Cuts that Gut: More Insight into the Ryan-Republican Budget

Last week, I posted about the Ryan-Republican Budget resolution and the extraordinarily harsh cuts in education, research and development, and basic government services that it would require. 

To recap, in2013, it would cut on its face annual non-defense funding by 5 percent.  Starting in 2014, the GOP resolution would cut this funding by 19 percent in nominal terms, and even more deeply when inflation is considered. Abandoning the bipartisan agreement signed by the President in August, it would cut more than $1 trillion in non-defense spending over the next decade on topof what was agreed to. These cuts are necessary since the GOP does not ask all Americans to do their share to get our fiscal house in order and create an economy that is built to last. Instead, the GOP plan gives those making over $1 million per year an average tax cut of at least $150,000 and preserves tax breaks for oil and gas companies and hedge fund managers.

As others have noted, these cuts would lead to unprecedented cuts in government services that would hurt the middle class and those trying to get there. Now, we’ve learned that these cuts in discretionary spending are even more extreme than we originally thought. 

For example, in 2013, the House Budget resolution on its face cuts $27 billion from the non-defense level to which Republicans and Democrats agreed last August. Yet, in the report language filed with the resolution last week, it says that the Republicans now refuse to abide by the disaster “cap adjustment” to which all parties explicitly agreed to in August in order to make sure that disaster victims get the help they need when they need it, and aren’t held hostage to politics.  Instead, disaster funding “will be fully offset within the discretionary levels provided in this resolution.” 

What does this mean?  It means that the House Republicans now want disaster assistance —likely to be about $10 billion this year based on the average from prior years — to come out of the overall discretionary funding pot. As a result, what looks like a $27 billion cut is now likely an approximately $37 billion; what had looked like a 5 percent cut in 2013 is actually closer to an 8 percent cut; and cuts beyond 2013 now exceed 20 percent.

There’s a similar issue with Pell Grants, one of the most important ways in which we help millions of students afford college.

The Republicans’ budget report includes an “illustrative option” for a $5,550 maximum Pell award to “be fully funded through discretionary spending.”  The Pell program depends on billions in mandatory funding this year.  If that mandatory funding is eliminated, as in this “option,” then more discretionary money will be needed to maintain the $5,550 award maximum -- even with other misguided Pell cuts the report proposes.  The amount of additional discretionary money needed totals $9 billion in 2013 alone. That’s another $9 billion that needs to come out of discretionary spending.

If you combine the Pell and disaster needs, then what was thought to have been roughly a 5 percent cut of $27 billion is now a cut of about $46 billion — a 10 percent cut in 2013 alone.

Finally, as I wrote last week, the GOP Budget resolution doesn’t specify where all their cuts would come from.  That’s still true; there is still an $897 billion allowance for cuts that are not specified.  But the new report does list some “illustrative options”—“serious proposals” that the House Republicans’ Budget supports. These include:

• Changing eligibility and funding under the Pell Grant formula so as to eliminate grants for 400,000 students and cut grants for more than 9 million others in 2013 alone.  
• Cutting funding for the Department of Energy’s Office of Science and Energy Efficiency and Renewable Energy (EERE), critical contributors to the research and development and clean energy initiatives that America needs to foster successful businesses and achieve a high-growth, clean energy economy. 
• Eliminating key investments in infrastructure, including high-speed rail and transit new starts, which are central to giving the country the roads, rails, and bridges that American businesses need to compete in the 21^st century. 
• Sharply undermining the Dodd-Frank Wall Street reforms.  The House GOP Budget calls for:
  • Eliminating mandatory funding for the Consumer Financial Protection Bureau’s (CFPB), undermining its independence and jeopardizing its funding.
  • Reducing funding at the Securities and Exchange Commission, adversely affecting the Commission’s ability to provide independent oversight and compliance with these reforms;
  • Eliminating the FDIC’s “orderly liquidation authority,” explicitly created to end ‘too big to fail’ by providing an orderly way of winding down failed large financial institutions—and requiring the industry to pay for its failures at zero cost to the taxpayer.
• Eliminating the International Trade Administration’s Trade Promotion Activities. ITA has estimated that, on average, $1 spent on these efforts facilitates over $100 in exports from the United States.  
• Eliminating the Corporation for National and Community Service, which would deny more than 82,000 Americans the opportunity to serve their communities through Americorps and eliminate senior programs that engage more than 330,000 older and retiring volunteers.  
• Eliminating the Home Affordable Modification Program, which is helping hundreds of thousands of homeowners to remain in their homes.  
• Eliminating the Social Services Block Grant  program, which provides $1.7 billion per year for States to fund critical services for many families and individuals in need, including individuals with disabilities, and abused and neglected children and elderly adults.
• Cutting the Supplemental Nutrition Assistance Program (SNAP) by more than $120 billion over the next decade, affectingmillions of low-income children, seniors, and people with disabilities, and likely leading to increased hunger and poverty. 

Let me be clear: even if all of these policies were adopted, there would still be vast and unspecified cuts in the House Republican Budget.  And, as I’ve explained above, the cuts are even deeper than we thought.  So our impact estimates from last week remain as good an estimate as any, and – if anything -- are still probably on the conservative side.

Overall, these cuts represent a very different vision for our budget, our economy, and our country. It would result in historic cuts in investments critical to long-term economic growth and job creation – from education to biomedical research and infrastructure – and create an enormous burden for middle-class families already working hard to make ends meet. A balanced approach – that asks all to shoulder their fair share of the responsibility – is what the President and others have proposed, and is what it will take to put the country on a path of fiscal sustainability and give our children an economy built to last.

Jeff Zients is Acting Director of the Office of Management and Budget