Hangover from 2019 Spending

Weekly WastebasketHangover from 2019 SpendingWhat's in store for 2020.

Budget & Tax,  | Weekly Wastebasket
Jan 2, 2020  | 6 min read | Print Article

Change, not what’s in your pocket but going forward. We’re entering a new decade, the next quarter century for TCS and a new president at our organization. But as they say: the more things change, the more they stay the same. And you can be sure we won’t change, we’re still committed to digging into the details, telling you the facts, holding policymakers accountable, and fighting to rein in exploding budget deficits.

Lawmakers pulled a legislative rabbit out of their hat at the end of the year, enacting a flurry of legislation. It was a particularly fat rabbit, though, and the legislation will cost taxpayers.

There’s the $1.4 trillion spending package. We expected that because of the earlier profligate Bipartisan Budget Act of 2019 that lifted budget caps for fiscal years 2020 and 2021 by more than $300 billion largely without offsets. But, you have to also consider that it increases the baseline and we’re looking at no caps in FY2022 and beyond. Katie, bar the budget door!

That wasn’t all. Lawmakers jammed through a whole passel of tax provisions that the Joint Committee on Taxation (JCT) scored at more than $425 billion in lost revenue over ten years. Nearly $375 billion of that loss is the repeal of several taxes that were partial offsets for the Affordable Care Act (aka Obamacare).

But the price tag on the package is much higher than it appears. The legislation includes the so-called “tax extenders” – a hodge-podge of targeted special interest tax breaks retroactively extended for a few years. The ten-year JCT score for the tax extender portion is $39 billion, but because these provisions are cockroaches of Washington policy they always seem to survive. Some of these provisions expired more than a year ago, yet they were extended – again. So even though they are bad tax policy and wasteful and we will continue to oppose them, it is likely that they will be extended again and that 10-year cost will be much more. Consider this, the five-year cost is $36 billion – just $3 billion less than the 10-year cost – and that’s with most of them expiring at the end of 2020. (Notable exception is the exceptionally wasteful biodiesel tax provision that expires at the end of 2022 – racking up $14 billion in lost revenue over that span).

Also signed into law was the bill that sets policy for the Pentagon for the fiscal year. There were a couple of victories for taxpayers. First, hopefully you won’t have to hear from us about the infamous “Coal to Kaiserslautern” program that shipped coal from Pennsylvania to U.S. military bases in Germany. It was killed. Again. Second, a common sense provision requiring the Secretary of Defense to seek compensation from contractors when they deliver faulty spare parts for the F35. The monstrously expensive F-35 program has been burning a hole in the Pentagon’s budget for years.

Unfortunately, the same bill also created a whole new military service, the so-called “Space Force.” This will be hugely expensive and, once started, will never end. A new military service will quickly grow to be a multi-billion dollar a year enterprise, despite the laughable claim by the former Secretary of Defense that this will only cost $5 billion. We’ll be watching for Space Force budgetary overreach in the coming Fiscal Year 2021 budget request.

Speaking of looking ahead, what’s the budgetary forecast? The aforementioned BBA 2019 set the spending limit for FY2021. But there are still gimmicks like the Overseas Contingency Account slush fund and emergency spending to get around that. Even though NAFTA 2.0 (U.S.-Mexico-Canada Agreement – USMCA) passed the House at the end of the year, it still has to get through the Senate, which – ahem – has other stuff on its plate at the moment. The trade war will continue in some form with wasteful hush money payments being sent to favored industries.

What needs to happen is a serious discussion about how to deal with spiraling deficits and debt. There’s a good bipartisan budget reform package lead by Senate Budget Committee Chair Mike Enzi (R-WY) and Sen. Sheldon Whitehouse (D-RI) that should be considered. Discussions about how to pay for policies that are emerging in the Democratic presidential debates. This needs to migrate into all areas of government spending and programs – setting priorities and measuring success. And into the full presidential campaign. We cannot afford business as usual in the 2020s, the budgetary approach must change.