Rescissions Redux

On Tuesday, June 5, the Trump Administration sent Congress a revised appropriations rescission proposal to replace the rescission proposal it sent in early May. The Administration hopes that the revisions will earn the support of enough Republican lawmakers to ensure approval in the House and Senate.
 
Rescissions take away money that has already been approved by Congress. The Administration submitted the rescissions recommendations under procedures set up by the Congressional Budget and Impoundment Control Act of 1974 that allow the plan to pass the Senate by a simple majority vote, rather than a 60-vote majority that is necessary for most other legislation.
 
The original rescission proposal from May was billed by the Administration as saving $15.4 billion, but the number is shrinking. The $15.4 billion may be off by a rounding error – the actual sum of all the cuts is $15.3 billion. Recently, the Congressional Budget Office (CBO) estimated $15.2 billion based on scrubbing the numbers for the House bill based on the President’s plan (H.R. 3, the “Spending Cuts to Expired and Unnecessary Programs Act”). With the June 5 revisions, the plan is now down to $14.7 billion (using CBO’s estimating assumptions).
 
“The HISTORIC Rescissions Package we’ve proposed would cut $15,000,000,000 in Wasteful Spending! We are getting our government back on track.” – President Trump tweet, June 5, 2018 

But the plan’s budget impact is still well overstated if you claim it saves $15 billion. This is the amount of reduced budget authority, which is permission given by Congress for agencies to commit to spend money. While most budget authority provided through congressional appropriations results in spending (or “outlays” – money withdrawn from the Treasury to pay the government’s commitments), some budget authority sits around and is never spent. There can be many reasons for this, including the simple fact that the money isn’t needed any longer because of changed circumstances. Most of the proposed rescissions are to budget authority that will never be used and, therefore, don’t reduce outlays.
 
Outlays are the proper measure to use for budget savings and to assess this proposal’s impact on the budget deficit and debt. The outlay savings in the Administration’s rescission proposal are minuscule in the context of the entire federal budget.
 
For H.R. 3, CBO estimated that $15.2 billion in rescissions would save only $1.3 billion in budget outlays through FY 2028. That is merely 0.0021% of the $60.7 trillion CBO expects will be spent in total by the federal government from FY 2018 through FY 2028.
 
The revisions sent to Congress on June 5 don’t do much to change this analysis. The revisions reduce budget authority savings by $515 million and outlay savings through FY 2028 (using CBO’s previous estimates as a base) by $159 million. This nets to outlay savings of $1.1 billion (0.0018% of federal spending through FY 2028).
 
The Administration’s new plan changes the original rescission proposal in four notable areas (in addition to some minor technical changes):

1. A rescission was removed that would have eliminated $252 million appropriated in FY 2015 to fight the Ebola virus in Africa. The recent Ebola outbreak in the Democratic Republic of Congo led to reconsideration of that rescission. 
2. A $10 million rescission to EPA water quality research and support grants was eliminated. This rescission had raised concerns from Sen. Lisa Murkowski (R-AK), a swing vote in the Senate. 
3. The proposal no longer includes a $107 million rescission of FY 2013 appropriations for Hurricane Sandy recovery and relief. Lawmakers from New York and New Jersey questioned the merit of this cut. 
4. Two proposals totaling $134 million were removed because of a U.S. Government Accountability Office ruling that rescissions to Federal Highway Administration projects were not allowed under the Congressional Budget and Impoundment Control Act. 

​Left unchanged is a $7 billion rescission (almost half of the total amount proposed to be rescinded) to two parts of the Children’s Health Insurance Program (CHIP). While Democrats have directed much criticism toward the CHIP cut, both OMB and CBO agree that the proposal would have zero effect on spending for children’s health insurance. Nevertheless, many lawmakers believe that the political optics of “looking to tear apart the bipartisan Children’s Health Insurance Program” (Senate Minority Leader Schumer, May 7, 2018 Facebook post) are bad – even if no children would actually lose health insurance.
 
Political optics aside, another CHIP rescission issue is in the esoteric realm of budgetary accounting. Congress uses CHIP as a bank to finance other programs. Here’s how that works: Congress has a legal cap on the amount of discretionary (annual) appropriations it can approve, but it also is able to spend more on discretionary programs and still be within that cap by finding budgetary offsets. The CHIP rescission is one such offset (a big one). The final FY 2018 appropriations bill (P.L. 115-141) included $6.8 billion in CHIP offsets (with no outlay savings, just as with the current rescission proposal). The offsets meant that $6.8 billion could be spent on other programs. Majorities of both House and Senate Democrats and Republicans voted in favor of the FY18 appropriations bill with these offsets, and in previous fiscal years many lawmakers on both sides of the aisle voted for similar bills with CHIP offsets.
 
If the President’s CHIP rescission proposal is enacted, there will be less money available to offset other spending in future appropriations bills. This may put the squeeze on other discretionary programs, but the actual impact of the CHIP rescissions is far from certain. Some CHIP funds may still be available to use as an offset, other offsets may be found, and the effect of any spending reduction could be softened by spreading it throughout the $600 billion nondefense discretionary budget.
 
The uncertain political and practical ramifications of CHIP rescissions will make it difficult for some Republican lawmakers to support a rescissions bill. There will be little support for the rescission bill from Democrats, so the loss of a small number of Republicans in either the House or Senate would stymie the bill’s passage. If Republican congressional leadership decides to bring the bill to a vote, that will be a good sign that they believe the bill can pass.
 
Whether or not the bill is enacted, the impact of these rescissions should not be measured in budget savings but in their influence on campaign soundbites leading up to the November election.

​Update, Wednesday, June 6: The House Committee on Rules approved a rule this evening that sets up House floor consideration of H.R. 3, the "Spending Cuts to Expired and Unnecessary Programs Act." The rule includes an amendment to conform the bill to the President's June 5 revisions. The Rules Committee action signals that House Republican Leadership believes that the bill has sufficient Republican support to pass the House.