Senate Budget Committee Releases Report on Budget Resolution

  CONCURRENT RESOLUTION ON THE BUDGET FISCAL YEAR 2018

COMMITTEE PRINT

TO ACCOMPANY

S. CON. RES. 25

TOGETHER WITH ADDITIONAL VIEWS AND MINORITY VIEWS

COMMITTEE ON THE BUDGET
UNITED STATES SENATE

MICHAEL B. ENZI, Chairman

OCTOBER 2017

Prepared for the use of the Committee on the Budget. This document has not been officially approved by the Committee and may not reflect the views of its members.

COMMITTEE ON THE BUDGET

MICHAEL B. ENZI, Wyoming, Chairman

CHARLES E. GRASSLEY, Iowa

MIKE CRAPO, Idaho

LINDSEY O. GRAHAM, South Carolina

PATRICK TOOMEY, Pennsylvania

RON JOHNSON, Wisconsin

BOB CORKER, Tennessee

DAVID A. PERDUE, Georgia

CORY GARDNER, Colorado

JOHN KENNEDY, Louisiana

JOHN BOOZMAN, Arkansas

LUTHER STRANGE, Alabama

BERNARD SANDERS, Vermont

PATTY MURRAY, Washington

RON WYDEN, Oregon

DEBBIE STABENOW, Michigan

SHELDON WHITEHOUSE, Rhode Island,

MARK R. WARNER, Virginia

JEFF MERKLEY, Oregon

TIM KAINE, Virginia

ANGUS S. KING, Jr., Maine

CHRIS VAN HOLLEN, Maryland

KAMALA D. HARRIS, California

ELIZABETH MCDONNELL, Republican Staff Director

WARREN GUNNELS, Minority Staff Director

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CONTENTS

I. Overview

II. Resolution Levels

III. Reconciliation and Enforcement

IV. Economics

V. Reserve Funds

VI. Summary Tables

VII. Committee Votes

VIII. Views and Estimates

IX. Additional and Minority Views

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OVERVIEW

CURRENT-LAW PROJECTIONS — MORE DEFICITS, MORE DEBT, SLOW GROWTH

Earlier this year the Congressional Budget Office (CBO) released An Update to the Budget and Economic Outlook: 2017 to 2027. The report showed that under current projections the Federal Government will spend over $10 trillion more than it takes in during the next 10 years. This projection is the byproduct of Washington’s chronic overspending and the economy’s anemic growth. According to CBO, annual deficits will surpass the $1 trillion mark in 2022 and grow each year thereafter. At the same time, annual economic growth is projected to settle at a paltry 1.9 percent.

Over the next decade, CBO projects that spending will increase from 20.5 percent of gross domestic product (GDP) in 2018 to 23.6 percent of GDP, well above the 50-year average of 20.3 percent. During the same period, however, revenues will remain at record highs. CBO currently projects revenues of 17.7 percent of GDP in 2018, growing to 18.4 percent of the economy. That is a full percentage point higher than the 50-year average of 17.4 percent.

Continual overspending and its resulting deficits will expand the Federal debt. During the next 10 years, debt held by the public is slated to rise from 77 percent of GDP ($15 trillion) to 91 percent of GDP ($26 trillion), the largest since the immediate aftermath of World War II. In March, CBO released The 2017 Long-Term Budget Outlook, which discusses the consequences of unchecked rising Federal debt if there is no fiscal course correction. These effects include:

• Reduced national savings and income — increasing interest rates, lowering private investment, economic output, worker compensation, and incentives to work.

• Increased Federal interest cost and its crowd-out effect on the rest of the budget — interest costs are projected to triple over the next 10 years and surpass all discretionary spending by 2044.

• Imposed limitations on the ability of the Government to respond to dramatic events — a large debt reduces flexibility to respond to or plan for fiscal, humanitarian, or international crises.

• Increased likelihood of a fiscal crisis — as CBO states plainly, "the larger a government’s debt, the greater the risk of fiscal crisis."

This forecast is bad news for American families, American businesses, and America’s standing in the world. This resolution puts forth another path — and it begins with tax reform.

FISCAL YEAR 2018 SENATE BUDGET RESOLUTION

THE FIRST STEP FOR TAX REFORM

The fiscal year 2018 Senate budget resolution is the start of the process to achieve historic, pro-growth tax reform so the U.S. economy grows again. That begins with changing the tax policies that are holding back investment and productivity. The United States needs a simpler, fairer, and more transparent tax system, which leaves more dollars in the average American’s pockets.

Comprehensive tax reform should broaden the base while lowering marginal tax rates, streamline U.S. tax laws, and limit Government distortion of market-based decisions. America’s tax policy should provide for a globally competitive corporate tax rate and an international tax system that does not penalize U.S. companies.

Tax policy affects the decisions of individuals and corporations, including whether to work an additional hour or invest an additional unit of capital. The outcome of these decisions has real consequences for our broader economy. The three key factors that contribute to overall economic growth are labor, capital, and technology. The Joint Committee on Taxation states: "[t]ax policy can directly influence the level of labor supply, physical capital, human capital, and technology in an economy by changing the after-tax returns to certain economic activities or changing the cost of pursuing such activities."

Pro-growth tax policy should reward work, savings, and investment. Marginal tax rates on individuals influence labor-force participation and hours worked. Corporate investment in capital is impacted by the tax code’s competitiveness and by tax policy effects on a company’s cash-flow, cost recovery, and financing options. Technological innovations increase productivity, allowing labor and capital to produce more output with less input. Additionally, a competitive international tax system has a direct impact on the choice to invest domestically.

The current tax code can favor certain industries and decisions, so it is biased in terms of investment allocation. Tax reform should eliminate special deductions, loopholes, and credits that distort the marketplace. Pro-growth reform that removes distortion would allow for resources to be reallocated toward their highest economic use, instead of the use that produces the best tax outcome. This efficiency will lead to increased investment, growth of businesses, and higher economic output, or GDP.

A more efficient tax system can produce the same level of revenue with lower rates, as long as tax expenditures are minimized and the economy grows through efficient market-based decisions. If tax reform can stop the projected economic decline, income and profits will rise, along with Federal revenues to the Treasury. A return to historic average growth would decrease projected deficits by over $2 trillion in the 10-year window, more than sufficient to pay for the decrease in revenues assumed under static scoring conventions that do not fully account for economic growth.

CBO has examined how growth in real output per unit of combined labor and capital services might affect GDP, income (including wages), and interest rates. Under the budget office’s simplified rule of thumb, policies that increase productivity by one-tenth of a percentage point ultimately reduce Federal deficits by $273 billion over 10 years. As economic growth rises in each year as a result of that higher productivity, taxable income would also grow more quickly than projected, and tax revenues would be higher.

CBO explains that if workers produce more, they earn more, so total wages and labor income are higher. If capital production were higher, the returns on that capital would also rise. Because Treasury securities compete with other investments for investors’ money, higher private returns imply that rates on Treasury securities would also be higher.

The Joint Economic Committee (JEC) has provided the Senate Budget Committee with a Views and Estimates letter on the state of the U.S. economy. JEC notes that every year since 2007, CBO has downgraded its projection of potential GDP and points to policies that have contributed to this decline. Heavy taxation on business owners and higher taxes on capital have left "a growing reserve of untapped potential not reflected in the current output gap."

The Senate Finance Committee’s Views and Estimates letter states, "[t]ax reform should focus on broad-based economic growth and job creation, fairness, simplification, and certainty." The Finance Committee’s objectives for tax reform include:

• Lowering the U.S. statutory corporate tax rate from the current highest in the world.

• Eliminating or changing various special provisions and preferences of the tax code that are inconsistent with an efficient allocation of capital.

• Reforming the corporate tax base, including so-called expensing provisions and provisions that provide the current bias toward debt financing, along with examining parity between businesses that organize as pass-throughs and as C corporations.

• Strengthening American manufacturing and innovation.

• Boosting wage growth for American workers.

• Boosting economic growth on a sustained basis.

• Strengthening the international tax system to encourage investments and innovation in America.

The tax-reform-writing committees of the Senate and House are tasked with developing and drafting legislation that will result in the first comprehensive tax reform in over a generation. Their joint statement with Senate and House leadership, Treasury, and the White House’s National Economic Council earlier this summer sets expectations that legislation will move through the committees this fall, under regular order, followed by consideration on the House and Senate floors.

As the first step toward historic, pro-growth tax reform, this budget provides the tools necessary to the Finance Committee to complete its work.

RESOLUTION DETAILS

The fiscal year 2018 Senate budget resolution is first and foremost about reforming the tax code and expanding the economy for all Americans.

But it also is a serious reform budget.

If Congress and the administration adhere to this blueprint, the Government will be back on track to fiscal responsibility — balancing the budget with a combination of restrained spending, reduced tax burdens, and a growing economy. In doing so this budget invests in a strong national defense and provides for the care of the Nation’s most vulnerable citizens. It serves as a framework to expand economic opportunity for all Americans.

The Senate budget presents a way forward with this budget, one geared toward creating a more effective, efficient, and accountable government. To accomplish this goal, the budget proposes $5.1 trillion in spending savings over the next 10 years. (This figure climbs to $6.4 trillion if compared to the CBO June 2017 Baseline, which incorporates $1.3 trillion in funding that qualifies for budget enforcement cap exceptions and related interest.) The spending policies of this budget are discussed in the Resolution Levels portion of this report.

The Senate budget also assumes more than $1.6 trillion in tax cuts, of which $1.5 trillion can be processed through fast-tracked reconciliation procedures. These figures are based on static current-law estimates of tax cut and reform policies assumed in the resolution. In addition, the budget assumes that with these policies, the coffers of the Federal Government will benefit from increased economic growth not envisioned under current-law projections. The resolution anticipates that enactment of tax reform will generate economic growth at a significant enough level to compensate for the initial decrease in revenues assumed under a static scoring convention.

This budget honors the special off-budget status of Social Security. This treatment also reflects the understanding that the congressional budget resolution is an on-budget document and that the Congressional Budget Act imposes certain limitations on what a resolution can contain, display, and support changing. From the start, this budget was focused on achieving on-budget balance by the end of budget window. By 2026, the resolution — with economic feedback included — would generate a $79 billion on-budget surplus. This surplus would grow to $197 billion by 2027.

In addition to the fiscal reforms proposed by the budget, this resolution continues efforts to respond to concerns about the broken budget process. The plan takes important steps to curtail budget gimmicks, increase honesty and accuracy by Government score-keepers, and end the "spend now, pay later" mentality of Washington. These changes are discussed in depth in the Enforcement section of this report.

RESOLUTION LEVELS

BUDGET FUNCTION 050: NATIONAL DEFENSE

The National Security function includes funds to develop, maintain, and equip the military forces of the United States. Historically, about 95 percent of these funds go to Department of Defense military activities, with remaining funding dedicated to atomic energy defense activities within the Department of Energy and other defense-related activities.

SUMMARY OF COMMITTEE-REPORTED RESOLUTION

The Committee-reported fiscal year 2018 budget resolution calls for $557.3 billion in budget authority and $569.3 billion in outlays. Discretionary budget authority totals $549.1 billion, with $560.8 billion in related outlays. Mandatory spending is $8.2 billion in budget authority and $8.5 billion in outlays. Over 10 years, budget authority totals $6,232.4 billion, with $6,107.8 billion in outlays, corresponding to baseline levels.

FOCUS ON REFORM

After years of defense budget brinkmanship under the previous administration, this budget resolution promotes much-needed fiscal stability to provide the foundation for effective and efficient defense planning. The resolution removes the specter of across-the-board sequestration cuts and allocates as much base Pentagon funding as possible under current law. The resolution also includes a mechanism to increase funding levels for defense accounts, once there is a final resolution of defense spending later this year.

This budget further provides for the national defense with $76.6 billion in budget authority for the Overseas Contingency Operations war-funding account, which can be found in budget function 970. This is the same level of OCO funding requested by the Trump administration earlier this year. Under law, OCO funding does not count against the discretionary spending caps contained in the 2011 Budget Control Act, as amended.

The Pentagon’s overall base budget remains near the average of defense spending during the Reagan buildup. Yet reforms still are required to combat wasteful spending. The department needs to pursue fundamental reforms in its organization, business operations, work force management, and compensation structure, all of which have been goals of the recent leadership of congressional defense committees. In a positive development, the Armed Services Committee now has a partner in the current administration that has pledged to steward taxpayer dollars more carefully by increasing efficiency and accountability.

Recently the Senate Armed Services Committee has promoted reforms including streamlining the acquisition system, updating departmental organization for a new era, rationalizing the whole Defense Department work force, and modernizing the department’s business operations. These efforts build on reforms spearheaded by the Armed Services Committee in recent years, including mandated savings and efficiency targets, new authorities for acquisition and personnel management, and repeal of unnecessary laws or regulations. This resolution remains supportive of those efforts to reform the department and restore taxpayer trust.

BUDGET FUNCTION 150: INTERNATIONAL AFFAIRS

The International Affairs function contains spending on international humanitarian and development assistance; international security assistance; the conduct of foreign affairs; foreign information and exchange activities; and international financial programs. Funding contained in the function supports operations at major agencies including the Departments of State, Treasury, and Agriculture; the U.S. Agency for International Development; and the Millennium Challenge Corporation.

SUMMARY OF COMMITTEE-REPORTED RESOLUTION

The Committee-reported fiscal year 2018 budget resolution calls for $45.2 billion in budget authority and $45.0 billion in outlays. Discretionary budget authority totals $39.5 billion, with $48.7 billion in related outlays. Mandatory spending is $5.7 billion in budget authority and $¥3.7 billion in outlays. Over 10 years, budget authority totals $451.9 billion, with $437.7 billion in outlays, corresponding to baseline levels.

FOCUS ON REFORM

This budget resolution supports the funding of U.S. foreign policy, including diplomatic efforts, the promotion of American ideals abroad, and global humanitarian aid and development assistance. The level of funding in the budget resolution is near the average spending for international affairs in the post-9/11 era. Still, management and implementation of international affairs activities is ripe for reform.

Bipartisan coalitions and a wide variety of independent analysts have consistently called for rationalizing the State Department’s organizational and management structure, revitalizing its regional bureaus, revamping food aid and development assistance, improving public diplomacy, and reassessing American contributions to international organizations. This budget supports the efforts of the Senate Foreign Relations Committee, as the committee of jurisdiction, to approve a new authorization bill for the department and related agencies.

Additional funding for programs in this function is assumed to occur with spending designated as overseas contingency operations. OCO funding in this resolution can be found in budget function 970.

BUDGET FUNCTION 250: SCIENCE AND TECHNOLOGY

The Science and Technology function includes the National Science Foundation, programs other than aviation programs at the National Aeronautics and Space Administration, and general science programs at the Department of Energy.

SUMMARY OF COMMITTEE-REPORTED RESOLUTION

The Committee-reported fiscal year 2018 budget resolution calls for $32.6 billion in budget authority and $31.9 billion in outlays. Discretionary budget authority totals $32.5 billion, with $31.8 billion in related outlays. Mandatory spending is $0.1 billion in budget authority and $0.1 billion in outlays. Over 10 years, budget authority totals $358.7 billion, with $351.1 billion in outlays, corresponding to baseline levels.

FOCUS ON REFORM

This function, largely consisting of Federal discretionary spending, supports NASA, the National Science Foundation, and the Energy Department’s Office of Science in their core missions, while allowing emphasis on such national priorities as basic research. As with all areas of Federal spending, programs funded under this portion of the budget can be reformed. According to the Government Accountability Office, areas for reform include NASA’s acquisition management, which remains on the agency’s high-risk list. The agency recommended specific actions to better evaluate the agency’s human-exploration programs, in particular. GAO also recommends in its annual report that NASA, the Energy Department, the Department of Health and Human Services, and the Science Foundation better coordinate their research activities.

To that end, the American Innovation and Competitiveness Act, enacted in January 2017, created an interagency working group addressing GAO’s concerns, as well as improved the administration and oversight of agency grant-making processes. Implementation of the act should enhance science and technology program efficiency, maximizing Federal investments. This budget remains supportive of those efforts and the role of appropriate Senate committees to report reforms.

BUDGET FUNCTION 270: ENERGY

The Energy function concerns the production, development, and use of energy for the country. This function contains civilian energy programs at agencies including the departments of Energy and Agriculture, Tennessee Valley Authority, Federal Energy Regulatory Commission, and Nuclear Regulatory Commission.

SUMMARY OF COMMITTEE-REPORTED RESOLUTION

The Committee-reported fiscal year 2018 budget resolution calls for $¥0.8 billion in budget authority and $2.7 billion in outlays. Discretionary budget authority totals $5.4 billion, with $5.1 billion in related outlays. Mandatory spending is $¥6.1 billion in budget authority and $¥2.4 billion in outlays. Over 10 years, budget authority totals $32.0 billion, with $25.9 billion in outlays, a divergence of $8.8 billion from baseline levels.

FOCUS ON REFORM

The budget resolution allows authorizing committees to focus taxpayer dollars on the modernization and reform of America’s energy generation and transmission assets. The Federal Government can devote taxpayer investments to key mission areas including nuclear security, basic scientific research, energy innovation and security, and nuclear waste and environmental cleanup.

In recent years, programs related to the commercialization of energy technology have expanded beyond the Energy Department’s intended role as a catalyst of basic research and development. Federal loan and loan-guarantee programs to subsidize early commercial development of certain technologies have cost taxpayers hundreds of millions of dollars when products prove uncompetitive on the open market.

The resolution allows a renewed focus on the department’s historic strength: early stage scientific research and development. Later-stage development, adoption, and deployment of technologies can return to the private sector.

This budget supports a focus on utilization of current energy supply and assets, rather than the previous administration’s efforts to pick market winners and losers.

Federal agencies should promote abundant and secure American energy resources, while supporting the Nation’s financial security and stability. This budget supports the work of the committees of jurisdiction as they consider policies to improve Federal energy programs.

In addition, the resolution contains a reconciliation instruction for the Senate Committee on Energy and Natural Resources. Provided at the request of the committee, the instruction will allow Congress to consider policies to unlock the Nation’s energy production capacity.

BUDGET FUNCTION 300: ENVIRONMENT AND NATURAL RESOURCES

The Environment and Natural Resources function focuses on the management, development, and maintenance of the Nation’s natural heritage. This function includes conservation of land and water resources; development of water power and transportation infrastructure; and agencies and resources associated with the management and regulation of pollution, public and recreational lands, and natural resources.

SUMMARY OF COMMITTEE-REPORTED RESOLUTION

The Committee-reported fiscal year 2018 budget resolution calls for $40.5 billion in budget authority and $40.6 billion in outlays. Discretionary budget authority totals $37.4 billion, with $38.0 billion in related outlays. Mandatory spending is $3.1 billion in budget authority and $2.6 billion in outlays. Over 10 years, budget authority totals $451.4 billion, with $445.5 billion in outlays, a divergence of $14.3 billion from baseline levels.

FOCUS ON REFORM

The Federal Government owns roughly 28 percent of the land in the United States, or 640 million acres, according to the Congressional Research Service. Much of that land is disproportionately concentrated in western States. Many agencies covered by this function are tasked with the preservation of those Federal lands, as well as the responsible development and management of its natural resources.

The budget resolution encourages the continued stewardship of Federal lands and assumes a greater return for American tax-payers on natural resources bountiful on those lands. This budget also supports recent efforts by Congress and this administration to reduce regulatory burdens that have for too long discouraged energy development and production on Federal land.

The budget resolution also allows committees of jurisdiction to pursue opportunities to achieve savings for taxpayers without harming the Nation’s land and water resources. The budget supports authorizing committee review of timber production from Federal lands, coupled with forest-management reforms focused on wildfire prevention.

To reduce inefficiencies and combat waste, fraud, and abuse of taxpayer resources, agencies should strive to implement improvements identified by the Government Accountability Office.

BUDGET FUNCTION 350: AGRICULTURE

The Agriculture function includes the Department of Agriculture and the Farm Credit Administration, and only deals with programs concerned with agricultural production.

SUMMARY OF COMMITTEE-REPORTED RESOLUTION

The Committee-reported fiscal year 2018 budget resolution calls for $22.1 billion in budget authority and $22.0 billion in outlays. Discretionary budget authority totals $6.5 billion, with $6.4 billion in related outlays. Mandatory spending is $15.6 billion in budget authority and $15.6 billion in outlays. Over 10 years, budget authority totals $200.6 billion, with $192.1 billion in outlays, a divergence of $20.6 billion from baseline levels.

FOCUS ON REFORM

The Farm Bill is subject to reauthorization in 2018. This budget resolution supports the committee of jurisdiction as it moves forward with efforts to reexamine the farm safety net, ensure domestic food production, and improve Federal agriculture programs.

BUDGET FUNCTION 370: COMMERCE AND HOUSING CREDIT

The Commerce and Housing Credit function includes the regulation and promotion of commerce and certain housing policies and agencies. Agencies concerned with the economy as a whole fall under this function. In addition, general-purpose subsidies and credit subsidies are recorded here.

SUMMARY OF COMMITTEE-REPORTED RESOLUTION

The Committee-reported fiscal year 2018 budget resolution calls for $7.6 billion in budget authority and $-5.9 billion in outlays. Discretionary budget authority totals $-4.2 billion, with $-3.8 billion in related outlays. Mandatory spending is $11.8 billion in budget authority and $-2.1 billion in outlays. Over 10 years, budget authority totals $-2.2 billion, with $-113.1 billion in outlays, a divergence of $173.1 billion from baseline levels. These figures reflect the combined on- and off-budget amounts associated with this function.

FOCUS ON REFORM

The budget resolution supports efforts by committees of jurisdiction to reform a system that exposes taxpayer dollars to undue risk into one that provides productive support to industry.

Under the previous administration, Federal bureaucrats gained excessive authority over industry, which impedes private-sector economic growth and job creation. The Federal Government should retain regulation that reduces systemic risk and helps to prevent another financial crisis, and remove over-regulation that places a costly burden on the U.S. economy and American workers.

At the same time, housing should become more growth-oriented rather than Government-focused, with taxpayers protected from undue risk. Reforming the U.S. housing industry would significantly reduce taxpayer subsidization of the secondary mortgage market and provide appropriate, effective oversight of Federal programs. In June 2017, the Government Accountability Office noted that absent modernization "the Federal role in housing finance is one of the highest risks facing the Government," and thus Congress has a duty to ensure that any reform proposals "protect taxpayers from absorbing avoidable losses to the maximum extent possible." This resolution supports financial safeguards to ensure that federally subsidized telecommunications access for Americans in rural or underserved areas is free from waste, fraud, and abuse. Furthermore, the budget supports any efforts by the appropriate committees to examine policies to give the private market more freedom to provide these services.

BUDGET FUNCTION 400: TRANSPORTATION

The Transportation function focuses on aid and regulation for ground transportation (including roads and highways, railroads, and urban mass transit), air transportation (including aeronautical research conducted by the National Aeronautics and Space Administration), and maritime commerce. The major agencies included in this function are the Department of Transportation (including the Federal Aviation Administration, Federal Highway Administration, Federal Transit Administration, and Maritime Administration), the Department of Homeland Security (including the Transportation Security Administration, United States Coast Guard, and the Federal Air Marshal Service), and the National Railroad Passenger Corporation.

SUMMARY OF COMMITTEE-REPORTED RESOLUTION

The Committee-reported fiscal year 2018 budget resolution calls for $89.1 billion in budget authority and $92.9 billion in outlays. Discretionary budget authority totals $33.7 billion, with $91.9 billion in related outlays. Mandatory spending is $55.4 billion in budget authority and $1.0 billion in outlays. Over 10 years, budget authority totals $749.7 billion, and outlays are $812.1 billion, a divergence of $207.7 billion from baseline levels.

FOCUS ON REFORM

The Federal Government has a fundamental interest in the transportation and infrastructure systems necessary for local, national, and global commerce, as well as the efficient movement of people. Maintaining safe and secure systems while promoting innovation and competition benefits American workers, businesses, and the economy. This budget supports efforts by the appropriate authorizing committees to maximize taxpayer resources by prioritizing infrastructure spending, streamlining project delivery, and facilitating beneficial public-private partnerships.

This resolution supports the idea that investments in transportation and infrastructure would benefit from improved project delivery and grant management processes, starting with a thorough review of Federal rules and regulations associated with infrastructure development. By streamlining these requirements through statutory and administrative changes, investments will be maximized and benefits realized sooner. Furthermore, the Government Accountability Office recommends that the Transportation Department implement a department-wide directive on the consistent administration of discretionary grant awards and strengthen oversight of awards through updated single audit policies and procedures. All these changes would stimulate continued investment in America’s infrastructure while promoting efficiency and fiscal responsibility.

As Congress continues to work with the executive branch, State and local governments, and the private sector on legislation related to transportation and infrastructure advancement, it should encourage enhanced partnerships among all stakeholders. While not appropriate for every project, furthering public-private partnerships, as well as promoting private investments, can help leverage appropriate Federal resources as recommended by appropriate authorizing committees.

BUDGET FUNCTION 450: COMMUNITY AND REGIONAL DEVELOPMENT

The Community and Regional Development function includes Federal programs to improve community economic conditions, promote rural development, and assist in Federal preparations for, and response to, disasters. This function provides appropriated funding for the Community Development Block Grant, Department of Agriculture rural development programs, Bureau of Indian Affairs, Federal Emergency Management Agency, and other disaster mitigation and community development-related programs. It also provides mandatory funding for the Federal flood insurance program.

SUMMARY OF COMMITTEE-REPORTED RESOLUTION

The Committee-reported fiscal year 2018 budget resolution calls for $19.0 billion in budget authority and $21.7 billion in outlays. Discretionary budget authority totals $18.5 billion, with $21.1 billion in related outlays. Mandatory spending is $0.5 billion in budget authority and $0.6 billion in outlays. Over 10 years, budget authority totals $200.6 billion, with $193.6 billion in outlays, a positive divergence of $32.6 billion from baseline levels.

FOCUS ON REFORM

This budget supports efforts by committees of jurisdiction to better target existing Federal grant programs and eliminate ineffective, wasteful programs, as well as those that encourage an over-reliance on the Federal Government. In concert with appropriate local and State efforts, the Federal Government has the opportunity to be a better and more successful partner.

The budget provides ample resources for disaster relief and mitigation and assumes at least $7 billion annually for responses to natural disasters. This additional funding is assumed to be provided on top of the regular funding constrained by statutory limits.

BUDGET FUNCTION 500: EDUCATION, TRAINING, EMPLOYMENT, AND SOCIAL SERVICES

The Education, Training, Employment, and Social Services function includes funding for the Department of Education, some social services programs within the Department of Health and Human Services, and employment and training programs within the Department of Labor.

SUMMARY OF COMMITTEE-REPORTED RESOLUTION

The Committee-reported fiscal year 2018 budget resolution calls for $90.2 billion in budget authority and $99.3 billion in outlays. Discretionary budget authority totals $95.4 billion, with $96.0 billion in related outlays. Mandatory spending is $¥5.1 billion in budget authority and $3.4 billion in outlays. Over 10 years, budget authority totals $1,017.0 billion, with $1,030.3 billion in outlays, a divergence of $131.7 billion from baseline levels.

FOCUS ON REFORM

Postsecondary education has become less affordable in recent years, despite the steady growth in the maximum Federal Pell Grant program award and the loosening of student-loan borrowing limits. In order to increase access to postsecondary education in a fiscally responsible way, the Federal Government should reform programs that promote unreasonable higher-education tuition increases and encourage student over-borrowing. The complex system bred over the past decade needs to be streamlined to ensure American students and their families have access to concise and distinct financing options.

In promoting choice, it is imperative that the information received from the Federal Government by education consumers is accurate and reliable. The budget resolution supports important steps to ensure that student borrowers receive important and valid information upfront. Providing greater transparency for students will promote better decisionmaking and improve their finances as they begin their careers, rather than saddle them with decades-worth of debt.

BUDGET FUNCTION 550: HEALTH

The Health function contains spending on a variety of health care services administered by the Department of Health and Human Services. It also includes health research conducted by the National Institutes of Health; public health and safety programs conducted by the Centers for Disease Control and Prevention; primary health care services conducted by the Health Resources and Services Administration; and the regulation of pharmaceuticals, medical devices, and food products conducted by the Food and Drug Administration. The most significant drivers of spending in this function are the Patient Protection and Affordable Care Act — commonly known as Obamacare — and Medicare.

SUMMARY OF COMMITTEE-REPORTED RESOLUTION

The Committee-reported fiscal year 2018 budget resolution calls for $546.6 billion in budget authority and $558.3 billion in outlays. Discretionary budget authority totals $64.0 billion, with $63.5 billion in related outlays. Mandatory spending is $482.6 billion in budget authority and $494.8 billion in outlays. Over 10 years, budget authority totals $5,958.1 billion, and outlays are $5,952.4 billion, a divergence of $1,316.2 billion from baseline levels.

FOCUS ON REFORM

Federal health care spending comprises nearly 30 percent of all Federal spending and is growing far more rapidly than other areas of the budget. This rapid expansion is due to the rising cost of health care, aging of the population, and substantial increase in the number of people who receive Federal subsidies under Obamacare.

Based on Congressional Budget Office estimates, Obamacare will be the chief driver of spiraling health spending over the next decade — this despite promises prior to passage of the 2010 health care law that it would improve the Nation’s budgetary outlook and "bend the cost curve." Despite this pledge, independent assessments by CBO and the non-partisan actuary at the Centers for Medicare and Medicaid Services affirm that Obamacare has increased Federal health spending.

Americans face skyrocketing premiums and soaring deductibles, and many families are left with higher costs and fewer options than they had before the law’s enactment 7 years ago. Clearly, the status quo is unsustainable.

Against this backdrop, the budget resolution supports continued efforts to repeal and replace Obamacare. It enables efforts by authorizing committees to lower health care costs and improve the quality of care for all Americans. It empowers committees to work to modernize and improve Federal health care programs, increase State flexibility, and protect the most vulnerable. In addition, the budget supports an extension in funding for the State Children’s Health Insurance Program, the highly successful effort to create a strong and durable partnership between the Federal Government and States to provide the Nation’s children with appropriate and sustainable health care resources.

BUDGET FUNCTION 570: MEDICARE

The Medicare function includes only the Medicare program, which provides health insurance to senior citizens and certain persons with disabilities. Nearly 99 percent of spending in this function occurs on the mandatory side of the budget, and almost all of the mandatory spending consists of payments for Medicare benefits. The balance of spending is discretionary annual appropriations covering the cost of administering and monitoring the Medicare program.

SUMMARY OF COMMITTEE-REPORTED RESOLUTION

The Committee-reported fiscal year 2018 budget resolution calls for $586.2 billion in budget authority and $586.0 billion in outlays. Discretionary budget authority totals $7.4 billion, with $7.5 billion in related outlays. Mandatory spending is $578.8 billion in budget authority and $578.5 billion in outlays. Over 10 years, budget authority totals $8,153.7 billion, and outlays are $8,151.4 billion, a divergence of $472.9 billion from baseline levels.

FOCUS ON REFORM

Medicare spending is on an unsustainable course. Without changes, Medicare’s Hospital Insurance Trust Fund will become insolvent in 2029, according to the Medicare Trustees’ current-law projections, and potentially as early as 2023 under the trustees’ high-cost scenario. The Congressional Budget Office estimates the trust fund will be fully exhausted within less than a decade, or by 2025.

In addition, the independent actuaries at the Centers for Medicare and Medicaid Services project that over a 75-year period the Federal Government has promised $33.5 trillion in Medicare benefits in excess of dedicated sources of revenue to support the program.

Given this untenable situation, the budget resolution supports work by the authorizing committees to recommend legislative solutions extending Medicare’s solvency in the near term, while pursuing policies that place the program on a sustainable long-term path.

BUDGET FUNCTION 600: INCOME SECURITY

The Income Security function covers a range of income security programs that provide cash or near-cash assistance to low-income persons and benefits to certain retirees, persons with disabilities, and the unemployed.

SUMMARY OF COMMITTEE-REPORTED RESOLUTION

The Committee-reported fiscal year 2018 budget resolution calls for $492.0 billion in budget authority and $477.5 billion in outlays. Discretionary budget authority totals $66.9 billion, with $66.3 billion in related outlays. Mandatory spending is $425.1 billion in budget authority and $411.2 billion in outlays. Over 10 years, budget authority totals $5,123.1 billion, with $5,029.8 billion in outlays, a divergence of $653.0 billion from baseline levels.

FOCUS ON REFORM

Participation in programs funded through this area of the budget typically increase during a recession and decrease during a recovery. But the most recent recession-recovery trend has been different: Participation rates in some programs have increased more than poverty or unemployment rates and have remained at elevated levels.

Over the past several years, many States relaxed eligibility standards and increased enrollment for persons above the poverty level, threatening the fiscal sustainability of these programs.

Additionally, waste, fraud, and abuse continue to plague some programs. The Treasury Department’s Inspector General has reported that millions of people not authorized to work in the United States have claimed billions of dollars in refundable child tax credits.

According to the Government Accountability Office, eligibility rules for Federal income-security programs are complex and confusing to applicants and administratively burdensome to Government agencies. The lack of a standard definition of eligible family members and variations in countable income and allowable deductions result in disparate treatment of similarly situated individuals.

The budget resolution assumes that Congress will make improvements to the programs in this function, ensuring programs for vulnerable populations will be protected. This budget supports authorizing committees acting on reforms providing States with flexibility so that they can target assistance to those most in need. In addition, the budget assumes that the committees of jurisdiction will exercise fiscal discipline and work to reduce spending on duplicative and wasteful programs.

Regarding Federal retirement programs, this budget prioritizes fiscal sustainability, specifically as it relates to the benefits that Federal employees have earned over a lifetime of service. It is imperative that the Federal employee benefit system be reformed to ensure fairness to both recipients and taxpayers.

BUDGET FUNCTION 650: SOCIAL SECURITY

The Social Security function consists of the payroll-tax-financed programs collectively known as Social Security: Old-Age and Survivors Insurance and Disability Insurance. These programs provide monthly cash benefits to approximately 61 million retired and disabled workers and their spouses, dependents, and survivors. This function includes both benefit payments and funds to administer the programs and ensure program integrity.

SUMMARY OF COMMITTEE-REPORTED RESOLUTION

The Committee-reported fiscal year 2018 budget resolution calls for $999.0 billion in budget authority and $994.0 billion in outlays. Discretionary budget authority totals $5.6 billion, with $5.6 billion in related outlays. Mandatory spending is $993.4 billion in budget authority and $988.4 billion in outlays. Over 10 years, budget authority totals $13,219.8 billion, with $13,154.7 billion in outlays, corresponding to baseline levels. These figures reflect the combined on- and off-budget amounts associated with this function.

BUDGET FUNCTION 700: VETERANS BENEFITS AND SERVICES

The Veterans Benefits and Services function includes health administration and health services for veterans (majority of the discretionary spending), their pensions and disability compensation (majority of the mandatory spending), and other services our Nation provides to veterans.

SUMMARY OF COMMITTEE-REPORTED RESOLUTION

The Committee-reported fiscal year 2018 budget resolution calls for $176.4 billion in budget authority and $177.4 billion in outlays. Discretionary budget authority totals $78.2 billion, with $76.5 billion in related outlays. Mandatory spending is $98.2 billion in budget authority and $100.9 billion in outlays. Over 10 years, budget authority totals $2,157.0 billion, with $2,138.3 billion in outlays, corresponding to baseline levels.

FOCUS ON REFORM

The Committee-reported budget resolution assumes no changes for the Veterans Benefits and Services function and is focused on providing America’s veterans with the care and resources they have earned and need.

This budget supports the work of the committees of jurisdiction as they consider common-sense proposals to ensure benefits are delivered in a manner that upholds fidelity to veterans and taxpayers alike.

Anticipating reauthorization of the Veterans Choice Program, authorizing committees should focus on prompt delivery of care to eligible veterans, along with measurable health outcomes. A thoughtful examination of VA benefit programs — many of which have not been reformed for several decades — could take into account contemporary economic and labor-market criteria, as well as advances in medical technology, in order to better match benefits to veteran needs.

In a positive development, Congress has acted to grant the VA additional authority and oversight to ensure veterans are served by the best possible work force. The VA should continue its work to implement reforms that will increase service and efficiency for veterans, including a focused standardization of care, modernization of health information technology, appropriate management of Federal real property assets, and vigilance in human-capital management.

BUDGET FUNCTION 750: ADMINISTRATION OF JUSTICE

The Administration of Justice function includes programs to provide judicial services, police protection, law enforcement, civil rights, rehabilitation and incarceration of criminals, and the general maintenance of domestic order.

SUMMARY OF COMMITTEE-REPORTED RESOLUTION

The Committee-reported fiscal year 2018 budget resolution calls for $65.0 billion in budget authority and $61.0 billion in outlays. Discretionary budget authority totals $58.0 billion, with $57.1 billion in related outlays. Mandatory spending is $7.0 billion in budget authority and $3.9 billion in outlays. Over 10 years, budget authority totals $688.8 billion, with $691.4 billion in outlays, a divergence of $21.4 billion from baseline levels.

FOCUS ON REFORM

The Federal Government has a duty to maintain domestic order, ensuring the safest possible community for all Americans. To that end, the Government provides and supports law enforcement activities; affords a judicial system to peacefully adjudicate disputes and protect rights; and rehabilitates and incarcerates persons found guilty of criminal conduct. At the same time, the Government must carry out these duties in a fiscally responsible way.

In order to achieve both a proper administration of justice and stewardship of taxpayer dollars, the resolution supports work by the appropriate committees of jurisdiction. The Government Accountability Office recommends that the Department of Justice better address the incarceration challenges of crowding, rising costs, and offender recidivism, as well as improve collaboration among the Department of Justice, the Department of Homeland Security, and the Office of National Drug Control Policy to streamline activities. In addition, GAO offers several ways for the Federal Bureau of Investigation to better handle whistleblower retaliation complaints, as well as for the Bureau and Justice to update technology to improve privacy, accuracy, and efficiency of computer systems. Furthermore, GAO urges Homeland Security to better focus on border security efforts by improving acquisition management, controlling fraud, and investing in tactical infrastructure.

Committee recommendations to reform or eliminate underperforming, wasteful programs could allow the Justice Department to focus on vital services that spend American taxpayer dollars wisely for good results.

BUDGET FUNCTION 800: GENERAL GOVERNMENT

The General Government function includes the activities of the White House and the Executive Office of the President, the legislative branch, and programs to carry out the administrative responsibilities of the Federal Government, including personnel management, fiscal operations, and property control.

SUMMARY OF COMMITTEE-REPORTED RESOLUTION

The Committee-reported fiscal year 2018 budget resolution calls for $24.7 billion in budget authority and $24.9 billion in outlays. Discretionary budget authority totals $17.4 billion, with $17.7 billion in related outlays. Mandatory spending is $7.3 billion in budget authority and $7.2 billion in outlays. Over 10 years, budget authority totals $276.7 billion, with $274.4 billion in outlays, a divergence of $0.1 billion from baseline levels.

FOCUS ON REFORM

The General Government function encompasses many of the programs and activities that constitute the operational responsibilities of the Federal Government. It also funds the salaries of Federal lawmakers and White House officials, as well as those who staff Congress and the Executive Office of the President. The budget resolution supports reforms, subject to the discretion of committees of jurisdiction, for these entities to help contribute to Federal fiscal discipline.

BUDGET FUNCTION 900: NET INTEREST

The Net Interest function contains the interest paid to private and foreign government holders of U.S. Treasury securities. This function includes interest on the public debt less the interest received by the Federal Government from trust fund investments and loans to the public. It contains mandatory payments, with no discretionary components.

SUMMARY OF COMMITTEE-REPORTED RESOLUTION

The Committee-reported fiscal year 2018 budget resolution calls for $307.0 billion in budget authority and $307.0 billion in outlays, all of which is mandatory spending. Over 10 years, budget authority totals $5,223.4 billion, with $5,223.4 billion in outlays, a divergence of $259.0 billion from baseline levels. These figures reflect the combined on- and off-budget amounts associated with this function.

FOCUS ON REFORM

Outlays in this function respond entirely to the changes in annual total budget deficits and borrowing from the public to meet or pay those deficits. The changes in spending and revenue levels described elsewhere in this budget account for all changes in net interest outlays.

BUDGET FUNCTION 920: ALLOWANCES

The Allowances function displays the budgetary effects of proposals that cannot be easily distributed across other budget functions.

SUMMARY OF COMMITTEE-REPORTED RESOLUTION

The Committee-reported fiscal year 2018 budget resolution calls for $-68.6 billion in budget authority and $-51.1 billion in out-lays. Discretionary budget authority totals $38.5 billion, with $-21.1 billion in related outlays. Mandatory spending is $-30.1 billion in budget authority and $-30.0 billion in outlays. Over 10 years, budget authority totals $-2,356.5 billion, with $-2,217.5 billion in outlays, a divergence of $-1,793.2 billion from baseline levels.

FOCUS ON REFORM

Spending levels in the Allowances function reflect policy assumptions that have an impact across Federal agencies or are not easily distributed across budget functions. This is a similar approach used by the Congressional Budget Office in its budget projections. This year changes to the nondefense discretionary topline are included in this function to better reflect the operation and realities of the congressional budget and appropriations process. Also included is the fiscal benefit scored by CBO for the budget resolution’s deficit trajectory.

BUDGET FUNCTION 950: UNDISTRIBUTED OFFSETTING RECEIPTS

The Undistributed Offsetting Receipts function comprises major offsetting receipts items that would distort the funding levels of other functional categories if they were distributed to them.

SUMMARY OF COMMITTEE-REPORTED RESOLUTION

The Committee-reported fiscal year 2018 budget resolution calls for $-112.6 billion in budget authority and $-112.6 billion in outlays, all of which is mandatory spending. Over 10 years, budget authority totals $-1,292.7 billion, with $-1,292.7 billion in outlays, a divergence of $217.3 billion from baseline levels. These figures reflect the combined on- and off-budget amounts associated with this function.

FOCUS ON REFORM

The Undistributed Offsetting Receipts function captures the receipt effects of proposals in the budget. This function comprises major offsetting receipts items that would distort the funding levels of other functional categories if they were directly distributed, including asset sales, fees, and royalties.

BUDGET FUNCTION 970: OVERSEAS CONTINGENCY OPERATIONS/GLOBAL WAR ON TERRORISM

This function includes funding for overseas contingency operations, the global war on terrorism, and other closely related activities.

SUMMARY OF COMMITTEE-REPORTED RESOLUTION

The Committee-reported fiscal year 2018 budget resolution calls for $76.6 billion in total budget authority and $43.1 billion in total outlays. All spending in this function is discretionary. Over 10 years, budget authority totals $163.6 billion, with $160.3 billion in outlays. The baseline used to construct this resolution does not include an extrapolation of war costs.

FOCUS ON REFORM

Besides the regular budget authority for national defense and international affairs, the budget resolution includes $76.6 billion in overseas contingency operations funding for fiscal year 2018, matching the president’s request. This resolution also includes out-year placeholders for OCO funding. While there are no policy options associated with this funding, this resolution is consistent with previous budget resolutions in assuming outyear placeholders.

This function was first included in the fiscal year 2016 congressional budget resolution.

REVENUES

Federal revenues are comprised of taxes and other collections from the public that result from the Government’s sovereign powers to impose levies under Article I, section 8, clause 1 of the U.S. Constitution. Federal revenues include individual and corporate incomes taxes, social insurance taxes, excise taxes, estate and gift taxes, customs duties, and miscellaneous receipts.

SUMMARY OF COMMITTEE-REPORTED RESOLUTION

The Committee-reported fiscal year 2018 budget resolution calls for $3,364.2 billion in revenues ($2,490.9 billion on-budget, $873.3 billion off-budget). Over 10 years, revenues total $41,381.0 billion ($31,171.5 billion on-budget, $10,209.5 billion off-budget), a divergence of $1,635.4 billion (on-budget) below baseline levels.

FOCUS ON REFORM

The budget resolution assumes the tax-writing committees will adopt a pro-growth tax reform proposal.

American taxpayers need a simpler, fairer, and more transparent tax system. Comprehensive tax reform should broaden the base while lowering marginal rates, streamline U.S. tax laws, and limit the Government’s distortion of market-based decisions. A tax over-haul would increase private investment, business expansion, U.S. economic output, and job creation. Furthermore, accelerated economic growth would raise taxable income and profits, thereby increasing Federal revenues through taxation.

Subject to the discretion of the authorizing committees, pro-growth tax reform should eliminate special deductions, loopholes, and credits that distort investment in the marketplace. A more efficient tax system would produce the same level of revenue with lower rates, provided tax expenditures are minimized and the economy grows by allowing for market-based decisions.

U.S. businesses need tax reform to remain competitive at home and abroad and to provide more American jobs. There should be parity for small and pass-through business, as compared to corporations. A globally competitive corporate tax rate and an international tax system that does not penalize U.S. companies are essential to promote domestic investment.

RECONCILIATION AND ENFORCEMENT

To help achieve the goals of this budget, the resolution includes reconciliation instructions and budget enforcement tools that will help bring Federal spending programs in line with the blueprint, allow for comprehensive tax reform, and generate economic growth.

RECONCILIATION

This title includes two reconciliation instructions to Senate committees. The first would allow the Finance Committee to reduce revenues and change outlays to increase the deficit by not more than $1.5 trillion over the next 10 years. The second instructs the Energy and Natural Resources Committee to save at least $1 billion over the next 10 years. This title also includes instructions to the appropriate House committees to mirror the Senate instructions.

ENFORCEMENT

Updates Advance Appropriations. — This section updates an existing point of order against appropriations legislation that would provide an advance appropriation for a discretionary account. This point of order is extended regularly in budget resolutions, and provides an exception for programs or activities identified in the manager’s joint explanatory statement, the Corporation for Public Broadcasting, and several accounts at the Department of Veterans Affairs. In addition to the accounts in the legislative text, other accounts eligible for advance appropriations include: Payment to Postal Service, Employment and Training Administration, Education for the Disadvantaged, School Improvement, Special Education, Career, Technical and Adult Education, Tenant-Based Rental Assistance, and Project-Based Rental Assistance.

Extends and Restates CHIMPS Points of Order. — This resolution includes two points of order against changes in mandatory programs (CHIMPS). The first point of order is an extension of a currently enforced point of order. The provision prohibits consideration of any measure that provides full-year appropriations that includes CHIMPS above a certain limit. This resolution restates the existing limits for 2018 and 2019, and extends the 2019 level through 2020. Additionally, this resolution closes an enforcement loophole on CHIMPS with net costs.

Reinstates a Limit on the Crime Victims Fund CHIMP. — This resolution protects the Crime Victims Fund by reinstating a 60-vote point of order against any provision that would cause the total budget authority of the Crime Victims Fund in fiscal year 2018 to be more than $11.2 billion.

Overseas Contingency Operations Designation. — This resolution establishes a 60-vote point of order against provisions that designate spending as funding for overseas contingency operations. Similar in operation to emergency designation points of order, this point of order would allow solely the designation to be struck.

Protects the Integrity of the Reconciliation Process. — If the Chairman of the Budget Committee, in his role as scorekeeper, cannot determine the budgetary effects of an amendment to a reconciliation bill, then the resolution establishes a 60-vote point of order against the amendment. In order to use this point of order, the Chairman will need to file a statement in the Congressional Record after consultation with the Ranking Member.

Creates a New One-Year Senate PAYGO Test. — Currently, Senate PAYGO is enforced on a 6- and 11-year test. This section repeals the previously enforced Senate PAYGO rule, and instead restates the 6- and 11-year tests with new current year and budget year tests. Consistent with past practice, the Senate PAYGO scorecard will be reset to zero following a final agreement on the fiscal year 2018 budget resolution.

Reactivates Dynamic Scoring Authority. — This resolution directs the Congressional Budget Office and the Joint Committee on Taxation to incorporate the budgetary effects of macroeconomic variables when each produces estimates of major legislation. These estimates will be used for informational purposes only. These more accurate assessments will help guide the Senate in its work both as a legislative body and financial steward of the United States.

Adjustment Authority for Discretionary Cap Deal. — If a measure becomes law that amends the discretionary limits established under the Balanced Budget and Emergency Deficit Control Act of 1985, then the Chairman of the Budget Committee has the ability to adjust committee allocations.

Allows for Adjustments for Wildfire Suppression Funding. — This resolution allows for adjustments to committee allocations to account for any legislation that would provide for wildfire suppression.

Improves Oversight of Spending. — This resolution allows the Chairman of the Budget Committee to adjust direct spending levels in the resolution following enactment of legislation that would change a program from a mandatory to a discretionary account. This adjustment will ensure savings generated on the mandatory side of the ledger are not used to then offset new spending.

Lifts Previous Constraints on Senate Consideration of Certain Legislation. — The fiscal year 2016 budget resolution established two points of order that constrained the Senate’s ability to consider certain types of legislation. In operation, these points of order were unnecessarily restrictive to the deliberative nature of the institution. As such, this resolution repeals them.

Provides a Technical Correction Relating to Emergency Provisions. — This section repeals the previously enforced emergency designation process, and restates it with a technical correction.

Provides for Enforcement Filing in the Senate. — Under this resolution, the Chairman of the Budget Committee has the ability to file committee allocations if this resolution passes both the House and Senate, in identical form, and a conference committee is not convened, and a joint explanatory statement is not produced. This is important for committee allocation budget enforcement procedures contained in the Congressional Budget Act of 1974.

Encourages Oversight of Government Performance. — This resolution directs Senate committees to identify waste, fraud, abuse, and duplication in Federal programs. The resolution also leads the committees to review recommendations offered by the Government Accountability Office, so Congress can better exercise its important oversight function. Committees are asked to provide their ideas for reform in their annual Views and Estimates report.

Establishes the Budgetary Treatment of Discretionary Administrative Expenses. — This resolution requires that the committee allocations found in the joint explanatory statement accompanying the conference report on the budget resolution include amounts for the discretionary administrative expenses of the Social Security Administration and the United States Postal Service. These amounts are crucial because these expenses are subject to the discretionary spending caps.

Allows for Changes in Allocations and Aggregates. — This section provides three necessary provisions relating to the timing and mechanics of budget enforcement. First, if any adjustments are made pursuant to a reserve fund or other directive, the adjustments will apply while a measure is under consideration, take effect once the measure is enacted, and be published in the Congressional Record. Second, any revisions to allocations and aggregates will be considered as if they were contained in this budget resolution. Third, Budget Committee estimates will serve as the basis for determining new levels of budget authority, outlays, direct spending, new entitlement authority, revenues, deficits, and surpluses.

Allows for Changes in Concepts and Definitions. — If Congress were to enact a bill or joint resolution that changes a concept or definition, then the resolution provides the Chairman of the Budget Committee the authority to change levels and allocations in the resolution, accordingly.

Allows for Adjustments to Reflect Legislation Not Included in the Baseline. — This section allows the Chairman of the Budget Committee to make adjustments to levels and allocations in the resolution to accommodate legislation enacted before bicameral agreement of this resolution, if the legislation was not yet incorporated into the June 2017 Congressional Budget Office’s baseline. CBO’s June 2017 baseline is the basis for enforcement of this resolution. Exercises in Rulemaking Power. — This section provides that the Senate has the constitutional authority to adopt the rules of this resolution, and the adopted rules shall be treated as Senate rules. Further, these rules supersede any prior, inconsistent rules.

ECONOMICS

Table 1 shows the assumed levels and rates of change for key economic variables that constitute the economic assumptions of the Senate Budget Committee-reported fiscal year 2018 budget resolution. The Budget Committee adopted the Congressional Budget Office’s (CBO) economic forecasts and projections as published in its June 2017 An Update to the Budget and Economic Outlook report in order to maintain consistency with its baseline selection. The CBO assumptions are based on current law, with regulations and major policies remaining as in statute over the budget period, and do not include the impact of proposed policy changes in the resolution.

COMPARISON WITH OTHER FORECASTERS

Table 2 shows how CBO’s assumptions compare with economic forecasts made by private sector economists (as reported by Blue Chip Economic Indicators) and with the White House Office of Management and Budget, or OMB (as reported in the Analytical Perspectives, Budget of the U.S. Government, Fiscal Year 2018). Table 2 differs slightly from Table 1 in that it contains calendar year forecasts, while Table 1 shows fiscal year forecasts. It was necessary to move to calendar year annual rates of change for Table 2 due to Blue Chip’s convention of only publishing calendar year forecasts. The publication dates of the various forecasts also differ. While the forecasts put out by OMB and the Blue Chip were finalized around March 2017, the CBO forecast was updated with its June 2017 publication.

STATE OF THE ECONOMY

Real, inflation-adjusted, growth in gross domestic product (GDP) has averaged 2.1 percent (fourth-quarter-on-fourth-quarter) since 2010. This is in contrast to historical annual growth rates, which have averaged 2.9 percent over the past 50 years and 3.2 percent in the postwar era. Under the policies in current law, the Congressional Budget Office (CBO) projects U.S. economic growth will decline to a long-term trend of 1.9 percent annually.

Following the November 2016 U.S. presidential election, market confidence has experienced sustained growth. All three major stock indexes (Dow Jones, S&P 500, and Nasdaq) hit record highs. Consumer spending, which accounts for more than two-thirds of economic activity, matched market confidence with consistent growth month-to-month.

Economic growth was boosted in the second quarter of 2017, with the Commerce Department showing an annual rate of 3.1 percent GDP growth, as compared to the first quarter of 2017 with only 1.2 percent growth. This increase reflects rising personal consumption expenditure (PCE), nonresidential fixed investment, exports, Federal Government spending, and private inventory investment.

Growth in consumer spending, business investment, and residential construction are expected to continue boosting the economy in short-term predictions. But weak productivity growth and demographic shifts in the labor market are expected to create a drag on the supply side in the long term.

The August 2017 Bureau of Labor Statistics report shows unemployment remains at 4.4 percent, with 1.7 million long-term workers unemployed and 1.5 million marginally attached. Frictional unemployment is a growing concern, as job openings persist or increase. The current labor-participation rate of 62.9 percent has changed only slightly over the last year, remaining at a persistently low level.

Total real private investment has rebounded past pre-2008 levels. Business investment is bolstered by confidence in the economic outlook and higher consumer spending. Nonresidential fixed investment has risen in 2017, and the rebuilding following Hurricanes Harvey and Irma may raise residential investment in the latter half of the year. The appreciation of home values since the crash incentivizes further investment, with housing permits and construction completions increasing.

Real Government consumption and expenditures may increase in the latter half of 2017 in response to hurricane recovery efforts. Real imports and exports continue to rise, and predicted faster global growth could improve U.S. performance. The value of the U.S. dollar has appreciated over the last few years, making imported goods cheaper for consumers.

Oil and gas prices have stabilized somewhat after a period of variability caused by supply controls abroad. U.S. production of oil has trended toward levels last seen in 2015. Hydraulic fracturing and new technologies that increase U.S. oil and natural gas production have also moderated price fluctuation in the global market.

The Federal Reserve continues to normalize monetary policy. The Federal funds rate has risen to 1.25 percent, as officials monitor inflation. Core PCE inflation remains below the target rate of 2 percent. Net interest rates remain below average, but the yield on the 10-year Treasury note increased in 2017.

POST-POLICY ECONOMIC GROWTH

As mentioned above, CBO’s economic assumptions do not include the dynamic effects of the proposed policy changes in the budget resolution. Instead, they are based on current law, which reflects how the economy is expected to perform if Congress fails to extend expiring tax provisions, reduce the regulatory burden, or slow the growth of Federal spending. As such, the continued anemic growth since the last recession can be attributed in part to a failure to pursue more robust, pro-growth policies.

While the numbers presented in the text of the budget resolution rely on CBO’s assumptions, the Budget Committee expects that enactment of pro-growth policies could generate sufficient economic growth to offset the static cost of the $1.5 trillion in higher deficits allowed under the reconciliation instruction. Assuming average economic growth of 2.6 percent over the next decade, rather than CBO’s 1.8 percent, would reduce the annual deficits assumed in the budget resolution, resulting in an on-budget surplus by the end of the 10-year budget window.

America has seen a dramatic decline in the rate of economic growth since the last recession. The chart below shows the 10-year period ending in 2016 had the lowest average annual growth rate of any 10-year period since the end of World War II. The ability to achieve a higher rate of growth depends on Congress enacting the right policies. Those policies are supported by this budget and include a combination of tax reform, regulatory reform, budget reform, and fiscal discipline.

Encouraging Americans to work, save, and invest by reducing regulatory barriers and improving economic incentives will boost economic growth and create additional jobs, wages, and profits. These dynamic effects, along with the elimination of excessive tax loopholes, will help offset the projected static cost of tax reform assumed in the reconciliation instruction.

RESERVE FUNDS

The Senate Budget Committee does not have the authority to make policy recommendations in a budget resolution — that is the role of the authorizing committees. Committees often make their policy priorities known in their Views and Estimates letters, and reserve funds are a way to accommodate those requests.

Reserve funds allow the Chairman of the Budget Committee to revise the committee allocations, budgetary aggregates, and other appropriate levels in the budget resolution to accommodate legislation described in the reserve fund — as long as the budgetary effects of that legislation satisfy the requirements enumerated. The Senate budget resolution includes deficit-neutral reserve funds for legislation that would:

• Allow Congress to address Obamacare with legislation to repeal or replace the program.

• Reform the American tax system — includes a revenue-neutrality requirement.

• Extend the State Children’s Health Insurance Program.

• Strengthen American families — including making it easier to save for retirement; addressing the opioid epidemic; assisting victims of domestic abuse; supporting foster care, child care, marriage, and fatherhood programs; extending expiring health care provisions; and improving housing opportunities.

• Promote innovative educational and nutritional models and systems for American students — including amending the Higher Education Act, ensuring State flexibility in education, enhancing job training, and reforming child nutrition programs.

• Improve the American banking system.

• Promote American agriculture, energy, transportation, and infrastructure improvements.

• Restore American military power — including improving military readiness and strengthening cybersecurity efforts.

• Improve benefit and services delivery for veterans and service members.

• Relate to public lands and the environment — including wildfire prevention and firefighting.

• Secure the American border.

• Promote economic growth and the private sector, and enhance job creation.

• Reform statutory budget controls — including the Budget Control Act’s discretionary caps.

• Prevent bailouts of private pension plans.

• Implement work requirements in means-tested Federal welfare programs.

• Protect Medicare.

• Make child and dependent care more affordable.

• Provide support for worker training programs.

The budget resolution includes a reserve fund for legislation that would provide disaster funds for relief and recovery efforts to areas devastated by hurricanes and flooding in 2017.

The resolution includes a reserve fund that allows the Chairman to make the adjustments necessary to accommodate legislation considered as a result of the reconciliation instructions.

SUMMARY TABLES

Table 1. Total Spending and Revenues

Table 2. Spending by Function, Discretionary, Mandatory

Table 3. Components of Deficit Reduction

Table 4. Discretionary Topline

Table 5. Allocation of Spending Authority to Senate Committee on Appropriations for Fiscal Year 2018

Table 6. Allocation of Spending Authority to Senate Committees Other Than Appropriations

 

 

COMMITTEE VOTES

On September 29, 2017, the "Chairman’s Mark" for the fiscal year 2018 budget resolution was provided to Budget Committee Member offices.

On October 4, 2017, the Committee met to commence the markup of the resolution and hear opening statements from Members. On October 5, 2017, the following votes were taken during the Committee markup of the fiscal year 2018 budget resolution:

1. An amendment offered by Senator Sanders to create a point of order against legislation that would provide a tax cut for the top 1 percent wealthiest individuals.

The amendment was ruled out of order by the Chair. The ruling was appealed. A motion to table the appeal of the ruling of the Chair was agreed to by a roll call of 12 ayes and 11 noes.

2. An amendment offered by Senator Kennedy to establish a deficit-neutral reserve fund relating to implementing work requirements in all means-tested Federal welfare programs.

The amendment was agreed to by a voice vote.

3. An amendment offered by Senator King to establish a deficit-neutral reserve fund relating to determining the impact of work requirements on the economic security and health coverage of recipients of Federal means-tested programs.

The amendment was not agreed to by a voice vote.

4. An amendment offered by Senator Sanders to create a point of order against legislation that would cut Social Security, Medicare, or Medicaid benefits.

The amendment was ruled out of order by the Chair. The ruling was appealed. A motion to table the appeal of the ruling of the Chair was agreed to by a roll call of 12 ayes and 11 noes.

5. An amendment offered by Senator Wyden to strike the reconciliation instructions.

The amendment was not agreed to by a roll call of 11 ayes and 12 noes.

6. An amendment offered by Senators Harris, Sanders, Murray, Wyden, and Stabenow to increase spending in the Medicare Function (570) by $473 billion.

The amendment was not agreed to by a roll call of 11 ayes and 12 noes.

7. An amendment offered by Senator Gardner to establish a deficit-neutral reserve fund to protect Medicare and repeal the Independent Payment Advisory Board.

The amendment was agreed to by a voice vote.

8. An amendment offered by Senators Stabenow, Sanders, and Van Hollen to increase spending in the Health Function (550).

The amendment was not agreed to by a roll call of 11 ayes and 12 noes.

9. An amendment offered by Senators Harris and Van Hollen to create a point of order against legislation that would increase taxes on taxpayers whose annual income is below $250,000.

The amendment was ruled out of order by the Chair. The ruling was appealed. A motion to table the appeal of the ruling of the Chair was agreed to by a roll call of 12 ayes and 11 noes.

10. An amendment offered by Senator Kennedy to ensure tax reform protects middle-income taxpayers

The amendment was agreed to by a voice vote.

11. An amendment offered by Senators King, Sanders, Whitehouse, Warner, and Kaine to create a point of order against budget reconciliation legislation that would increase the deficit or reduce a surplus.

The amendment was not agreed to by a roll call of 11 ayes and 12 noes.

12. An amendment offered by Senator Stabenow to create a budget point of order against any legislation that would give a tax cut to companies that offshore American jobs.

The amendment was ruled out of order by the Chair. The ruling was appealed. A motion to table the appeal of the ruling of the Chair was agreed to by a roll call of 12 ayes and 11 noes.

13. An amendment offered by Senators Kaine, Murray, Wyden, Warner, King, and Harris to reinstate and expand the requirement that a Congressional Budget Office (CBO) score be publicly available for 28 hours prior to a vote on certain legislation.

The amendment was not agreed to by a roll call of 11 ayes and 12 noes.

14. An amendment offered by Senator Warner for the use of CBO baseline to determine budgetary effects.

The amendment was not agreed to by a roll call of 11 ayes and 12 noes.

15. An amendment offered by Senator Warner to strike pay as you go (PAYGO) and short-term deficits exceptions.

The amendment was not agreed to by a roll call of 11 ayes and 12 noes.

16. An amendment offered by Senator Van Hollen to create a point of order against legislation that would repeal the estate tax. The amendment was ruled out of order by the Chair. The ruling was appealed. A motion to table the appeal of the ruling of the

Chair was agreed to by a roll call of 12 ayes and 11 noes.

17. An amendment offered by Senator Kaine to make the deficit-neutral reserve fund for tax reform revenue-neutral.

The amendment was agreed to by a roll call of 12 ayes and 11 noes.

18. An amendment offered by Senators Merkley and Sanders to create jobs by investing to rebuild our infrastructure paid for by closing tax loopholes.

The amendment was not agreed to by a roll call of 11 ayes and 12 noes.

19. An amendment offered by Senator Merkley to create a point of order against legislation that would allow for a net reduction of taxes paid by persons with income of more than a million dollars.

The amendment was ruled out of order by the Chair. The ruling was appealed. A motion to table the appeal of the ruling of the Chair was agreed to by a roll call of 12 ayes and 11 noes.

20. An amendment offered by Senator Stabenow to create a point of order against legislation that would turn Medicare into a voucher program.

The amendment was ruled out of order by the Chair. The ruling was appealed. A motion to table the appeal of the ruling of the Chair was agreed to by a roll call of 12 ayes and 11 noes.

21. An amendment offered by Senator Wyden to strike the deficit-neutral reserve fund for repeal of the Affordable Care Act.

The amendment was not agreed to by a roll call of 11 ayes and 12 noes.

22. An amendment offered by Senator Sanders to create a deficit-neutral reserve fund for campaign finance reform.

The amendment was ruled out of order by the Chair. The ruling was appealed. The amendment was not agreed to by a roll call of 11 ayes and 12 noes.

23. An amendment offered by Senators Kaine, Murray, Warner, and King to provide relief from sequestration and to provide adjustment authority for security and non-security spending.

The amendment was not agreed to by a roll call of 11 ayes and 12 noes.

24. An amendment offered by Senator King to establish a deficit-neutral reserve fund for legislation that relates to making the cost of child and dependent care more affordable and useful for American families.

The amendment was agreed to by a voice vote.

25. An amendment offered by Senator Murray to ensure the timely and adequate provision of disaster and other assistance for relief and recovery efforts to Puerto Rico, the U.S. Virgin Islands, Texas, Florida, and other areas of the United States devastated by hurricanes and flooding in 2017.

The amendment was agreed to by a voice vote.

26. An amendment offered by Senators Van Hollen and Harris to create a point of order against legislation that would eliminate the deduction for State and local taxes.

The amendment was ruled out of order by the Chair. The ruling was appealed. A motion to table the appeal of the ruling of the Chair was agreed to by a roll call of 12 ayes and 11 noes.

27. An amendment offered by Senator King to require the Congressional Budget Office and the Joint Committee on Taxation to produce estimates of certain distributional effects across income categories resulting from major legislation.

The amendment was agreed to by a voice vote.

28. An amendment offered by Senator Kaine to establish a deficit-neutral reserve fund relating to career and technical education.

The amendment was not agreed to by a voice vote.

29. An amendment offered by Senator Harris to establish a deficit-neutral reserve fund relating to worker training programs, such as training programs that target workers that need advanced skills to progress in their current profession or apprenticeship or certificate programs that provide retraining for a new industry.

The amendment was agreed to by a voice vote.

Following the vote on the Harris amendment, Senator Enzi made a motion to report the resolution. The motion was agreed to and the resolution was reported by a roll call vote of 12 ayes and 11 noes.

[Editor's Note: For the complete Views and Estimates section and the Additional and Minority Reviews section, see Doc 2017-91896.]