May 17, 2018

The White House’s much-ballyhooed package of proposed spending cuts, submitted to Congress on May 8 and then introduced in the House as the bill H.R. 3 on the following day, proposes to rescind (cancel) $15.2 billion in appropriations from fiscal year 2017 and prior years. But the nonpartisan Congressional Budget Office has estimated that the package will only reduce federal deficits by $1.3 billion over the next ten years.

Rescissions bills proposed by the President are “privileged business” under the Impoundment Control Act of 1974 and are entitled to an up-or-down vote in the House and Senate (and in the Senate, such bills are immune from filibuster). H.R. 3, introduced by House Majority Leader Kevin McCarthy (R-CA) and given a top ten bill number to demonstrate its importance to party leaders (H.R. 1 was the tax cut bill, H.R. 2 the farm bill, H.R. 4 the FAA bill, and H.R. 5 regulatory reform), may come up in the House for a vote as soon as next week.

Why the twelvefold difference between the face value of the spending cuts and their actual deficit reduction? Because Congress only provides (or rescinds) budget authority – the beginning of the spending process. Budget authority is a permission slip for someone in the federal government to enter into a legally binding obligation (the middle part of the spending process) to spend federal money, and this obligation may eventually lead to an outlay (cash leaving the Treasury going to a non-federal source). Not all budget authority gets obligated, and not all obligations eventually lead to successful outlays. But it is outlays that are the measure of the spending side of the federal deficit.

The problem is, the two biggest cuts in the rescissions package – $7.0 billion from the Children’s Health Insurance Program (CHIP) and $5.0 billion from Energy Department loan programs – are what is called “empty rescissions” in that they have almost zero effect on outlays. The budget authority being rescinded was going to be impossible to spend in the real world.

By contrast, CBO estimates that the $279 million in proposed rescissions of budget authority at the U.S. Department of Transportation would result in $224 million in outlay savings – about 80 percent of the face value of the spending cuts would result in real-world deficit reduction.

(Put another way, Department of Transportation rescissions only represent 2 percent of the total budget authority proposed to be rescinded, but the outlays from those cuts would be 18 percent of the total deficit reduction.)

The CBO scoring of the rescissions of dead highway earmarks is surprising. In the past, CBO has determined that if an earmarked project cannot move forward, or the project is complete and money is left over, that rescinding the money won’t have any outlay savings. But since the Appropriations Committees have started putting new legal authority to reprogram dead earmarks into the annual appropriations bills, that may have changed CBO’s methodology for scoring rescissions of dead earmark money. (It has also led to criticism from appropriators that rescinding dead earmarks will actually cost some state DOTs some real money.)

The only DOT rescission that CBO says won’t really save any money is the $53 million cut in fiscal 2010 High Speed and Intercity Passenger Rail appropriations, almost all of which was dedicated to a project to restore Amtrak service between Iowa City, Iowa and Chicago, Illinois, which never went anywhere.

The Federal Transit Administration has indicated that almost all of the $47 million in pre-2006 general fund transit formula money proposed to be rescinded is money from the Urbanized Area Formula Grant program that originally went to Atlanta and was allocated to build their multimodal passenger terminal, but that after the money sat around untouched for over 16 years, FTA withdrew the funding.

Office of Management and Budget Director Mick Mulvaney was on Capitol Hill yesterday trying to reassure Republican members that it was safe to vote for the rescissions bill. Members are reportedly expressing concerns about the appearance of rescinding $7 billion from the popular CHIP program, even though CBO says that it is impossible for the money to be spent in the real world and that the rescissions won’t affect the functioning of the program at all.

This threatens to expose the dirty little secret of the CHIP program – Congress routinely provides the program with far more money than it needs to operate effectively, so that the Appropriations Committees can then turn around and rescind billions of dollars per year in the program to offset other funding for social programs in the mammoth Labor-HHS-Education appropriations bill. The FY 2017 Labor-HHS bill relied on $8.2 billion in CHIP rescissions and the FY 2018 bill relied on $6.8 billion in CHIP rescissions. (Don’t believe me? See the table on page H2782 of the Record here and add up all the CHIP-related rescissions).

If this rescissions bill – a top priority of the White House and of Republican leaders in the House – can’t get the votes to pass the House because enough Republicans are afraid of being demagogued on the campaign trail over a meaningless cut in CHIP spending, then House leaders would be foolish to allow the Appropriations Committees to write another Labor-HHS-Education bill relying on those identical CHIP rescissions. Which then blows a $6 billion or $7 billion hole in the Labor-HHS bill, and while it that is the biggest non-defense appropriations bill, a hole that size is still big enough to cause problems for the bill.

(Of course, if the rescissions bill is somehow enacted into law, that would also make it more difficult for the 2019 Labor-HHS bill to rescind more money from the CHIP program.)