President’s Tax Plan Leaves Out Infrastructure

As you have no doubt heard by now, the Trump administration yesterday released a tax reform “plan” that filled just one side of a single sheet of paper. Which is to say, the plan is light on details. The “goals for tax reform” are outlined:

  • “Grow the economy and create millions of jobs
  • Simplify our burdensome tax code
  • Provide tax relief to American families – especially middle-income families
  • Lower the business tax rate from one of the highest in the world to one of the lowest”

Some of the specifics include reducing the number of tax brackets, doubling the standard deduction while eliminating a number of itemized deductions (but preserving the deductibility of mortgage interest and charitable gifts), repealing the inheritance tax and alternative minimum tax, reducing the corporate rate to 15%, and switching to a territorial system of taxation for corporations.

Aside from the elimination of some tax deductions, the only other offset mentioned is a one-time tax on overseas earnings, or repatriation. This is notable if you care about infrastructure. The repatriation funding has long been considered the primary way to pay for a significant infrastructure investment. Even the president has mentioned this possibility in the past. With some $2.3 trillion parked overseas, a 10% tax could bring in hundreds of billions of dollars. But the new plan does not specifically tie repatriation to infrastructure, at least not at the outset.

Rep. John Delaney (D-MD), who has introduced bi-partisan legislation that would use repatriated funds specifically for infrastructure, called yesterday’s announcement a “punch in the gut.” His release on the tax plan states: “Strategically, this is a strong sign by President Trump that they’re not serious about infrastructure, it’s a punch in the gut on infrastructure, frankly. Today the White House essentially announced they aren’t doing infrastructure. After working on this issue for four years, it is clear to me that the only way you can pay for a real infrastructure program is by using revenues from repatriation.”

There is still a long path from here to passage of a tax package. But as a first draft, yesterday’s proposal would result in massive increases in the federal deficit and potentially make a large infrastructure package next to impossible. Let’s hope there’s more here than meets the eye, and that the president remains committed to ensuring we invest in the nation’s infrastructure as a major part of his economic plan.

Want America to Be ‘Great’ Again? Pay For It – By Pat Jones, IBTTA

The following article, Want America to be Great Again? Pay for It, by Pat Jones was originally published as a guest editorial in the April 18 issue of Time magazine. Pat Jones is the CEO of the International Bridge, Tunnel, and Turnpike Association (IBTTA), an organization that represents tolling agencies from around the nation and world. His organization has been at the forefront of advocating for increased resources to maintain our roads, bridges and tunnels, and other infrastructure. This blog argues for a coherent, thoughtful transportation policy that provides the necessary funds to ensure that America’s roads and bridges, and other infrastructure, are properly maintained. Most recently, Mr. Jones was a general session speaker at NARC’s  2017 National Conference of Regions.

Elon Musk recently announced that he is fed up with traffic in Los Angeles and will soon begin boring a tunnel under the city to relieve congestion. As a billionaire and innovator, Musk has the resources to make something like this happen. But even if he bores his tunnel, where does that leave the rest of the country with its congested highways, crumbling bridges, aging water systems and fragile power grid? One big push in L.A. doesn’t solve the problems of an entire country struggling under the burden of billions of dollars in deferred maintenance. We need a national vision to pay for and revitalize our infrastructure for all Americans.

For decades, my association (IBTTA) and many others have urged Congress and the states to make much bigger investments in our vital infrastructure. But we are still far behind where we would like to be. The problem is us. We say we want better roads and safer drinking water. But year after year, we refuse to come up with the money to make the big improvements that we need. Yes, some states and local governments have taken it upon themselves to raise revenue. But that isn’t enough to meet all our infrastructure needs.

But there is hope. President Donald Trump has shined a bright light on infrastructure. During the campaign, his inaugural address – and most recently, his Joint Address to Congress – he emphasized his commitment to rebuild roads, bridges and schools. Last October, his advisors published a paper that proposed $1 trillion in new infrastructure investment over ten years by offering tax credits to private investors. And recently, Senate Democrats introduced their own $1 trillion plan to repair crumbling roads, rebuild schools and do more while creating over 15 million new jobs.

As hopeful as these proposals are, there is a big problem: They are heavy on vision and light on details, specifically how to pay for them. Paying for a grand plan is always the sticking point. Those who advance these proposals don’t want to talk about “pay-fors” until the last minute, because they want to limit the opportunity of their adversaries to oppose them. So, we get the big vision first in the light of day, and the messy sausage-making of pay-fors in the dead of night.

And who’s to blame for this? The American people. It may seem that Congress and the President are pursuing wicked ends through clandestine means when they wrap up a deal with pay-fors at the eleventh hour. But they are simply following our lead.

Consider this reader comment in response to a recent newspaper article describing Americans’ reluctance to pay user fees to rebuild infrastructure. The reader said, “Americans want first class roads but don’t want to pay for them. Well, folks, nothing is free. No one will provide these things without taxes or user fees.”

In response to this attitude, Congress and the President have twisted themselves into unnatural shapes to say to voters, “Yes, we’re going to rebuild your infrastructure,” and “No, we’re not going to raise taxes or fees to do it (well, maybe just a little).”

This Harry Houdini act must end. We can’t rebuild our infrastructure if our elected leaders are forced to carry out our will wrapped in a straitjacket and submerged in a glass coffin rapidly filling with water. This tableau makes for great theater but lousy public policy.

Having a grand infrastructure proposal without a means to pay for it doesn’t solve the problem. It merely names the problem and a happy end state, without any of the hard work needed to get to the end. We need to be honest with each other and make sacrifices now to ensure a better future. Sacrifice in this case means money, with Americans paying more than they pay today in exchange for better infrastructure.

It’s time to treat the American people like adults and explain the need for bigger investment in the form of taxes and user fees. Adults understand that there is no free lunch and there are no free roads. Let’s have an honest conversation that starts like this: We are going to build and maintain the finest infrastructure in the world and we, the American people, are going to pay for it.

Whispers of a Shutdown

Washington’s attention is turning to the April 28 deadline for fiscal year (FY) 2017 spending bills. Congress has barely a month to either finish its work on outstanding appropriations bills, or pass another continuing resolution (CR). The timeline is particularly challenging due to a two-week Congressional recess in April. Just three in-session weeks are available between now and the CR’s expiration.

At least two issues complicate the completion or extension of this year’s spending bills. Some in Washington are starting to whisper the dreaded “s” word (shutdown).

1) Trump Administration changes to funding levels.

The CR is often an extension of the previous year’s funding levels. The Trump administration, however, has proposed significant increases for military and military-related spending. This would force cuts of as much as $18 billion in the discretionary budget. These cuts would come from the remaining few months of the fiscal year, not the entire year, making the situation even more challenging.

As an example of the administration’s proposed cuts, a portion of the $18 billion spending reduction would come from the transportation program:

  • Immediately eliminate the TIGER discretionary grant program (estimated FY17 savings: $500 million)
  • No new full funding grant agreements through the Federal Transit Administration’s (FTA’s) small starts and new starts programs (estimated FY17 savings: $450 million)
  • A reduction to the Army Corps of Engineers water resources program (estimated FY17 savings: $100 million)

The FTA cuts are perhaps the most interesting. Even if Congress chooses to continue funding the program at historic levels (or higher, even), it likely will not matter. It is up to the administration to sign the long-term funding agreements, and it has signaled that it will honor previous funding agreements but not sign new ones. Additional money could be provided, but likely will not be spent.

2) Potential dust up over Planning Parenthood funding.

The House’s failure to pass an Obamacare repeal last week leaves the defunding of Planned Parenthood an open issue. The administration and House conservatives, in particular, hope to resolve this quickly. Some members that opposed the Republican health care bill would also oppose spending bills that fail to end Planned Parenthood funding. This politically charged issue could force Speaker Paul Ryan (R-WI) to choose: work with Democrats to keep the government functioning, or shut down the federal government. If a House bill passes that does defund Planned Parenthood, it will assuredly not pass in the Senate. A stalemate on this issue is highly likely, increasing the odds of a shutdown.

This is sure to become a major story in coming weeks.

The President’s Skinny Budget: What’s It All About?

The President Proposes

On March 16, the president offered his “skinny budget.” Nicknamed “skinny” by the White House, the March 16 budget was released to offer an overview of the budget the president will finally submit to Congress in late April.

Unfortunately, this budget does not present a very pretty picture. If adopted it would decimate many federal programs that are critical to the ongoing activities of most regional councils. It would also decimate many federal programs that are critical to the health and well-being of lower income and poor Americans.

Now, most of us are familiar with the programs proposed for elimination that have received wide coverage like Meals on Wheels, the Corporation for Public Broadcasting, the National Endowment for the Humanities, and the National Endowment for the Arts. We have also heard that the budget, if adopted, would do significant harm to a wide range of programs. But what we have heard very little about is the impact this budget will have on cities, counties, and regional councils.

This blog will provide information on programs slated for elimination and what that may mean for cities, counties, and regional councils. To this end I will offer some macro- and micro-level impacts – impacts that will be felt across the board and locally – to explain why this budget is ultimately bad for cities and counties and the people who live there, as well as the regional councils that address the governmental and human needs of the regions they serve.

Some Likely Macro Impacts

A survey of 285 economists released earlier this month by the National Association for Business Economics shows that they believe the president’s tax plan and spending proposals will add to the national debt and widen the federal budget deficit. Such an outcome could result in higher interest rates and slower economic growth. Higher interest rates would make it more costly for cities and counties to borrow, reducing the likelihood that cities and counties will make major capital investments.

Democrats and Republicans, liberals and conservatives, are in disagreement over the president’s budget. One theme that has emerged is that the proposed cuts could place in danger millions of working class and lower income Americans who need programs like the Low Income Home Energy Assistance Program (LIHEAP) to heat their homes, weatherization to make their homes more energy efficient, or the Social Services Block Grant to fund important and necessary programs for seniors. Cuts of these sorts are likely to place the burden on cities and counties to provide these services and meet these needs, thereby forcing local governments to redirect their spending toward activities the federal government traditionally supported.

Long-Term Questions

There are long-term questions that must be answered as well. What would these cuts mean in the long run for the agencies, local governments, and regions that often depend on federal grants? Would the federal government be able to continue to play the role that it has in the past if it is no longer able to carry out the functions it is mandated to perform? And how would this impact local governments and regions? Would states and localities be forced to raise their taxes in order to meet their residents’ needs when the federal government abdicates that responsibility?

president's skinny budget

Federal agencies on the non-defense discretionary funds side of the ledger have already been cut to the bone. As the chart shows, since 2011 when the Budget Control Act was adopted, funding for every non-defense discretionary federal agency has been reduced, some by as much as 15 to 30 percent. We know that these cuts have already had a substantial impact on cities, counties, and regions. By reducing the amount of federal assistance available, the responsibility was transferred to local governments and regions. Under the president’s budget additional cuts would be enacted for fiscal year 2018 funding for every federal agency – that would result in a loss of up to 40 or 50 percent of the funds available in 2011.

Many of the grants that cities, counties, and regions have come to rely on would evaporate; local governments could be forced to raise taxes or turn to their states to fund what were once federal initiatives; and the federal government could literally be forced to abdicate its mandated functions and responsibilities.

House Appropriations Committee chair Rodney Frelinghuysen (R-NJ), who has expressed his opposition to the president’s budget, has said that each federal department or agency has been charged by Congress to carry out certain functions. It is Congress’ responsibility to fund those departments and agencies so that they can do the job we instructed them to do. He also noted that “we’ve reduced our discretionary spending over the last seven to eight years an incredible amount,” and added that many of the programs slated to be cut or eliminated “keep America open for business.”

Individual Programs Up for Elimination

Of significant concern, of course, are the individual programs funded through the various agencies and department that cities, counties, and regions benefit from.

Transportation and Housing and Urban Development appropriations stand out as two of the most problematic for regional councils given the work that they do. Both departments would sustain significant overall cuts (13 and 15 percent, respectively), and face the elimination of several important programs.

Transportation programs that would be eliminated include TIGER Discretionary Grants, Essential Air Services, Transportation Security Administration grants to states and localities, and federal support for Amtrak’s long distance train services.

Housing and Urban Development programs that would be eliminated include the Community Development Block Grant, HOME Investment Partnerships Program, Choice Neighborhoods, and Self-Help Homeownership Program.

The Departments of Transportation and Housing and Urban Development, however, are not alone. Altogether, 20 independent agencies and 42 programs would be eliminated, including numerous human services programs.

For example, the Department of Health and Human Services would be cut by 23 percent, and LIHEAP and the Community Services Block Grant would be eliminated altogether. The Labor Department would be cut by 21 percent and programs that would be eliminated include the Senior Community Service Employment Program and possibly the Workforce Innovation and Opportunity Act, which the “skinny” budget does not address but has been slated for elimination by such organizations as the Heritage Foundation.

The Commerce Department would be cut by 16 percent and with those cuts would come the elimination of the Economic Development Administration and other business programs. The Department of Agriculture, which would be cut by 29 percent, would see the elimination of the Water and Waste Disposal Loan and Grant Program and the Rural Business and Cooperative Service’s discretionary programs.

The Environmental Protection Agency’s appropriation would be cut by 31 percent, and programs that would be cut substantially or eliminated include Superfund, categorical grant funds to states and localities, funding for regional water programs, geographically-based funding, restoration initiatives, climate change programs, and 50 other programs.

Finally, the Department of Energy would see the smallest cuts among non-defense discretionary programs at only 5.6 percent. Nonetheless, weatherization programs, programs to support advanced technology vehicles, and loans to local governments to support the use of new energy technology would be eliminated.

So Where Does This Leave Us? 

There is never certainty in Washington. As I write this blog, it appears increasingly unlikely that the American Health Care Act  will pass the House on Thursday, March 23. And yet at the last minute, enough members of Congress could be influenced to make the impossible possible. This lack of certainty makes it so difficult to know if the congressional majority will ultimately adopt the proposed budget. Some in the House and Senate have called it dead on arrival, while others have embraced the proposal and called for its adoption. But as one economist told NPR a few weeks ago, Donald Trump is the “master of the deal.” What he may be doing is simply going for the extreme with the full knowledge that the final budget will fall somewhere in the middle and be far better than anything he could have expected had he been more moderate from the start.

The author would like to thank the National Association of Counties and the Coalition for Human Needs for much of the information that appears in this blog, and the Center for Budget and Policy Priorities for the graph which appears above.

The Trump Administration’s Budget Blueprint: The Regional Impact

Today President Trump unveiled his first federal budget blueprint, which calls upon Congress to make dramatic changes to the shape, if not the size, of the federal government. The plan calls for deep cuts at some departments and agencies while significantly increasing funding at others.

At the core of the proposal is a $54 billion increase in defense spending, $2.6 billion for a border wall, and $1.4 billion for school choice provisions. These increases are fully offset by significant cuts to the non-defense discretionary portion of the budget, leaving entitlement spending and other mandatory spending (which makes up approximately 73% of the federal budget), unchanged.

“The defense and public safety spending increases in this Budget Blueprint are offset and paid for by finding greater savings and efficiencies across the Federal Government. Our Budget Blueprint insists on $54 billion in reductions to non-Defense programs. We are going to do more with less, and make the Government lean and accountable to the people.

“This includes deep cuts to foreign aid. It is time to prioritize the security and well-being of Americans, and to ask the rest of the world to step up and pay its fair share.

“Many other Government agencies and departments will also experience cuts. These cuts are sensible and rational. Every agency and department will be driven to achieve greater efficiency and to eliminate wasteful spending in carrying out their honorable service to the American people.”

– From America First: A Budget Blueprint to Make America Great Again

 

The deep cuts to so many programs that each have constituencies of their own makes it likely that Congress will see this skinny budget and the full budget to follow as ‘dead on arrival.’ But it does offer important insight into the new administration and where their priorities lie, and will be taken under some consideration by the Republican majority in Congress.

The departments of Commerce, Agriculture (USDA), Energy (DOE), Housing and Urban Development (HUD), and Transportation (DOT) would face major cuts if this budget were enacted. The Environmental Protection Agency would lose nearly one-third of its budget. Federal funding for 19 agencies would be terminated, including the Corporation for Public Broadcasting, the National Endowments for the Arts, the Appalachian Regional Commission, and the Delta Regional Authority. As feared, the proposed budget would eliminate the $3 billion Community Development Block Grant program. What follows is a selected list of agencies and programs, and how they are treated in the budget blueprint. This is not comprehensive as details are limited at this time. NARC will continue to track these and update you as new information becomes available. Please follow the NARC website (www.narc.org) and our new blog, Regions Lead (www.regionslead.org), to keep up with the latest.

Department of Agriculture

FY2018 proposed funding level: $17.9B (-$4.7 billion, 21% decrease)

  • Eliminates Water and Wastewater loan and grant program (-$500 million)
  • Eliminates McGovern-Dole International Food for Education program (-$200 million)
  • Fully funds Food Safety and Inspection Service and wildland fire preparedness activities
  • Reduces Women, Infants, and Children nutrition assistance (-$200 million)
  • Unspecified staff reductions at USDA service center agencies around the country
  • Cuts funding for Rural Business and Cooperative Service (-$95 million)

Department of Commerce

FY2018 proposed funding level: $7.8B (-$1.5 billion, 16% decrease)

  • Eliminates the Economic Development Agency (EDA) (-$221 million)
  • Increases funding for Census Administration in anticipation of 2020 census (+$100 million)

Department of Energy

2018 Proposed Funding Levels $28 billion (-$1.7 billion, 5.6% decrease)

  • Increases National Nuclear Security Administration (NNSA) funding more than 11%; all other program are cut by nearly 18%
  • Increases spending for managing the nation’s nuclear stockpile by restarting licensing at Yucca (+$120 million)
  • Eliminates Weatherization Assistance Program and State Energy Program
  • Cuts Office of Science funding to support research at 300 universities and 10 of 17 national labs (-$900 million)
  • Focuses funding for the Office of Energy Efficiency and Renewable Energy, the Office of Nuclear Energy, the Office of Electricity Delivery and Energy Reliability, and the Fossil Energy Research and Development program on limited, early-stage applied energy research and development activities where the federal role is stronger (-$2.0 billion)

Department of Health and Human Services

Proposed funding level: $84.1B (-$15.1 billion, 16% decrease)

  • Cuts Office of Community Services funding (-$4.2 billion), eliminating Low Income Home Energy Assistance Program and Community Services Block Grant
  • Increases funding for treatment and prevention of opioid addictions (+$500 million)

Department of Homeland Security

FY2018 proposed funding level: $44.1B (+$2.8 billion, 7% increase)

  • The proposed increase is to fund a border wall and other border-related items (+$2.6 billion); Immigration and Customs Enforcement (+$314 million); detention-related expenses (+$1.5 billion); and protection against cybersecurity threats (+$1.5 billion)
  • Eliminates or reduces state and local grant funding under FEMA, including the Pre-disaster Mitigation Program and Homeland Security Grant Program (-$667 million); institutes a local cost-match requirement for FEMA grant awards if none exists now

Department of Housing and Urban Development

FY2018 proposed funding level: $40.7B (-$6.2 billion, 13% decrease)

  • Eliminates Community Development Block Grant (CDBG) program (-$3.0 billion)
    • From the blueprint: “The Federal Government has spent over $150 billion on this block grant since its inception in 1974, but the program is not well-targeted to the poorest populations and has not demonstrated results.”
  • Eliminates HOME Investment Partnerships Program and similar programs (-$1.1 billion)

Department of the Interior

2018 Proposed Funding Levels $11.6 billion (-$1.5 billion, 12% decrease)

  • Increases funding for development of energy on public lands and offshore waters and streamlines permitting processes and provides industry with access to the energy resources
  • Eliminates Land and Water Conservation Fund program
  • Eliminates Abandoned Mine Land grants that overlap with existing mandatory grants, National Heritage Areas that are more appropriately funded locally, and National Wildlife Refuge fund payments to local governments that are duplicative of other payment programs
  • Streamlines operations at National Park Service, Fish and Wildlife Service, and Bureau of Land Management
  • Reduces funding for certain Indian Country demonstration projects and initiatives
  • Reduces funding for new major acquisitions of Federal land (-$120 million), and redirects that to increase spending on National Park Service deferred maintenance projects. Reduces funds for other DOI construction and major maintenance programs
  • Provides full 10-year rolling average of expenditures for wildland fire suppression, which will result in a small increase in funding
  • Provides $1 billion in water resources program throughout the western United States
  • Reduces funding for counties through Payments in Lieu of Taxes (PILT) program, but keeps program in line with average funding for PILT over the past decade

Department of Justice

2018 Proposed Funding Levels $27 billion, (-$1.1 billion, 3.8 percent decrease)

  • Increases funding for the Federal Bureau of Investigation (FBI) (+$249 million)
  • Provides additional funding to hire 75 additional immigration judge teams (+$80 million); 60 additional border enforcement prosecutors and 40 deputy U.S. Marshals to combat illegal immigration; and 20 attorneys to pursue federal efforts to obtain the land and holdings necessary to secure the Southwest border and another 20 attorneys and support staff for immigration litigation assistance
  • Additional short-term detention space to hold federal detainees, including criminal aliens, parole violators, and other offenders awaiting trial or sentencing (+$171 million)
  • Funds Preventing Violence Against Law Enforcement Officer Resilience and Survivability and the Bulletproof Vest Partnership
  • Eliminates State Criminal Alien Assistance Program (-$700 million)

Department of Labor

FY2018 proposed funding level: $12.2B (-$2.6 billion, 21% decrease)

  • Eliminates the Senior Community Service Employment Program (-$434 million)
  • Eliminates OSHA training grants (-$11 million)
  • Expands Reemployment and Eligibility Assessments
  • Closes underperforming Job Corps centers
  • Decreases federal funding for job training and employment service grants, shifts responsibility of continuing programs to states & localities

Department of Transportation

FY2018 proposed funding level: $16.2B (-$2.6 billion, 13% decrease)

  • Corporatizes the Air Traffic Control (ATC) system
  • Eliminates New Starts transit funding for capital projects if a full funding grant agreement is not already in place
  • Reduces federal support for Amtrak; eliminates funding for long-distance routes, redirects savings to State-support routes and the Northeast Corridor
  • Eliminates Essential Air Service (-$175 million)
  • Eliminates TIGER grant program (-$499 million)

Army Corps of Engineers

FY2018 proposed funding level: $5.0B (-$1.0 billion, 16% decrease)

  • Changes unknown

Environmental Protection Agency

FY2018 proposed funding level: $5.7B (-$2.5 billion, 31% decrease)

  • Maintains Water Infrastructure Finance and Innovation Act program at same funding level as last year
  • Eliminates Clean Power Plan funding (-$100 million)
  • Halves funding for the Office of Research and Development (-$233 million)
  • Significantly reduces funding for the Hazardous Substance Superfund Account (-$330 million)
  • Eliminates funding for specific regional efforts such as the Great Lakes Restoration Initiative, the Chesapeake Bay, and other geographic programs (-$427 million)
  • Eliminates more than 50 programs, including: Energy Star; Targeted Airshed Grants; the Endocrine Disruptor Screening Program; and infrastructure assistance to Alaska Native Villages and the Mexico Border (-$347 million)

A Budget Mess

To say that things are a mess on Capitol Hill around the budget and appropriations process may be an understatement. Here are six reasons for the mess:

  1. Earlier this year congressional leaders committed to completing the appropriations process for fiscal year 2017 by April 28th, the date on which the current continuing resolution (CR) expires. However, senators from both parties are now expressing concern that the appropriations process is so far behind schedule that they may need to adopt another temporary funding bill in the form of a CR, something they are loathe to do.
  2. Democrats, who are deeply concerned that the president will demand that the April funding bill includes money for “the wall” between Mexico and the United States, have indicated that they are prepared to prevent such a funding bill from passing Congress, thereby shutting down the government. The ramifications of a shutdown can only be conjectured.
  3. Many economists are predicting that the president’s budget is so bad for discretionary non-defense programs that mass federal employee layoffs and a shrinking housing market and economy are likely in states with large numbers of federal employees.
  4. According to the Washington Post, the president’s budget proposal is “expected to seek a historic contraction of the federal workforce” that would “shake the federal government to its core if enacted.” Noting that this will be the first time since the drawdown following World War II that the government would execute “cuts of this magnitude,” the Post goes on to say that while funding for the military and homeland security will increase substantially, other areas such as housing, environmental programs, and research will be slashed substantially. Again, the ramifications can only be conjectured.
  5. The New York Times is reporting that some Republicans on Capitol Hill believe that the president’s budget may be going in the wrong direction by cutting “too much from already lean department accounts while leaving untouched the massive benefit programs” that have been blamed by Republicans for contributing to the nation’s deficits, and that many of the proposed cuts to foreign aid and domestic programs are a non-starter, especially in the Republican-led Senate as well as the more conservative House. It seems that they are prepared to oppose efforts to cut federal funding to non-defense discretionary programs. For example, House Appropriations Committee Chairman Rodney Frelinghuysen (R-NJ) told the Times that “we’ve reduced our discretionary spending over the last seven or eight years an incredible amount. Maybe some people don’t like those agencies, but it’s been pretty difficult for them to meet their mandate.”
  6. Democrats are claiming that if the president has his way, discretionary non-defense programs would be cut by anywhere from 13 to 20 percent. In simple terms, nearly one-fifth of all funding for transportation, infrastructure, housing, health, education, and economic development programs would be cut, and programs like those funded through the Environmental Protection Agency, U.S. Department of Housing and Urban Development, U.S. Department of Energy, and Economic Development Administration could be eliminated completely.

The question of course is where does this leave us? The answer is neither simple nor straightforward.

Presidential budgets are often dead on arrival (DOA) and summarily rejected by Congress for any number of reasons, not the least of which is that Congress has its own priorities that may differ dramatically from those of the president. But presidential budgets, regardless of party or person, set a tone for further discussions and are often incorporated into Congress’ plans, even when congressional leadership announces that the budget is DOA.

Adding to the complicated environment on Capitol Hill is that the majority party is very divided, with many wanting to see more cuts to domestic discretionary programs coupled with a substantial increase in military spending and significant tax cuts. Others are calling for caution, arguing that many of the domestic programs slated for slashing are critical to the nation’s economic growth and safety.

But here is the bottom line. If these cuts do come to fruition – if education, job growth, housing, community and economic development, environmental, and aging programs are cut to the extent the president wants and Democrats predict – we will see, without a doubt, a significant reduction in programs designed to support economic development, help businesses and industry obtain well-trained staff, protect seniors, provide safe and secure communities, support affordable housing, address homelessness, and so on. Regional councils across the nation are likely to see substantial reductions in the federal funds they receive necessitating either additional funding from their states and localities or a significant reduction in the services they provide for their regions. And the larger impact on our economy may be more far reaching than anyone, including the president, could have anticipated.

Tomorrow the president’s “skinny” budget will be released. At that point, we will have a clearer idea of what he wants, what Congress is willing to accept, and how far Democrats may go to defend non-defense discretionary programs. And of course, we will have more to share with you.

By Neil E. Bomberg, NARC senior policy advisor

Budget and Appropriations: Where Do We Go From Here?

As the Senate and House move to finalize fiscal year (FY) 2017 funding for the federal government, it is becoming increasingly clear that three obstacles – two pieces of legislation and an on-going congressional investigation – stand in the way of a rapid and conclusive FY2017 funding bill.

The current continuing resolution (CR) expires on April 28, at which point a new CR or other funding bill must be passed to avoid a government shutdown. While April 28 may seem like a long way off and plenty of time for Congress to complete the appropriations process, the reality is that Congress will only be in session for 26 legislative days before the CR expires and funding for the federal government runs out. Additionally, most of the work has to be completed in March because Congress will recess for two weeks in April for the Easter and Passover holidays. As if these limitations were not enough, Congress must deal with two pieces of legislation and an on-going congressional investigation that may substantially slow the legislative process.

The first obstacle to rapid completion of the appropriations process is the defense appropriations bill. It is a must pass appropriations bill and a priority for many members of Congress. The outcome of this bill will set the tone for the rest of the debate around funding, which is why there is little-to-no work being done on other appropriations bills.

The second obstacle is the American Health Care Act (AHCA), which House leaders introduced this past Monday, March 6. Designed to repeal and replace the Affordable Care Act (ACA) – often referred to as Obamacare – House and Senate leaders have indicated that they want this bill passed and on the president’s desk before the April recess.

The third obstacle is the on-going turmoil around alleged collusion between the Trump campaign and Russian President Vladimir Putin.

The outcome of each of these obstacles will have a tremendous impact on non-defense discretionary program funding.

Why do they matter? 

The calendar matters because there is actually very little time to resolve all of the outstanding appropriations issues.

The defense appropriations bill that Congress will pass and the president will sign will matter greatly. Under current budget rules, there must always be parity between defense and non-defense discretionary programs. That means for every dollar increase or decrease in funding for either half of the discretionary pot, there must also be an equal increase or decrease on the other side. But Congress could change that and permit defense discretionary funding to increase so long as there is an opposite reaction in non-defense discretionary funding. In other words, Congress may choose to pay for an increase in defense spending with a decrease in non-defense discretionary funding. And even if this does not happen this year, there is clear evidence that it will happen with the FY2018 budget when the majority is expected to increase defense discretionary spending by $54 billion. According to appropriations committee staff, that kind of an increase in defense spending could result in a 13 to 20 percent cut in non-defense discretionary funding, cuts that on a program-by-program basis could even be more.

The AHCA matters greatly, as well. The effort to repeal and replace the ACA may prove much more difficult than originally expected. Already, several senators and many House members have expressed significant reservations about the bill, which was just released on Monday, March 2. If that happens, efforts to pass the AHCA may eat up a significant amount of legislative time, leaving little time for either chamber to address appropriations issues. More importantly, public opinion of Congress is likely to diminish if it cannot complete the work leadership has been promising to do for eight years, and further loss of public support would severely hamper Congress’s ability to adopt other legislation.

Investigation into alleged collusion between the Russian government and the White House also matters. It has become an albatross around the necks of the Administration and Congress, and the way this issue plays out over the next weeks and months will determine the political clout that the president will have in his dealings with Congress. The more clout he has, the easier it will be to push through his legislative agenda that includes a substantial increase in defense funding.

Of course, all of this is speculation. Congress could find a way to get its work done and pass the appropriations and other bills. The Russian albatross could vanish. Agreements around funding could emerge and help prevent the kinds of cuts that we are anticipating. But if the past is prologue, Congress will not be able to do its job and will only pass an appropriations bill in the form of a continuing resolution or omnibus appropriations bill at the very last minute, without significant input from the public, the minority party, or public interest groups like NARC.

By Neil E. Bomberg, NARC senior policy advisor

Next week:  What can we expect in the president’s “skinny” budget and what does that mean for programs important to regional councils?

Beyond Traffic 2045 National Freight Strategy Framework

This USDOT document reflects on the progress made to address freight challenges and provides thoughts on the future of freight and the role of the government with regard to freight policy. The Beyond Traffic 2045 National Freight Strategy Framework includes lessons learned and synthesizes input from engaged citizens, business leaders, practitioners, operators, and planners, among others, as to what works, what does not work, and what future we should collectively work to achieve for the future freight economy.

A Final Farewell from Secretary Foxx

January 19 marked Transportation Secretary Anthony Foxx’s last day in office. In his farewell message to USDOT employees, Foxx highlighted the successes of USDOT during his tenure, including securing the first long-term transportation bill in over a decade and embracing innovative technologies, such as autonomous vehicles and unmanned aircraft systems. He also highlighted the integration of his long-standing priority of using transportation policy to foster inclusivity and equality in USDOT work. Foxx closed by thanking his department for their support and stating that the future is bright for USDOT.