byline: Lance Roberts is an engineer, born and raised in Fairbanks. He is a former member of the FNSB Assembly.

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U.S. Budget Just Made History

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By Daily Wire. In April, the federal government took in a record sum of $515 billion in taxes, according to a newly released Congressional Budget Office report. During that time, we spent $297 billion. Yes, you read that correctly: We actually took in more than we spent — a lot more. That $218 billion surplus is, in fact, a new record, beating the previous record set back in 2001 ($190 billion) by $28 billion.

As The Washington Times points out, the amount of the surplus surprised CBO analysts, who were predicting about $40 billion less, though some of that has to do with a shift in timing of payments. In its report, the CBO suggests that the unexpectedly high tax revenues was a result of “stronger-than-expected” economic growth last year and in early 2018.

“Those payments were mostly related to economic activity in 2017 and may reflect stronger-than-expected income growth in that year,” reads the summary. “Part of the strength in receipts also may reflect larger-than-anticipated payments for economic activity in 2018. The reasons for the added revenues will be better understood as more detailed information becomes available later this year.”

While the news for April is good, a surplus in April is common and some of the record-setting numbers have to do with “shifts in the timing of certain payments that otherwise would have been due on a weekend,” the CBO notes. We are also still behind for fiscal year 2018. (Read more from “U.S. Budget Just Made History” HERE)

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April Was Best Month in History for U.S. Budget, According to CBO Figures

By Washington Post. The federal government took in a record tax haul in April en route to its biggest-ever monthly budget surplus, the Congressional Budget Office said, as a surging economy left Americans with more money in their paychecks — and this more to pay to Uncle Sam.

All told the government collected $515 billion and spent $297 billion, for a total monthly surplus of $218 billion. That swamped the previous monthly record of $190 billion, set in 2001.

CBO analysts were surprised by the surplus, which was some $40 billion more than they’d guessed at less than a month ago.

Analysts said they’ll have a better idea of what’s behind the surge as more information rolls in, but for now said it looks like individual taxpayers are paying more because they have higher incomes . . .

Official numbers are due out from the Treasury Department in a few days, but the CBO is usually accurate to within a couple billion dollars. (Read more from “April Was Best Month in History for U.S. Budget, According to CBO Figures” HERE)

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Republicans Just Made Tax Reform More Difficult

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This week, the House Budget Committee released its long-awaited budget. It makes progress in some areas, and falls short in others.

One of the places it falls short is in facilitating tax reform.

By all accounts, tax reform will be difficult. True tax reform that simplifies the tax code while making important reforms to enable greater economic growth must also take on the difficult task of taking away special tax privileges that benefit well-organized special interests.

The proposed budget includes reconciliation instructions that allow Congress to fast-track reform in the Senate, limiting debate and lowering the necessary vote threshold to a simple majority, instead of requiring 60 votes.

However, the budget sets tax reform up to be revenue-neutral, which makes tax reform a Herculean task. The budget does provide room for repeal of the Obamacare taxes, but the revenue-neutral constraint on the remaining effort for tax reform is problematic for several reasons.

First, revenue is not the problem.

Over the next 10 years, the Congressional Budget Office’s projected baseline revenues are set to grow as a percentage of gross domestic product from the current 17.6 to 18.4. At the end of the 10-year budget window, revenues will be a full percentage point above historical averages.

I will say it again—revenue is not the problem. Spending is the problem. The budget proposal instructs the committees to find $203 billion in mandatory savings, but these reforms are only a small piece of the necessary cuts to truly reform our long-term fiscal problems.

Sustainable, long-term tax reform should be deficit-neutral in reconciliation, allowing Congress to adjust both spending and taxes to alleviate the pressure for future tax hikes from rising deficits. Congress must reform the programs that our tax dollars fund.

Second, the revenue-neutral constraint forces Congress to make a false choice between not doing tax reform at all, and tax reform that is tied to new revenue raisers.

The search for additional new sources of revenue has already led policymakers down several unfortunate paths. Carbon taxes, value added taxes, and international minimum taxes have all been proposed as revenue raisers tied to otherwise pro-growth tax reforms.

The most prominent example of a new and possibly destructive source of additional revenue is the proposed border adjustment tax.

Third, revenue-neutrality may be difficult to accomplish, even if harmful revenue raisers are included.

It is unclear if the current House tax reform blueprint, which includes about a trillion dollars from the border adjustment tax, will be scored as revenue-neutral.

Some dynamic analyses—analyses that take economic feedback into account—have shown the House plan to be revenue-neutral. However, others, whose modeling is probably more consistent with how congressional scorekeepers will likely look at the reforms, show the plan will lose around $3 trillion in revenues over 10 years.

The true economic impact will be more pronounced than the projections of congressional scorekeepers, but unless Congress is willing to take unprecedented actions to use outside revenue analysis—which is not prohibited—they will have to work within the constraints of the scores they are given by their internal referees.

Lastly, the proposed budget continues the tradition of using a current law rather than a current policy baseline.

Using a current policy baseline, which basically assumes the status quo will continue, would have made tax reform easier by assuming a revenue target of about $460 billion less.

Instead, the continued use of the current law baseline follows the letter of the law, which does not take into account the current policy of regularly extending many expiring provisions.

There are competing reasons to use one baseline over the other, but the use of current law as a benchmark certainly makes tax reform more difficult.

The proposed budget does provide about $1 trillion for the repeal of Obamacare taxes. This is an improvement over past budgets that have not included the repeal of these destructive taxes.

However, the repeal of the Obamacare taxes is only a small piece of tax reform. True reform will require additional room to work.

The rules of reconciliation require deficit neutrality outside the 10-year budget window—not revenue neutrality—and there are many options for pro-growth tax reform that include both spending restraint and economically desirable base broadeners that remove current tax preferences and raise additional revenue.

The budget could use a longer budget window to allow for more gradual spending reforms and additional tax savings. It is also not necessary to outline specific spending cuts this year.

Congress could impose an automatic mandatory sequester to limit the growth of government spending and meet reconciliation’s constraints, allowing more time to review spending reforms in a process separate from the tax reform debate.

On the revenue side, there are more than $3 trillion of base broadeners that are not included in the House tax reform blueprint that Congress should consider including in its reform.

Pro-growth tax reform that provides relief for American families and businesses must continue to be the centerpiece of Congress’ agenda going forward. The House Budget Committee’s proposed budget makes that task considerably more difficult. (For more from the author of “Republicans Just Made Tax Reform More Difficult” please click HERE)

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Good Trump: Budget Rumored to Contain Entitlement Reform

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President Trump’s White House is reportedly building a fiscal 2018 budget proposal that aims to balance the federal budget in 10 years and cut $800 billion from entitlement programs.

According to Paul M. Krawzak, reporting for Roll Call, Social Security and Medicare will remain untouched. The president campaigned against spending cuts to entitlement programs. However, sources that spoke to Roll Call said the proposal will seek to cut a “wide array of means-tested, mandatory spending programs including Medicaid” over the next 10 years.

Food stamps, Temporary Assistance for Needy Families, Supplemental Security Income, child nutrition programs, and the Pell Grant program are potential welfare programs that the budget may address.

“The budget will include proposals to reduce the cost of the Social Security Disability Insurance program, which is not means-tested,” Krawzak reports.

If true, these proposed reforms are a good step in the right direction. Federal entitlement programs account for 60 percent of the budget and 12 percent of GDP. Social Security, Medicare, and Medicaid are the biggest contributors to the national debt, which is rapidly approaching $20 trillion. In March, the Congressional Budget Office (CBO) estimated the federal debt will reach 150 percent of gross domestic product – that’s all the wealth produced in the U.S. – by 2047 at its current rate of growth. This is unsustainable.

Entitlement reform is necessary to America’s fiscal stability. But do Republicans have the political will to address this problem?

Consider the widely praised Paul Ryan budget plan of FY 2013. When push came to shove, Republicans capitulated to the Democrats, and Paul Ryan, R-Wisc., struck a deal with Senator Patty Murray, D-Wash., that increased spending and failed to reform entitlements. Conservatives were told to wait for a Republican-controlled Senate and a Republican president to achieve real spending reform.

Well, conservatives waited. And when President Donald Trump revealed a “skinny budget” proposal, it did not propose reforms to entitlements. While compensating defense spending increases with domestic spending cuts, the Trump skinny budget still carried a $488 billion deficit. And congressional Republicans blasted those few spending victories as “draconian” cuts to their favorite government programs.

If Republicans, in the majority, were unwilling to support Trump’s budget proposal then, why should we expect them to support more spending cuts in the future? Further, assuming that there are enough Republicans in Congress who will go along with the president’s proposal, what happens when the Democrats threaten a government shutdown? Why should conservatives expect them to fight when last time they surrendered?

President Trump should be encouraged to fight for every penny of this rumored $800 billion entitlement reform. The evidence suggests congressional Republicans won’t. (For more from the author of “Good Trump: Budget Rumored to Contain Entitlement Reform” please click HERE)

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