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115th Congress    }                                    {       Report
                        HOUSE OF REPRESENTATIVES
 1st Session      }                                    {      115-240


                         CONCURRENT RESOLUTION

                            ON THE BUDGET--

                            FISCAL YEAR 2018


                              R E P O R T

                                 of the

                        COMMITTEE ON THE BUDGET

                        HOUSE OF REPRESENTATIVES

                              to accompany

                            H. Con. Res. 71

                        YEARS 2019 THROUGH 2027

                             together with



 July 21, 2017.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                         U.S. GOVERNMENT PUBLISHING OFFICE 

26-315                         WASHINGTON : 2017 
  For sale by the Superintendent of Documents, U.S. Government Publishing 
  Office Internet: Phone: toll free (866) 512-1800; 
         DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
                          Washington, DC 20402-0001
                        COMMITTEE ON THE BUDGET

                    DIANE BLACK, Tennessee, Chairman
TODD ROKITA, Indiana, Vice Chairman  JOHN A. YARMUTH, Kentucky,
MARIO DIAZ-BALART, Florida             Ranking Minority Member
TOM COLE, Oklahoma                   BARBARA LEE, California
TOM McCLINTOCK, California           MICHELLE LUJAN GRISHAM, New Mexico
ROB WOODALL, Georgia                 SETH MOULTON, Massachusetts
MARK SANFORD, South Carolina         HAKEEM S. JEFFRIES, New York
STEVE WOMACK, Arkansas               BRIAN HIGGINS, New York
DAVE BRAT, Virginia                  SUZAN K. DelBENE, Washington
GARY J. PALMER, Alabama              BRENDAN F. BOYLE, Pennsylvania
BRUCE WESTERMAN, Arkansas            RO KHANNA, California
JAMES B. RENACCI, Ohio               PRAMILA JAYAPAL, Washington,
BILL JOHNSON, Ohio                     Vice Ranking Minority Member
JASON SMITH, Missouri                SALUD CARBAJAL, California
JASON LEWIS, Minnesota               SHEILA JACKSON LEE, Texas
JACK BERGMAN, Michigan               JANICE D. SCHAKOWSKY, Illinois
JOHN J. FASO, New York
LLOYD SMUCKER, Pennsylvania

                           Professional Staff

                     Richard E. May, Staff Director
                  Ellen Balis, Minority Staff Director
                            C O N T E N T S

Introduction.....................................................     3
Summary Tables--Spending and Revenue:
    Table 1. Fiscal Year 2018 Budget Resolution Total Spending 
      and Revenue................................................    17
    Table 2. Fiscal Year 2018 Budget Resolution Discretionary 
      Spending...................................................    20
    Table 3. Fiscal Year 2018 Budget Resolution Mandatory 
      Spending...................................................    23
The Long-Term Budget Outlook.....................................    27
Direct Spending Trends and Reforms...............................    31
    Table 4. Historical Means-Tested and Non Means-Tested Direct 
      Spending...................................................    34
    Table 5. Projected Means-Tested and Non Means-Tested Direct 
      Spending...................................................    35
The Economy and Economic Assumptions.............................    39
    Table 6. Economic Projections: Administration, CBO, and 
      Private Forecasters........................................    45
    Table 7. Economic Assumptions of the Fiscal Year 2018 Budget 
      Resolution.................................................    46
Macroeconomic Feedback Effects of Pro-Growth Policies............    47
Functional Presentation..........................................    51
    Principal Federal Responsibilities...........................    55
        National Defense.........................................    55
        International Affairs....................................    59
        Overseas Contingency Operations/Global War on Terrorism..    63
        Veterans Benefits and Services...........................    64
        Administration of Justice................................    76
        General Government.......................................    81
        Government-Wide Policy...................................    84
    Domestic Priorities..........................................    89
        General Science, Space, and Technology...................    90
        Energy...................................................    92
        Natural Resources and Environment........................    98
        Agriculture..............................................   102
        Commerce and Housing Credit..............................   103
        Transportation...........................................   107
        Community and Regional Development.......................   117
        Education, Training, Employment, and Social Services.....   119
        Health...................................................   126
        Income Security..........................................   131
        Other Discretionary Spending.............................   133
    Direct Spending..............................................   135
        Social Security..........................................   135
        Medicare.................................................   141
        Medicaid, the American Health Care Act, and Related 
          Programs...............................................   153
        Income Support, Nutrition, and Related Programs..........   168
        Farm Support and Related Programs........................   180
        Banking, Commerce, Postal Service, and Related Programs..   181
        Student Loans, Social Services, and Related Programs.....   187
        Federal Lands and Other Resources........................   194
        Other Direct Spending....................................   196
    Financial Management.........................................   199
        Net Interest.............................................   199
        Allowances...............................................   200
        Undistributed Offsetting Receipts........................   200
Revenue and Tax Reform...........................................   203
    Table 8. Tax Expenditure Estimates by Budget Function, Fiscal 
      Years 2016-2020............................................   207
Addressing Improper Payments.....................................   217
Unauthorized Spending Programs...................................   221
    Table 9. Summary of Authorizations of Appropriations Expiring 
      on or Before 30 September 2017, by Appropriations 
      Subcommittee...............................................   222
    Table 10. Summary of Authorizations of Appropriations 
      Expiring on or Before 30 September 2017, by House 
      Authorizing Committee......................................   222
`High-Risk' Federal Programs and Activities......................   225
Government Waste, Fraud, and Abuse...............................   231
Budget Process Reform............................................   239
    Reclaiming Constitutional Authority Through the `Power of the 
      Purse'.....................................................   241
    The Importance of Fiscal Goals...............................   253
    The Need to Control Direct Spending..........................   265
    Making Budget Enforcement More Effective.....................   277
    Alternative Approaches to the Federal Budget.................   287
    Proposals for a Rewrite of the Congressional Budget Process..   303
Regulatory Budgeting.............................................   309
The President's Budget: A Brief Summary..........................   313
    Table 11. Summary of Fiscal Year 2018 Budget Resolution......   316
    Table 12. Fiscal Year 2018 House Budget Resolution vs. the 
      President's Budget.........................................   316
Section-by-Section Description...................................   319
The Congressional Budget Process.................................   337
    Table 13. Allocation of Spending Authority to House Committee 
      on Appropriations..........................................   339
    Table 14. Resolution by Authorizing Committee (On-budget 
      Amounts)...................................................   339
Reconciliation...................................................   343
Enforcing Budgetary Levels.......................................   347
Statutory Controls Over the Budget...............................   351
Accounts Identified for Advance Appropriations...................   357
Votes of the Committee...........................................   359
Other Matters Under the Rules of the House.......................   393
Minority Views...................................................   395
Additional Views.................................................   399
Supplemental Material............................................   401
Concurrent Resolution on the Budget--Fiscal Year 2018 
  (legislative text).............................................   409
                              T A B L E S

Summary Tables--Spending and Revenue:
    Table 1. Fiscal Year 2018 Budget Resolution Total Spending 
      and Revenue................................................    17
    Table 2. Fiscal Year 2018 Budget Resolution Discretionary 
      Spending...................................................    20
    Table 3. Fiscal Year 2018 Budget Resolution Mandatory 
      Spending...................................................    23
Direct Spending Trends and Reforms:
    Table 4. Historical Means-Tested and Non Means-Tested Direct 
      Spending...................................................    34
    Table 5. Projected Means-Tested and Non Means-Tested Direct 
      Spending...................................................    35
The Economy and Economic Assumptions:
    Table 6. Economic Projections: Administration, CBO, and 
      Private Forecasters........................................    45
    Table 7. Economic Assumptions of the Fiscal Year 2018 Budget 
      Resolution.................................................    46
Revenue and Tax Reform:
    Table 8. Tax Expenditure Estimates by Budget Function, Fiscal 
      Years 2016-2020............................................   207
Unauthorized Spending Programs:
    Table 9. Summary of Authorizations of Appropriations Expiring 
      on or Before 30 September 2017, by Appropriations 
      Submmittee.................................................   222
    Table 10. Summary of Authorizations of Appropriations 
      Expiring on or Before 30 September 2017, by House 
      Authorizing Committee......................................   222
The President's Budget: A Brief Summary:
    Table 11. Summary of Fiscal Year 2018 Budget Resolution......   316
    Table 12. Fiscal Year 2018 House Budget Resolution vs. the 
      President's Budget.........................................   316
The Congressional Budget Process:
    Table 13. Allocation of Spending Authority to House Committee 
      on Appropriations..........................................   339
    Table 14. Resolution by Authorizing Committee (On-budget 
      Amounts)...................................................   339

115th Congress    }                                    {       Report
                        HOUSE OF REPRESENTATIVES
 1st Session      }                                    {      115-240


                            FISCAL YEAR 2018


                        YEARS 2019 THROUGH 2027


 July 21, 2017.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed


 Mrs. Black, from the Committee on the Budget, submitted the following

                              R E P O R T

                             together with


                     [To accompany H. Con. Res. 71]



    Anyone paying attention these days, anyone willing to face 
reality, knows the Federal Government's fiscal health is 
reaching critical condition. Spending is rising at plainly 
unsustainable rates. Deficits are about to begin swelling 
again, exceeding $1 trillion annually within the next 10 years. 
The government's publicly held debt, already at historically 
high levels, is on course to exceed the size of the entire 
economy in slightly more than a decade. The trust funds of the 
two major social insurance programs--Social Security and 
Medicare--are approaching depletion, which will force deep and 
automatic cuts in benefits, as required by law. Meanwhile, last 
year Washington paid out nearly $150 billion in benefits to the 
wrong people, in the wrong amounts, or for the wrong reasons--
and that is very likely an underestimate.
    The term ``unsustainable'' is used so often to describe the 
government's fiscal path that it has almost lost its impact. 
What it means is this: The increases in spending, deficits, and 
debt cannot continue--and will not. Perhaps major programs will 
collapse under their own weight. Perhaps investors in Treasury 
bonds will begin demanding higher returns, further increasing 
the cost of debt service. Alternatively, investors may begin 
losing confidence in Washington's ability to correct its fiscal 
course and take their money elsewhere, leaving the Federal 
Government unable to finance its programs--an effect that could 
cascade unexpectedly. Or perhaps the debt will so burden the 
economy that growth stagnates altogether. In short, if 
policymakers do not start making changes, and soon, the changes 
will be imposed on the entire country--and they will be 
    Some will doggedly oppose reform, branding it ``mindless 
austerity.'' The government's deficit troubles can be fixed, 
they will say, simply by raising taxes on the wealthy or 
controlling health care costs with more government-imposed 
regulation and price-fixing. They will claim to be protecting 
government programs intended to serve the elderly or 
vulnerable. Instead, they will only ensure the demise of those 
very programs as they become unaffordable not only for the 
government, but for the economy itself.
    All that said, it is neither naive nor fanciful to see in 
these challenges a once-in-a-generation opportunity--an 
opportunity not only to correct the disastrous course of fiscal 
policy, but to transform government itself. Anti-poverty 
programs can cease trapping beneficiaries in dependency and 
instead boost them toward self-sufficiency. Health care can be 
freed from Washington's dictates to provide more choices and 
better care at lowers costs. The Byzantine Federal tax code can 
be revised and simplified to encourage work, saving, and 
investment. Burdensome regulations can be discarded and bloated 
bureaucracies trimmed. These changes should happen anyway, but 
if the pressure of budgetary constraints drives them, so be it. 
Indeed, budget and policy reforms go hand in hand. The right 
kinds of reforms can significantly reduce costs, easing 
government's constant pressure on taxpayers and helping 
Congress toward the most sound and reliable of fiscal goals: a 
balanced budget.
    Meeting the government's fiscal challenges will be a 
daunting task, requiring conviction and resolve. Governing is 
hard. Then again, Members of Congress are elected not to do 
what is easy, but to do what is right. This budget resolution 
starts the process. It retains longstanding beliefs about 
budgeting and governing. It reverses the drift toward excessive 
spending and larger government; it reinforces the innovation 
and creativity stirring in the myriad institutions and 
communities across the country; and it revitalizes the 
prosperity that creates ever-expanding opportunities for all 
Americans to pursue their destinies. Like any good budget 
resolution, this one expresses a vision of governing, and of 
America itself. As described further in this report, this 
fiscal blueprint follows these guidelines:

     LBalancing the Budget. The resolution draws a path 
toward a balanced budget within 10 years, without raising 
taxes, and places the government on a fiscal course sustainable 
for the long term. The national debt is already an impediment 
to greater prosperity and a threat to the security of future 
generations. This committee's budget significantly reduces 
spending and reforms programs to put the government on a 
sustainable spending path.

     LPromoting Economic Growth. For the past eight 
years, government has been a hindrance to economic growth. This 
budget urges reversing this trend with a combination of pro-
growth policies, including deficit reduction, spending 
restraint, comprehensive tax reform, welfare reform, Obamacare 
repeal-and-replace legislation, and regulatory reform. All can 
promote more robust growth over the longer term.

     LEnsuring a Strong National Defense. Defending 
America's security is the highest priority of the Federal 
Government. To that end, this budget supports robust funding of 
troop training, equipment, compensation, and improved 

     LImproving the Sustainability of Medicare. 
Notwithstanding Medicare's popularity, there are far better 
ways to achieve the program's worthy goals. Retirees should be 
able to choose the coverage plan best suited to their 
particular needs, rather than accept a set of benefits dictated 
by Washington. The program should ensure doctors and patients 
make health care decisions for themselves, and promote 
competition among insurers to expand choices of coverage and 
restrain costs. Reforms such as these will have the added 
benefit of improving Medicare's long-term financial condition, 
ensuring it will be there for future generations.

     LRestoring the Proper Role of State and Local 
Governments. The resolution encourages the innovation and 
creativity outside Washington. Under this budget, States and 
localities would reclaim their rightful authority to tailor 
programs in areas such as education, transportation, welfare, 
and environmental stewardship. They possess not only the 
ability but also the will to reform and modernize programs that 
serve their citizens. The laboratories of democracy, not the 
Federal Government, are where these reforms should happen.

     LReforming Government Programs While Improving 
Accountability. Every tax dollar collected by the Federal 
Government was generated by private-sector economic activity. 
Responsible stewardship of taxpayer dollars is a fundamental 
component of the budget resolution. At every opportunity 
possible, the budget reforms government programs and improves 
accountability to while generating better outcomes for 

    This resolution is more, however, than a symbolic, 
philosophical statement. It is an instrument for governing. The 
majorities in Congress are in a position to make their policy 
goals a reality. The budget assumes Congress will support its 
limits on spending growth by enforcing its allocations to 
authorizing and appropriations committees. The resolution also 
employs budget reconciliation to drive policy reforms and 
achieve specified fiscal outcomes. By adhering to the 
guidelines of the resolution, Congress can enact, not just 
envision, a range of major policy reforms. Lawmakers could, for 
example, begin the establishment of truly patient-centered 
health care to replace Obamacare; reform the tax code; lighten 
the yoke of the regulatory state; transform public assistance 
programs so they promote self-sufficiency rather than expanding 
dependency. The budget calls for action to reduce the 
government's billions of dollars in improper payments, and to 
slice away vast sums of unnecessary, obsolete, duplicative, and 
nonsensical grants and spending programs. The budget aims to 
make these policies real, and provides the means of doing so.
    The policy changes to meet the budget's parameters will be 
determined by the respective committees of jurisdiction. They 
retain maximum flexibility in determining those specific 
policies. The discussions in this report, while developed in 
consultation with the authorizing and appropriations 
committees, reflect purely illustrative options committees may 
want to consider. Nothing in the report, or in the budget 
resolution's reconciliation instructions, predetermines, 
promotes, or assumes any specific policy change to be made. 
Nevertheless, they may wish to consider these discussions I 
constructing their proposals.
    The guiding principles of the resolution follow in this 

                          Balancing the Budget

    Since Republicans reclaimed the House Majority in 2011, 
every House budget resolution has drawn a path to balance. As 
Congress now turns to the fiscal year 2018 budget, the fiscal 
outlook suffers from a weak economy, mounting pressure on 
spending, and deeper projected deficits. Hence the task of 
balancing the budget has become more difficult.

    A Lackluster Economic Outlook. An expanding economy, which 
boosts Federal revenue without tax increases, is essential for 
deficit reduction. Just five years ago, the Congressional 
Budget Office [CBO] projected real (inflation-adjusted) 
economic growth would average 3 percent per year--roughly equal 
to the historical trend rate. Every year since then, however, 
CBO has ratcheted down its forecast, and now projects a 
sluggish 1.9-percent average annual growth rate for the next 10 
years--partly due to the Obama Administration's health care 
plan, high spending, and heavy regulation. (See further 
discussion in the section of this report titled ``The Economy 
and Economic Assumptions.'')

    Larger Projected Deficits. As recently as February 2013, 
CBO projected deficits would total roughly $7.0 trillion for 
the 10-year period of 2014 through 2023. In CBO's January 2017 
budget outlook, the 10-year deficit projections had surged by 
nearly $2.5 trillion, totaling $9.4 trillion for 2018 through 
2027.\1\ (See Figure 1.)
    \1\In CBO's updated budget outlook, published in June, the deficit 
figure had worsened further, to $10.1 trillion over the next 10 years. 
This budget, however, was constructed from CBO's January baseline, so 
the discussion here employs those figures.

    Relentless Mandatory Spending Pressure. In addition to the 
sluggish economy, the principal drivers of these growing 
deficits are the government's health, retirement, and income 
security programs. By 2029, these programs, plus net interest, 
are expected to consume all Federal tax revenue, meaning the 
rest of the government's activities--defense, infrastructure, 
research, and myriad others--will have to be financed on 
borrowed money.

    Greater Savings Needed. The fiscal year 2016 budget 
resolution conference report (S. Con. Res. 11) reached balance 
by proposing $5 trillion in savings, coupled with improved 
economic growth due to deficit reduction and tax reform. Now, 
just two years later, this fiscal year 2018 budget requires 
$6.5 trillion in net deficit reduction over 10 years to reach 
    In short, balancing the budget will require improved 
economic growth, bold program reforms, and a sustained 
commitment to fiscal discipline. That is a major task facing 
the 115th Congress.
    This formula proved effective in the 1990s. Over the course 
of that decade, Congress actually reduced annually appropriated 
``discretionary'' spending after adjusting for inflation. In 
1997, following two years of confrontation, President Clinton 
finally joined the Republican Congress in striving to surpass 
the timid and unsuccessful pursuit of mere deficit reduction 
and commit to eliminating deficits--and to do so entirely 
through spending restraint. The Balanced Budget Act of 1997 was 
paired with tax cuts then estimated at $95.3 billion over five 
years and $275.4 billion over 10 years.\2\ Perhaps not 
surprisingly, economic growth surged: Growth in real gross 
domestic product [GDP] exceeded 4 percent annually in the 
latter part of the decade. With this combination, the plan to 
reach balance in five years actually produced surpluses in one 
year--surpluses that remained until the terrorist attacks of 11 
September 2001.
    \2\See the Conference Report on the ``Taxpayer Relief Act of 1997'' 
(H.R. 2014), p. 807.
    Balancing the budget is not, however, merely a matter of 
making numbers add up. It is an ethical commitment. As Nobel 
Laureate James M. Buchanan wrote:

          Politicians prior to World War II would have 
        considered it to be immoral (to be a sin) to spend more 
        than they were willing to generate in tax revenues, 
        except during periods of extreme and temporary 
        emergency. To spend borrowed sums on ordinary items for 
        public consumption was, quite simply, beyond the pale 
        of acceptable political behavior. There were basic 
        moral constraints in place; there was no need for an 
        explicit fiscal rule in the written constitution.\3\
    \3\James M. Buchanan, ``Clarifying Confusion About the Balanced 
Budget Amendment,'' National Tax Journal, Vol. 48, No. 3, September 
1995, page 347.

    When the typical family borrows, for a home or a new car or 
college, they themselves assume the responsibility for their 
own debt. When the government borrows chronically--as it has 
been doing--it imposes the costs on future generations who have 
no say in the matter and will receive no benefits from it. In 
fact, they will be worse off due to the higher taxes and weaker 
economic growth that result. What does that say about the 
character of a government that encourages and perpetuates such 
a practice?
    While some ``experts'' dismiss the balanced budget standard 
as a kind of quaint anachronism, nothing has come to replace it 
as a consensus norm for budgeting. As a result, fiscal policy 
has been adrift, and increasingly unsustainable. Some have 
tried to substitute intellectually sophisticated concepts, such 
trying limiting deficits or debt as a share of the economy--yet 
there is no agreement on what the acceptable maximum levels 
might be. Others have suggested allowing ``counter-cyclical'' 
policies in the near term while striving for ``long-term fiscal 
sustainability''--with no sound definition of what the latter 
means. This formula, of course, merely rationalizes spending 
now while putting off restraint until later--so the restraint 
never happens.
    Today, in the absence of the balanced budget principle, the 
only fiscal guideline is the modern, relativistic pay-as-you-go 
concept, which merely ratifies existing deficits as the measure 
of budgetary rectitude--no matter how large those deficits 
might be. Thus, proponents of the Affordable Care Act could 
boast the health care program was fiscally ``responsible'' 
because it did not increase deficits--which in 2010, the year 
of its enactment, already exceeded a trillion dollars a year--
while it recklessly added trillions more to government 
    The durability of the balanced budget principle is 
demonstrated even by the non-partisan Congressional Budget 
Office itself. Every time the CBO publishes its regular updates 
of budget and economic conditions, the first item it reports is 
the magnitude of the deficit or surplus--that is, the 
relationship between total outlays and total tax revenue. It is 
the very same measure that underlies the balanced budget 
standard: a simple comparison of current income and outgo.\4\ 
CBO's clear implication is that the more spending exceeds 
revenue, and the more rapidly the two diverge, the more 
unstable is the government's fiscal condition. There is simply 
no more straightforward measure of the government's fiscal 
health and stability.
    \4\For example, the first three sentences of the summary in the 
recent The Budget and Economic Outlook: 2017 to 2027 (p. 1) read as 
follows: ``In fiscal year 2016, for the first time since 2009, the 
federal budget deficit increased in relation to the nation's economic 
output. The Congressional Budget Office projects that over the next 
decade, if current laws remained generally unchanged, budget deficits 
would eventually follow an upward trajectory--the result of strong 
growth in spending for retirement and health care programs targeted to 
older people and rising interest payments on the government's debt, 
accompanied by only modest growth in revenue collections.''

        FIGURE 1

        FIGURE 2

    If current policies remain unchanged, deficits are about to 
begin surging, nearly tripling over the next decade. CBO's 
January estimates project deficits swelling from $487 billion 
in fiscal year 2018 to $1.4 trillion in 2027. As a share of 
economic output, deficits will grow steadily as well, reaching 
5 percent of gross domestic product [GDP] in fiscal year 
2027.\5\ Debt held by the public will climb to $24.9 trillion 
at the end of 10 years, or 88.9 percent of GDP--its highest 
level since 1947 (see Figure 2). Gross Federal debt, which 
includes funds owed to the Social Security Trust Fund and other 
Federal accounts, is projected to rise from $20.4 trillion at 
the end of 2017 to $30.0 trillion in 2027.\6\
    \5\Congressional Budget Office, The Budget and Economic Outlook: 
2017 to 2027, January 2017, Table 1-1, p. 10.
    \6\Ibid., Table 1-4. p. 29.
    Make no mistake; this pattern is due to excessive spending, 
not insufficient tax revenue. CBO's January figures show 
revenue rising to 18.1 percent of GDP in 2018--well above the 
17.4-percent average of the past 50 years. Revenue will remain 
at that level through 2023, and then rise, reaching 18.4 
percent of GDP in 2027. Nevertheless, spending will 
consistently outpace these healthy tax collections. Even 
excluding interest payments, programmatic government spending 
will hit 19.1 percent of GDP in 2018, then rise throughout the 
decade, to 20.8 percent of GDP in 2027. Because of the chronic 
borrowing to finance government operations, debt service will 
add to the problem: With interest payments included, spending 
rises from 20.5 percent of GDP in 2018 to 23.4 percent in 
    \7\Congressional Budget Office, The Budget and Economic Outlook: 
2017 to 2027, Table 1-1, p. 10.
    The trend persists for the longer term. While CBO projects 
tax revenue rising to historically high levels--averaging 19.3 
percent of GDP in the decade of 2038 through 2047--programmatic 
spending will still outgrow revenue. Adding debt service drives 
total spending to 28 percent of GDP, generating relentlessly 
deepening deficits and growing debt.\8\
    \8\Congressional Budget Office, The 2017 Long-Term Budget Outlook, 
June 2017, Table 1.
    Only by controlling spending can Congress alter this 
catastrophic course.
    In the face of this fiscal onslaught, doing nothing invites 
financial disaster. A rising debt level is unsustainable 
because its growth eventually begins to exceed that of the 
overall economy. As a result, debt service costs absorb an 
increasing share of national income and the government must 
borrow an increasing amount each year--likely in the face of 
rising interest rates--to both fund its ongoing services and 
make good on its previous debt commitments. Ultimately, this 
dynamic leads to a decline in national saving and a ``crowding 
out'' of private investment, sapping economic output and 
diminishing the country's standard of living. In a worst-case 
scenario, this dynamic could also lead to a full-blown debt 
crisis, devastating at the macroeconomic level and acutely 
painful for families and businesses.
    Investors and businesses look forward in making their 
decisions. They recognize today's large debt levels are simply 
tomorrow's tax hikes, interest rate increases, or inflation--
and they act accordingly. This debt overhang, and the 
uncertainty it generates, weighs on growth, investment, and job 
    Interest payments on the debt (the ``legacy cost'' of 
deficit spending) will total a staggering $5.2 trillion over 
the next decade, according to CBO.\9\ These payments threaten 
to overwhelm other spending priorities in the budget. In 2012, 
Deloitte LLP--a tax, audit and consulting firm--discussed the 
ways in which debt will hamper U.S. competitiveness in the 
years ahead.
    \9\Ibid., Table 1-1, p. 10.

          [A] great variety of meaningful investments will 
        almost certainly be left undone simply because interest 
        payments will push them out of the budget. This is the 
        silent cost of prior debts that, unless explicitly 
        recognized, crucially leads policymakers to 
        underestimate the effect that prior deficits have 
        already had on this decades planned expenditures.\10\
    \10\Deloitte LLP, The Untold Story of America's Debt, June 2012.

    Debt service is already projected to dominate the budget. 
Within a decade, the Federal Government will reach a point at 
which it spends more on interest payments than it does on 
national defense, Medicaid, education, or infrastructure, among 
others (see Figure 3). Interest on the debt will become the 
government's third largest program, following only Social 
Security and Medicare.
    All these factors point to the need for returning to the 
balanced budget standard. It is the only clear fiscal guideline 
that commands a consensus of public understanding and support. 
All other formulations are merely ways of rationalizing 
continued deficit spending. A balanced budget is also the 
sturdiest means of limiting government. A balanced budget 
commitment establishes real-time restraint on the expansion of 
the public sector: The size and scope of government, as 
measured by its spending, may not exceed the amount taxpayers 
endorse and the economy sustains. This empowers the people, on 
an ongoing basis, to hold their government in check.

        FIGURE 3

    The pursuit of balance has distinct economic and fiscal 
benefits as well. Nearly all economists, including those at the 
CBO, explain that reducing budget deficits (bending the curve 
on debt levels) increases the pool of national savings and 
boosts investment, thereby raising economic growth and job 
creation. The greater economic output that stems from a large 
deficit reduction package would have a sizeable impact on the 
Federal budget. For instance, higher output would lead to 
greater revenues through the increase in taxable incomes. Lower 
interest rates, and a reduction in the stock of debt, would 
lead to lower government spending on net interest expenses. 
(See the section in this report titled ``Macroeconomic Feedback 
Effects of Pro-Growth Policies.'')
    For all these reasons, this budget resolution reasserts the 
balanced budget standard, and then maintains it--putting the 
government on a path to paying off the debt.

                      Mandatory Spending Programs

    Just as important as pursuing balance is the way in which 
lawmakers achieve it. Some experts and policymakers advocate a 
mix of spending restraint and tax increases--the so-called 
``balanced'' approach--as if the two were merely opposite sides 
of the same coin. That sterile, policy-neutral concept, 
however, masks the fundamental cause and effect of government 
budgeting: Spending comes first. Spending--one of the best 
measures of the size and scope of government--is how government 
does what it does. Government's programs and activities exist 
only if government spends money to implement them. ``In a 
fundamental sense,'' writes longtime budget expert Allen 
Schick, ``the federal government is what it spends.''\11\ It is 
because of spending that the government taxes and borrows. 
Hence, spending is the root cause of all other fiscal 
    \11\Allen Schick, The Federal Budget: Politics, Policy, Process 
(Washington DC: The Brookings Institution Press, 2007), page 2.
    Today, gaining control of spending unquestionably requires 
controlling mandatory, or direct, spending. Unlike the 
government's ``discretionary'' accounts, for which Congress 
sets fixed limits on total budget authority, direct spending is 
open-ended and flows from effectively permanent authorizations. 
Programs funded this way pay benefits directly to groups or 
individuals without an intervening appropriation. They spend 
without limit. Their totals are determined by numerous factors 
outside the control of Congress: caseloads, the growth or 
contraction of GDP, inflation, and many others. To put it 
simply, the design of direct spending makes it especially 
difficult to control.
    The list of these programs is long and broad. It includes 
the social insurance programs, Social Security and Medicare; 
other health spending, such as Medicaid and the Affordable Care 
Act; income support, nutrition assistance, unemployment 
compensation, disability insurance, student loans, and a range 
of others.
    In 1965, as President Johnson's Great Society programs were 
being enacted, net direct spending (including interest) 
represented about 34 percent of the budget. By last year, this 
form of spending had doubled as a share of the budget, reaching 
69 percent. By 2040, direct spending, coupled with interest 
payments, will constitute more than four-fifths of total 
Federal spending (see Figure 4).

    Clearly this problem with direct spending has been building 
for decades, yet lawmakers have found it difficult to build an 
enduring consensus for addressing it. With each year that 
passes, spending control becomes more difficult, because the 
necessary changes in programs become larger and more wrenching. 
At some point the programs will simply collapse under their own 
weight. Those who claim to ``protect'' them by resisting reform 
only ensure their demise.
    Controlling mandatory spending need not be seen, however, 
as some daunting exercise in ``mindless austerity,'' as former 
President Obama so ominously put it. As long as reform is 
necessary, it can be approached as an opportunity to save and 
strengthen these programs--to make them better for the people 
they are intended to serve.

        FIGURE 4

    Consider a few examples.
    This resolution assumes enactment of the American Health 
Care Act [AHCA], recently passed by the House. The AHCA serves 
as a fundamental transformation of health care policy--away 
from the domineering, nationalized approach of Obamacare toward 
a strategy that places patients at the center of health care. 
To put this another way: ``In a nation of over 323 million 
people, each with different needs and circumstances, it makes 
no sense for one federal agency to dictate the contents of 
every American's health insurance plan.''\12\ The American 
Health Care Act removes a bureaucratically designed one-size-
fits-all scheme and promotes a greater range of choices, at 
lower costs, for all Americans.
    \12\The Speaker's Health Care Reform Task Force, A Better Way: Our 
Vision for a Confident America--Health Care, 22 June 2016, p. 12.
    In a similar way, the budget envisions a new Medicare 
option that would transform this retirees' health coverage 
program from a government-run, price-controlled bureaucracy to 
a personalized system in which seniors have the option of 
choosing the health coverage best suited to their needs from a 
range of commercial plans. Traditional fee-for-service Medicare 
would always be an option available to current seniors, those 
near retirement, and future generations of beneficiaries. Fee-
for-service Medicare, along with private plans providing the 
same level of health coverage, would compete for seniors' 
business, just as Medicare Advantage does today. The new 
program, however, would also adopt the competitive structure of 
Medicare Part D, the prescription drug benefit program, to 
deliver savings for seniors in the form of lower monthly 
premium costs.
    In short, this Medicare reform would give retired 
Americans, not the government, the ultimate leverage over what 
kind of coverage they will have--and the government would 
provide them financial assistance in making the choices.
    Another area of automatic spending, assistance for low-
income Americans, should be revised to encourage self-
sufficiency, not to trap people in dependency. Clearly, persons 
with chronic disadvantages need and deserve a sturdy safety 
net. Others require assistance at particular times of economic 
downturns or personal misfortune. Still, the most compassionate 
way to provide government assistance is to help free 
individuals from the need for it. Welfare programs should 
encourage recipients toward supporting themselves to the 
greatest degree possible. As was proved with the successful 
welfare reform of the 1990s, when struggling people are 
challenged to work and earn on their own way, they rise to the 
occasion--and they are better off for it.
    It should be noted, too, that government is not the sole 
source of the many domestic benefits Americans receive; it is 
not even the primary one. Every benefit the government 
ostensibly ``provides'' actually draws from the abundant 
resources of the Nation's economy. The government could not 
maintain Medicare, or Social Security, or its numerous safety 
net programs without the funding generated by free markets. 
Communities could not build schools and hospitals without local 
economies sufficiently prosperous to support them. This is why 
the fiscal policy of this budget--restraining spending and 
reducing deficits--is crucial to the well-being of all 
Americans. Those who strive to pull themselves out of 
difficulties benefit most from the expanding opportunities and 
rising incomes that only a prosperous economy can provide.
    Finally, policymakers must embrace the recognition that 
government can never substitute for nature's safety net: the 
family. For generation upon generation, the family has been the 
main source of comfort, security, and economic stability for 
the individual. It is where moral values and a sense of 
responsibility grow. The family reinforces the individual's 
place in the larger community. As government seeks to support 
those who lose any connection to a family, it should take care 
not to contribute to the dissolution of families. Government 
programs should aim to strengthen the family, the most 
important and enduring institution in society.

           Restoring the Role of State and Local Governments

    The republic of the United States reached a turning point 
in 1936: That was the first peacetime year in which the Federal 
Government's total spending exceeded the combined outlays of 
the State and local governments. ``It can even be argued that 
one year--1936--created the modern entitlement challenge that 
so bedevils both parties.''\13\
    \13\Amity Shlaes, The Forgotten Man: A New History of the Great 
Depression (New York: Harper Perennial, 2008), page 11.
    As the 20th century unfolded, the national government's 
dominance--both fiscally and as the central governing 
authority--expanded. This was understandable during times of 
war, especially World War II, when the entire Nation was under 
threat. The notion continued to expand, however, into an ever-
growing range of domestic policies. President Roosevelt's New 
Deal was a major step. Later came President Truman's pursuit of 
nationalized health care, and President Johnson's Great 
Society. By the late 1980s, health care once again came to the 
fore, with some proposing a single-payer Canadian-style system 
for the United States. The trend culminated with Obamacare.
    Over time, States in some respects have been reduced to 
carrying out the wishes of Washington, rather than serving as 
the ``laboratories of democracy.'' This is precisely contrary 
to the Founders' vision:

          The powers delegated by the proposed Constitution to 
        the Federal Government, are few and defined. Those 
        which are to remain in the State governments are 
        numerous and indefinite. The former will be exercised 
        principally on external objects, as war, peace, 
        negotiation, and foreign commerce; with which last the 
        power of taxation will, for the most part, be 
        connected. The powers reserved to the several States 
        will extend to all the objects which, in the ordinary 
        course of affairs, concern the lives, liberties, and 
        properties of the people, and the internal order, 
        improvement, and prosperity of the State.\14\
    \14\Federalist No. 45.

    As succinctly put in the Tenth Amendment: ``The powers not 
delegated to the United States by the Constitution, nor 
prohibited by it to the States, are reserved to the States 
respectively, or to the people.''
    Indeed, Madison argued the Federal Government would depend 
on the States--not the other way around: ``The State 
governments may be regarded as constituent and essential parts 
of the Federal Government; whilst the latter is nowise 
essential to the operation or organization of the former.''\15\ 
This point is proved in reality by the countless activities, 
essential to the lives of individuals and communities, that 
predated the national government and would continue without it. 
Even if the 50 States stood as separate entities, they would 
still operate schools and hospitals; they would find ways to 
build roads and bridges; scientific research would continue; 
energy and communications companies would emerge.
    This is not to say Americans would be better off without 
the Federal Government. Their security and prosperity are 
vastly enhanced by the voluntary unity reflected in the bonds 
of the national Constitution. The point is simply that the 
Federal Government's principal role is to protect the security 
of the Nation, and to maintain an environment that supports the 
initiative and creativity possible only through the diversity 
of the several States and the bonds of civil society.
    The reversal of this concept that developed over the past 
100 years or so also has fiscal consequences. Federal 
Government resources cannot maintain the overreach of its 
governing ambitions. That is the message of Washington's 
current, catastrophic spending path. To restore fiscal 
sustainability, Congress sooner or later will have to consider 
realigning the roles of different levels of government. It will 
have to reinstitute the practice of federalism.
    This will remain a necessity even if Congress gains control 
of direct spending. Yet the fiscal concerns are only part of 
the reason. The increasing centralization of government 
smothers the energy of State and local policymakers. Restoring 
State autonomy will deliver benefits for the entire Nation in 
critical areas such as education, health care, infrastructure, 
energy, the environment, and employment.
    The budget resolution supports these aims. It promotes 
State flexibility in areas such as Medicaid and the 
Supplemental Nutrition Assistance Program. It encourages State 
and local initiative in education. It sheds the conceit that 
Washington knows what is right for the people. The very 
structure of this report reflects a distinction between those 
activities required of the Federal Government from those best 
suited to States and localities and the private sector (see the 
explanation in the section titled ``Functional Presentation'').

                   Restoring Congressional Budgeting

    The congressional budget process, enacted in 1974, has 
rarely worked as designed. Deadlines in the Congressional 
Budget Act are missed far more often than made, rules are often 
skirted, loopholes in spending disciplines exploited. Since 
1998, the House and Senate have failed 10 times to agree on a 
budget resolution, the cornerstone of the process.
    Congressional budgeting by the early 1970s was already 
complicated, and the 1974 Act added new procedures onto 
existing spending and tax practices. Since then, Congress has 
enacted additional layers, such as the Balanced Budget and 
Emergency Deficit Control Act of 1985, the Budget Enforcement 
Act of 1990, and the Statutory Pay-As-You-Go Act of 2010, among 
others. Given all this, it may be time to dismantle the entire 
process and build a new one. The lessons of the past four 
decades of congressional budgeting will certainly inform that 
development. Still, in thinking about a new process, lawmakers 
should step back and ask a threshold question: What is the 
congressional budget process for?
    The obvious first answer is fiscal control. That, however, 
is part of a more fundamental act: the act of governing. 
Because budgeting truly is governing, the budget process should 
be seen as a principal means of exercising constitutional 
government. The Constitution does not prescribe how big 
government should be, but it does establish a framework for 
limiting government. One of the best ways to determine that 
limit is to limit spending--one of the clearest measures of the 
size and scope of government.
    The budget also is Congress's main instrument for 
policymaking, the legislature's essential authority. ``This 
power of the purse may, in fact, be regarded as the most 
complete and effectual weapon with which any constitution can 
arm the immediate representatives of the people, for obtaining 
a redress of every grievance, and for carrying into effect 
every just and salutary measure.''\16\ Any new budget process 
should enhance Congress's policymaking role.
    \16\Federalist, No. 58.
    The process also must reinforce the balance of powers, one 
of the most critical protections of liberty. For nearly a half 
century after enactment of the 1921 Budget and Accounting Act--
which attempted to straddle the separation of powers by 
establishing an executive-centered budget process modeled after 
Great Britain's--the presidency grew increasingly powerful. 
Starting in the 1950s, presidents began deliberately tying 
their budgets together with their legislative programs, 
increasing their ability to set the legislative agenda, and 
helping sustain what Schlesinger called ``the imperial 
presidency.''\17\ The 1974 Congressional Budget Act was, in 
part, an attempt to restore the legislature's agenda-setting 
role. Any new budget process should advance that effort.
    \17\Arthur M. Schlesinger Jr., The Imperial Presidency, (New York: 
Houghton Mifflin Company, 2004).
    Budgeting also should be an instrument for enhancing 
congressional oversight. There is no better way to get the 
attention of executive agencies than by controlling their 
funding. The budget process should encourage appropriations 
subcommittees and authorizing committees to use the tool of the 
budget aggressively, and to control the ever-expanding 
administrative state.
    Finally, just as the restoration of sound budgeting for how 
the Federal Government spends is critical to the promotion of 
economic growth, debt-reduction, federalism, and ordered 
liberty, so too is the introduction of budgeting for how the 
Federal Government directs others to spend: regulatory 
    When regulation is needed, it can be done in more cost-
effective ways. Before it is imposed, Congress can budget for 
how much new regulation, if any, can sustainably be imposed on 
America's economy year by year. It makes eminent sense to do 
that using the kinds of budgeting tools Congress applies to put 
the brakes on runaway Federal spending. To date, Congress has 
not adopted regulatory budgeting tools to manage the Federal 
regulatory footprint. Neither has it imposed robust statutory 
controls against Federal regulators' abilities to burden 
America's workers and economy with excessively expensive and 
insufficiently effective Federal regulations. The time has come 
to do both.


    As described at the outset, this budget resolution 
expresses a vision; its contours are detailed throughout the 
text of this report. It is also an instrument for realizing 
that vision. Its allocations of spending authority implement 
the budget's priorities; its fiscal path--achieving balance 
within 10 years--restores the sound fiscal norm that long kept 
spending, and the size of government itself, in check. It is an 
instrument for true fiscal sustainability, and for maintaining 
America's unique and exceptional brand of constitutional 

                                                                                 TABLE 1.--FISCAL YEAR 2018 BUDGET RESOLUTION TOTAL SPENDING AND REVENUE
                                                                                                        [In millions of dollars]
                        Fiscal year                             2018         2019         2020         2021         2022         2023         2024         2025         2026         2027            2018-2022             2018-2027
Total spending:
  BA......................................................    4,096,933    4,210,736    4,286,076    4,344,146    4,567,485    4,685,904    4,810,056    5,019,533    5,198,404    5,370,264        21,505,376            46,589,537
  OT......................................................    4,024,170    4,184,625    4,263,701    4,371,392    4,560,681    4,662,535    4,771,559    4,976,995    5,172,531    5,344,567        21,404,569            46,332,757
  BA......................................................    3,232,597    3,286,018    3,299,573    3,290,186    3,441,975    3,483,686    3,528,872    3,655,413    3,746,208    3,824,652        16,550,350            34,789,180
  OT......................................................    3,164,885    3,265,306    3,283,026    3,323,464    3,441,603    3,467,047    3,497,308    3,620,210    3,727,971    3,806,792        16,478,284            34,597,612
  BA......................................................      864,336      924,717      986,503    1,053,959    1,125,510    1,202,219    1,281,184    1,364,120    1,452,197    1,545,612         4,955,026            11,800,357
  OT......................................................      859,285      919,319      980,675    1,047,928    1,119,078    1,195,488    1,274,251    1,356,785    1,444,561    1,537,776         4,926,286            11,735,146
  Total...................................................    3,542,479    3,668,467    3,796,957    3,920,337    4,066,811    4,219,233    4,386,477    4,574,285    4,784,571    4,993,388        18,995,051            41,953,005
  On-budget...............................................    2,670,356    2,767,357    2,870,414    2,963,953    3,077,586    3,195,139    3,325,690    3,475,784    3,642,629    3,811,687        14,349,666            31,800,595
  Off-budget..............................................      872,123      901,110      926,543      956,384      989,225    1,024,094    1,060,787    1,098,501    1,141,942    1,181,701         4,645,385            10,152,410
Recommended Change in Revenues (vs. CBO Baseline):
  Total...................................................      -61,209      -64,517      -81,260      -98,684     -109,109     -126,636     -140,283     -150,125     -146,865     -146,800          -414,779            -1,125,488
  On-budget...............................................      -63,213      -66,151      -80,162      -95,958     -105,330     -122,777     -136,738     -146,394     -146,749     -146,700          -410,814            -1,110,172
  Off-budget..............................................       +2,004       +1,634       -1,098       -2,726       -3,779       -3,859       -3,545       -3,731         -116         -100            -3,965               -15,316
  Total...................................................     -471,691     -496,158     -436,744     -381,055     -393,870     -293,302     -175,082     -152,710      -87,960        8,821        -2,179,518            -2,879,752
  Macroeconomic Impact on the Deficit.....................       10,000       20,000       30,000       70,000      100,000      150,000      210,000      250,000      300,000      360,000           230,000             1,500,000
  On-budget...............................................     -494,529     -497,949     -412,612     -359,511     -364,017     -271,908     -171,618     -144,426      -85,342        4,895        -2,128,618            -2,797,017
  Off-budget..............................................       12,838      -18,209      -54,132      -91,544     -129,853     -171,394     -213,464     -258,284     -302,619     -356,075          -280,901            -1,582,736
Debt Held by the Public (end of year).....................   15,399,966   15,971,804   16,477,150   16,920,847   17,371,706   17,720,326   17,949,306   18,156,356   18,299,466   18,345,826
Debt Subject to Limit (end of year).......................   21,059,756   21,720,619   22,263,387   22,717,657   23,120,068   23,414,924   23,577,205   23,665,687   23,701,446   23,484,672
                                                                                                               BY FUNCTION
National Defense (050):
  BA......................................................      629,595      660,832      693,646      728,125      731,818      735,468      739,157      742,886      747,414      751,098         3,444,016             7,160,038
  OT......................................................      607,810      636,795      666,519      698,761      717,568      720,401      720,755      729,581      734,037      737,798         3,327,453             6,970,025
International Affairs (150):
  BA......................................................       41,521       40,210       39,428       38,654       37,623       38,445       39,285       40,174       41,121       42,025           197,436               398,486
  OT......................................................       43,643       41,207       39,965       38,585       38,021       37,795       38,102       38,643       39,365       40,175           201,421               395,501
General Science, Space and Technology (250):
  BA......................................................       28,524       29,107       29,702       30,346       31,018       31,694       32,378       33,112       33,854       34,602           148,697               314,337
  OT......................................................       30,072       29,365       29,360       29,718       30,259       30,797       31,325       31,928       32,550       33,162           148,774               308,536
Energy (270):
  BA......................................................       -3,088        1,704      -11,179        1,871        1,705          754          437           -4        2,233        2,324            -8,987                -3,243
  OT......................................................        2,559        1,714      -11,813          786          445         -491         -727       -1,052        1,207        1,370            -6,309                -6,002
Natural Resources & Environment (300):
  BA......................................................       31,720       31,856       33,255       32,704       34,295       34,684       34,598       35,520       36,186       36,742           163,830               341,560
  OT......................................................       35,641       33,751       33,581       32,652       33,909       34,186       34,081       34,921       35,526       36,078           169,534               344,326
Agriculture (350):
  BA......................................................       24,223       21,091       19,786       18,217       17,835       18,153       18,880       19,863       20,214       20,422           101,152               198,684
  OT......................................................       22,913       20,200       19,293       17,660       17,339       17,713       18,331       19,225       19,593       19,817            97,405               192,084
Commerce & Housing Credit (370):
    BA....................................................       -7,287       -7,517      -10,358      -13,446      -12,880      -12,330      -10,989      -10,255      -11,141      -11,933           -51,488              -108,136
    OT....................................................      -19,601      -15,753      -18,126      -22,106      -22,470      -22,598      -22,362      -22,849      -23,569      -24,521           -98,056              -213,955
    BA....................................................       -2,816       -2,850       -5,083       -5,375       -5,646       -5,813       -5,979       -6,153       -6,358       -6,669           -21,770               -52,742
    OT....................................................       -2,815       -2,848       -5,081       -5,374       -5,645       -5,811       -5,977       -6,152       -6,357       -6,667           -21,763               -52,727
Transportation (400):
  BA......................................................       88,095       88,892       82,748       37,190       66,950       66,895       67,483       68,481       69,714       70,948           363,875               707,396
  OT......................................................       91,796       90,602       90,508       77,995       65,076       68,694       69,617       69,074       69,044       69,741           415,977               762,147
Community & Regional Development (450):
  BA......................................................        4,365        4,170        4,240        4,353        4,487        4,556        4,673        4,857        5,077        4,953            21,615                45,731
  OT......................................................       18,626       16,983       11,842        9,558        6,386        5,090        4,745        4,767        4,805        4,809            63,395                87,611
Education,Training,Employment,and Social Services (500):
  BA......................................................       69,920       79,090       80,305       81,922       82,350       86,279       86,641       86,977       87,459       88,216           393,587               829,159
  OT......................................................       89,295       81,404       81,129       82,479       83,539       85,843       87,897       88,522       89,186       90,080           417,846               859,374
Health (550):
  BA......................................................      579,328      564,387      552,405      512,289      528,560      547,998      571,335      594,923      618,119      623,810         2,736,969             5,693,154
  OT......................................................      551,277      570,419      541,949      518,445      533,688      549,687      569,207      591,171      613,682      626,774         2,715,778             5,666,299
Medicare (570):
  BA......................................................      593,830      652,984      692,126      739,367      826,276      845,800      850,393      916,244      988,183    1,053,671         3,504,583             8,158,874
  OT......................................................      593,567      652,740      691,917      739,161      826,057      845,593      850,177      916,009      987,942    1,053,435         3,503,442             8,156,598
Income Security (600):
  BA......................................................      491,789      464,425      475,015      484,414      492,453      475,767      484,425      493,048      502,057      511,675         2,408,096             4,875,068
  OT......................................................      477,428      454,786      464,925      475,140      489,299      468,217      471,370      480,920      496,505      505,382         2,361,578             4,783,972
Social Security (650):
    BA....................................................       39,475       43,016       46,287       49,748       53,392       57,378       61,764       66,388       70,871       75,473           231,918               563,792
    OT....................................................       39,475       43,016       46,287       49,748       53,392       57,378       61,764       66,388       70,871       75,473           231,918               563,792
    BA....................................................      966,037    1,024,166    1,086,433    1,152,744    1,222,514    1,295,244    1,371,263    1,450,496    1,533,384    1,619,909         5,451,894            12,722,190
    OT....................................................      960,983    1,018,765    1,080,602    1,146,712    1,216,081    1,288,510    1,364,328    1,443,160    1,525,746    1,612,071         5,423,143            12,656,958
Veterans Benefits and Services (700):
  BA......................................................      176,704      191,507      194,930      199,751      215,442      212,567      209,943      227,991      234,947      243,718           978,334             2,107,500
  OT......................................................      178,038      190,235      193,931      197,856      213,337      210,444      207,908      225,820      232,660      241,501           973,397             2,091,730
Administration of Justice (750):
  BA......................................................       51,367       58,245       59,720       61,054       62,092       63,671       65,285       66,947       69,907       70,270           292,478               628,558
  OT......................................................       61,079       58,867       60,036       60,946       61,925       63,462       65,043       66,498       70,200       69,722           302,853               637,778
General Government (800):
  BA......................................................       23,564       23,948       23,557       23,386       23,127       26,420       26,351       26,246       26,083       25,855           117,582               248,537
  OT......................................................       23,091       23,314       23,303       23,190       23,013       26,057       26,168       26,060       25,917       25,722           115,911               245,835
Net Interest (900):
    BA....................................................      376,842      409,185      450,859      493,778      531,929      565,282      589,292      607,012      620,536      623,786         2,262,594             5,268,502
    OT....................................................      376,842      409,185      450,859      493,778      531,929      565,282      589,292      607,012      620,536      623,911         2,262,594             5,268,627
    BA....................................................      -81,548      -78,697      -76,363      -74,350      -71,711      -66,958      -63,222      -58,701      -52,643      -44,758          -382,668              -668,951
    OT....................................................      -81,548      -78,697      -76,363      -74,350      -71,711      -66,958      -63,222      -58,701      -52,643      -44,758          -382,668              -668,951
Allowances (920):
  BA......................................................      -44,505      -42,219      -45,246      -48,056      -50,544      -52,326      -53,659      -55,439      -51,908      -55,254          -230,570              -499,156
  OT......................................................      -23,272      -34,499      -40,640      -44,164      -47,877      -49,819      -51,411      -53,060      -52,127      -53,919          -190,452              -450,788
Government-Wide Savings (930):
  BA......................................................       34,145       -1,555      -67,381     -120,155     -153,376     -174,438     -194,373     -193,336     -246,573     -258,801          -308,322            -1,375,843
  OT......................................................        2,778       -2,528      -47,665      -97,069     -137,459     -159,489     -179,541     -187,355     -223,016     -240,977          -281,943            -1,272,321
Undistributed Offsetting Receipts (950):
    BA....................................................      -83,212      -86,409      -86,316      -90,347      -93,573     -100,001     -105,371     -115,139     -117,033     -127,808          -439,857            -1,005,209
    OT....................................................      -83,212      -86,409      -86,316      -90,347      -93,573     -100,001     -105,371     -115,139     -117,033     -127,808          -439,857            -1,005,209
    BA....................................................      -17,326      -17,890      -18,472      -19,048      -19,635      -20,241      -20,865      -21,509      -22,172      -22,856           -92,371              -200,014
    OT....................................................      -17,326      -17,890      -18,472      -19,048      -19,635      -20,241      -20,865      -21,509      -22,172      -22,856           -92,371              -200,014
                                                                       Overseas Contingency Operations/Global War on Terrorism (970):
  BA......................................................       86,591       60,000       43,000       26,000       12,000       12,000       12,000            0            0            0           227,591               251,591
  OT......................................................       45,781       50,748       43,076       31,635       18,768       13,799       11,957        4,171        1,160          165           190,008               221,260
Across the Board Adjustment (990):
    BA....................................................         -909         -931         -956         -979       -1,004       -1,030       -1,056       -1,083       -1,112       -1,140            -4,779               -10,200
    OT....................................................         -740         -837         -895         -944         -968         -993       -1,018       -1,045       -1,070       -1,099            -4,384                -9,609
    BA....................................................          -11          -12          -12          -12          -12          -13          -13          -13          -14          -14               -59                  -126
    OT....................................................           -9          -11          -11          -12          -12          -12          -13          -13          -13          -14               -55                  -120
1. Only on-budget amounts for fiscal years 2018-2027 are entered into the budget resolution legislative text. Off-budget amounts are shown for display purposes only.
2. The Office of Management and Budget and the Congressional Budget Office do not separately track outlays for Overseas Contingency Operations/Global War on Terrorism (GWOT) once funds have been appropriated. The budget, therefore,
  shows in function 970 OCO/GWOT outlays that result from new budget authority occurring in fiscal years 2018-2027 only. Outlays resulting from OCO/GWOT activity prior to fiscal year 2017 are included in budget functions 050 and

                                                                                   TABLE 2.--FISCAL YEAR 2018 BUDGET RESOLUTION DISCRETIONARY SPENDING
                                                                                                        [In millions of dollars]
                        Fiscal year                             2018         2019         2020         2021         2022         2023         2024         2025         2026         2027            2018-2022             2018-2027
Total spending:
  BA......................................................    1,219,896    1,222,022    1,193,737    1,183,604    1,168,176    1,166,265    1,163,587    1,159,312    1,159,356    1,164,130         5,987,435            11,800,084
  OT......................................................    1,249,478    1,277,039    1,262,142    1,239,131    1,212,860    1,204,530    1,196,357    1,195,544    1,193,811    1,197,352         6,240,650            12,228,245
Base Defense (050):
  BA......................................................      621,500      652,575      685,204      719,464      722,964      726,464      729,964      733,464      736,964      740,464         3,401,707             7,069,026
  OT......................................................      599,410      628,198      657,708      689,706      708,294      711,055      711,338      720,002      723,493      727,057         3,283,316             6,876,261
Base Non Defense:
  BA......................................................      510,749      508,666      464,966      437,666      432,666      426,666      421,166      425,666      422,166      423,666         2,354,713             4,474,043
  OT......................................................      603,733      597,360      560,722      517,258      485,258      478,821      472,387      470,994      468,883      469,993         2,764,332             5,125,410
                                                                                                               BY FUNCTION
National Defense (050):
  BA......................................................      621,500      652,575      685,204      719,464      722,964      726,464      729,964      733,464      736,964      740,464         3,401,707             7,069,026
  OT......................................................      599,410      628,198      657,708      689,706      708,294      711,055      711,338      720,002      723,493      727,057         3,283,316             6,876,261
International Affairs (150):
  BA......................................................       36,320       36,486       36,630       36,794       37,612       38,416       39,229       40,103       40,997       41,891           183,842               384,478
  OT......................................................       47,318       44,203       42,138       39,863       39,225       38,994       39,305       39,863       40,565       41,395           212,747               412,869
General Science, Space and Technology (250):
  BA......................................................       28,417       29,007       29,602       30,246       30,918       31,594       32,278       33,012       33,754       34,502           148,190               313,330
  OT......................................................       29,967       29,263       29,260       29,618       30,159       30,697       31,225       31,828       32,450       33,062           148,267               307,529
Energy (270):
  BA......................................................        3,438        3,204        3,165        3,175        3,203        3,322        3,617        3,385        3,468        3,547            16,185                33,524
  OT......................................................        5,701        4,803        4,010        3,492        3,199        3,169        3,482        3,264        3,364        3,470            21,205                37,954
Natural Resources & Environment (300):
  BA......................................................       31,335       32,088       32,963       33,879       34,791       35,739       36,733       37,737       38,792       39,884           165,056               353,941
  OT......................................................       34,609       33,511       33,230       33,736       34,423       35,262       36,172       37,141       38,144       39,212           169,509               355,440
Agriculture (350):
  BA......................................................        6,360        6,526        6,692        6,868        7,048        7,234        7,423        7,624        7,830        8,035            33,494                71,640
  OT......................................................        6,199        6,440        6,613        6,786        6,960        7,145        7,329        7,517        7,721        7,925            32,998                70,635
Commerce & Housing Credit (370):
    BA....................................................      -16,407      -15,730      -14,773      -14,111      -13,473      -13,032      -12,062      -11,410      -11,414      -11,523           -74,494              -133,935
    OT....................................................      -15,825      -15,568      -14,873      -14,217      -13,578      -13,144      -12,177      -11,529      -11,540      -11,656           -74,061              -134,107
    BA....................................................          275          284          294          304          315          325          336          348          360          372             1,472                 3,213
    OT....................................................          274          284          294          304          315          325          336          347          359          371             1,471                 3,209
Transportation (400):
  BA......................................................       28,517       28,660       29,111       28,911       28,599       28,482       28,525       28,999       28,073       28,767           143,798               286,644
  OT......................................................       90,618       90,082       90,423       78,412       65,970       70,055       71,454       71,408       70,257       71,430           415,505               770,109
Community & Regional Development (450):
  BA......................................................        5,132        5,128        5,279        5,415        5,546        5,689        5,830        5,979        6,139        6,295            26,500                56,432
  OT......................................................       19,601       17,625       12,711       10,558        7,192        6,030        5,823        5,963        6,140        6,337            67,687                97,980
Education, Training, Employment, and Social Services
  BA......................................................       80,373       91,865       93,529       95,235       96,936       98,719      100,514      102,409      104,327      106,210           457,938               970,117
  OT......................................................       91,328       91,159       92,126       93,680       95,371       97,079       98,861      100,697      102,575      104,480           463,664               967,356
Health (550):
  BA......................................................       61,560       61,785       62,417       63,026       63,637       64,185       64,664       65,186       65,649       66,033           312,425               638,142
  OT......................................................       61,269       61,300       61,572       61,853       62,195       62,583       62,947       63,281       63,678       64,018           308,189               624,696
Medicare (570):
  BA......................................................        6,550        6,892        7,240        7,605        8,001        8,404        8,823        9,262        9,704       10,161            36,288                82,642
  OT......................................................        6,613        6,887        7,194        7,539        7,929        8,331        8,747        9,183        9,623       10,079            36,162                82,125
Income Security (600):
  BA......................................................       68,090       68,719       69,607       70,345       71,006       71,651       72,297       72,998       73,701       74,390           347,767               712,804
  OT......................................................       67,548       68,516       69,665       70,660       71,148       71,468       71,845       72,473       73,171       73,850           347,537               710,344
Social Security (650):
    BA....................................................            0            0            0            0            0            0            0            0            0            0                 0                     0
    OT....................................................            0            0            0            0            0            0            0            0            0            0                 0                     0
    BA....................................................        5,374        5,532        5,697        5,866        6,039        6,218        6,402        6,595        6,796        6,999            28,508                61,518
    OT....................................................        5,420        5,531        5,666        5,834        6,006        6,184        6,367        6,559        6,758        6,961            28,457                61,286
Veterans Benefits and Services (700):
  BA......................................................       79,067       83,387       83,386       85,140       87,603       90,132       92,738       95,459       98,293      101,165           418,583               896,370
  OT......................................................       77,871       81,776       82,342       83,284       85,755       88,234       90,782       93,438       96,208       98,987           411,028               878,677
Administration of Justice (750):
  BA......................................................       53,984       55,335       57,067       58,816       60,625       62,485       64,413       66,417       68,514       70,655           285,827               618,311
  OT......................................................       55,217       56,326       57,464       58,734       60,206       62,060       63,974       65,958       68,029       70,156           287,947               618,124
General Government (800):
  BA......................................................       15,868       16,423       16,023       15,797       15,481       18,747       18,590       18,389       18,143       17,857            79,592               171,318
  OT......................................................       15,488       15,860       15,800       15,646       15,390       18,384       18,424       18,235       18,013       17,761            78,184               169,001
Allowances (920):
  BA......................................................      -39,567      -40,476      -43,053      -46,676      -48,870      -50,554      -51,788      -53,575      -53,744      -55,254          -218,642              -483,557
  OT......................................................      -20,852      -33,359      -38,713      -42,718      -46,314      -48,313      -49,864      -51,505      -52,365      -53,463          -181,956              -437,466
Government-Wide Savings (930):
  BA......................................................       58,039       35,275      -14,375      -47,504      -60,789      -78,912      -95,870     -101,973     -115,864     -125,166           -29,354              -547,139
  OT......................................................       26,672       34,302        5,341      -24,318      -44,772      -63,863      -80,938      -91,692     -102,909     -113,132            -2,775              -455,309
                                                                       Overseas Contingency Operations/Global War on Terrorism (970):
  BA......................................................       86,591       60,000       43,000       26,000       12,000       12,000       12,000            0            0            0           227,591               251,591
  OT......................................................       45,781       50,748       43,076       31,635       18,768       13,799       11,957        4,171        1,160          165           190,008               221,260
Across the Board Adjustment (990):
    BA....................................................         -909         -931         -956         -979       -1,004       -1,030       -1,056       -1,083       -1,112       -1,140            -4,779               -10,200
    OT....................................................         -740         -837         -895         -944         -968         -993       -1,018       -1,045       -1,070       -1,099            -4,384                -9,609
    BA....................................................          -11          -12          -12          -12          -12          -13          -13          -13          -14          -14               -59                  -126
    OT....................................................           -9          -11          -11          -12          -12          -12          -13          -13          -13          -14               -55                  -120

                                                                                     TABLE 3.--FISCAL YEAR 2018 BUDGET RESOLUTION MANDATORY SPENDING
                                                                                                        [In millions of dollars]
                         Fiscal year                             2018        2019         2020         2021         2022         2023         2024         2025         2026         2027            2018-2022             2018-2027
Total spending:
  BA........................................................   2,877,037   2,988,714    3,092,339    3,160,542    3,399,309    3,519,639    3,646,469    3,860,221    4,039,048    4,206,134        15,517,941            34,789,453
  OT........................................................   2,774,693   2,907,586    3,001,559    3,132,261    3,347,820    3,458,005    3,575,202    3,781,451    3,978,720    4,147,215        15,163,919            34,104,513
    BA......................................................   2,018,339   2,069,800    2,111,815    2,112,740    2,280,141    2,323,951    2,372,010    2,503,031    2,593,994    2,667,879        10,592,836            23,053,701
    OT......................................................   1,921,093   1,994,070    2,026,833    2,090,458    2,235,051    2,269,015    2,307,641    2,431,559    2,541,264    2,616,757        10,267,506            22,433,742
    BA......................................................     858,698     918,913      980,524    1,047,801    1,119,168    1,195,689    1,274,459    1,357,190    1,445,055    1,538,255         4,925,105            11,735,752
    OT......................................................     853,600     913,515      974,726    1,041,802    1,112,769    1,188,991    1,267,561    1,349,892    1,437,457    1,530,458         4,896,413            11,670,771
                                                                                                               BY FUNCTION
National Defense (050):
  BA........................................................       8,095       8,257        8,442        8,661        8,854        9,004        9,193        9,422       10,450       10,634            42,309                91,012
  OT........................................................       8,400       8,597        8,811        9,055        9,274        9,346        9,417        9,579       10,544       10,741            44,137                93,764
International Affairs (150):
  BA........................................................       5,201       3,724        2,798        1,860           11           29           56           71          124          134            13,594                14,008
  OT........................................................      -3,675      -2,996       -2,173       -1,278       -1,204       -1,199       -1,203       -1,220       -1,200       -1,220           -11,326               -17,368
General Science, Space and Technology (250):
  BA........................................................         107         100          100          100          100          100          100          100          100          100               507                 1,007
  OT........................................................         105         102          100          100          100          100          100          100          100          100               507                 1,007
Energy (270):
  BA........................................................      -6,526      -1,500      -14,344       -1,304       -1,498       -2,568       -3,180       -3,389       -1,235       -1,223           -25,172               -36,767
  OT........................................................      -3,142      -3,089      -15,823       -2,706       -2,754       -3,660       -4,209       -4,316       -2,157       -2,100           -27,514               -43,956
Natural Resources & Environment (300):
  BA........................................................         385        -232          292       -1,175         -496       -1,055       -2,135       -2,217       -2,606       -3,142            -1,226               -12,381
  OT........................................................       1,032         240          351       -1,084         -514       -1,076       -2,091       -2,220       -2,618       -3,134                25               -11,114
Agriculture (350):
  BA........................................................      17,863      14,565       13,094       11,349       10,787       10,919       11,457       12,239       12,384       12,387            67,658               127,044
  OT........................................................      16,714      13,760       12,680       10,874       10,379       10,568       11,002       11,708       11,872       11,892            64,407               121,449
Commerce & Housing Credit (370):
    BA......................................................       9,120       8,213        4,415          665          593          702        1,073        1,155          273         -410            23,006                25,799
    OT......................................................      -3,776        -185       -3,253       -7,889       -8,892       -9,454      -10,185      -11,320      -12,029      -12,865           -23,995               -79,848
    BA......................................................      -3,091      -3,134       -5,377       -5,679       -5,961       -6,138       -6,315       -6,501       -6,718       -7,041           -23,242               -55,955
    OT......................................................      -3,089      -3,132       -5,375       -5,678       -5,960       -6,136       -6,313       -6,499       -6,716       -7,038           -23,234               -55,936
Transportation (400):
  BA........................................................      59,578      60,232       53,637        8,279       38,351       38,413       38,958       39,482       41,641       42,181           220,077               420,752
  OT........................................................       1,178         520           85         -417         -894       -1,361       -1,837       -2,334       -1,213       -1,689               472                -7,962
Community & Regional Development (450):
  BA........................................................        -767        -958       -1,039       -1,062       -1,059       -1,133       -1,157       -1,122       -1,062       -1,342            -4,885               -10,701
  OT........................................................        -975        -642         -869       -1,000         -806         -940       -1,078       -1,196       -1,335       -1,528            -4,292               -10,369
Education, Training, Employment, and Social Services (500):
  BA........................................................     -10,453     -12,775      -13,224      -13,313      -14,586      -12,440      -13,873      -15,432      -16,868      -17,994           -64,351              -140,958
  OT........................................................      -2,033      -9,755      -10,997      -11,201      -11,832      -11,236      -10,964      -12,175      -13,389      -14,400           -45,818              -107,982
Health (550):
  BA........................................................     517,768     502,602      489,988      449,263      464,923      483,813      506,671      529,737      552,470      557,777         2,424,544             5,055,012
  OT........................................................     490,008     509,119      480,377      456,592      471,493      487,104      506,260      527,890      550,004      562,756         2,407,589             5,041,603
Medicare (570):
  BA........................................................     587,280     646,092      684,886      731,762      818,275      837,396      841,570      906,982      978,479    1,043,510         3,468,295             8,076,232
  OT........................................................     586,954     645,853      684,723      731,622      818,128      837,262      841,430      906,826      978,319    1,043,356         3,467,280             8,074,473
Income Security (600):
  BA........................................................     423,699     395,706      405,408      414,069      421,447      404,116      412,128      420,050      428,356      437,285         2,060,329             4,162,264
  OT........................................................     409,880     386,270      395,260      404,480      418,151      396,749      399,525      408,447      423,334      431,532         2,014,041             4,073,628
Social Security (650):
    BA......................................................      39,475      43,016       46,287       49,748       53,392       57,378       61,764       66,388       70,871       75,473           231,918               563,792
    OT......................................................      39,475      43,016       46,287       49,748       53,392       57,378       61,764       66,388       70,871       75,473           231,918               563,792
    BA......................................................     960,663   1,018,634    1,080,736    1,146,878    1,216,475    1,289,026    1,364,861    1,443,901    1,526,588    1,612,910         5,423,386            12,660,672
    OT......................................................     955,563   1,013,234    1,074,936    1,140,878    1,210,075    1,282,326    1,357,961    1,436,601    1,518,988    1,605,110         5,394,686            12,595,672
Veterans Benefits and Services (700):
  BA........................................................      97,637     108,120      111,544      114,611      127,839      122,435      117,205      132,532      136,654      142,553           559,751             1,211,130
  OT........................................................     100,167     108,459      111,589      114,572      127,582      122,210      117,126      132,382      136,452      142,514           562,369             1,213,053
Administration of Justice (750):
  BA........................................................      -2,617       2,910        2,653        2,238        1,467        1,186          872          530        1,393         -385             6,651                10,247
  OT........................................................       5,862       2,541        2,572        2,212        1,719        1,402        1,069          540        2,171         -434            14,906                19,654
General Government (800):
  BA........................................................       7,696       7,525        7,534        7,589        7,646        7,673        7,761        7,857        7,940        7,998            37,990                77,219
  OT........................................................       7,603       7,454        7,503        7,544        7,623        7,673        7,744        7,825        7,904        7,961            37,727                76,834
Net Interest (900):
    BA......................................................     376,842     409,185      450,859      493,778      531,929      565,282      589,292      607,012      620,536      623,786         2,262,594             5,268,502
    OT......................................................     376,842     409,185      450,859      493,778      531,929      565,282      589,292      607,012      620,536      623,911         2,262,594             5,268,627
    BA......................................................     -81,548     -78,697      -76,363      -74,350      -71,711      -66,958      -63,222      -58,701      -52,643      -44,758          -382,668              -668,951
    OT......................................................     -81,548     -78,697      -76,363      -74,350      -71,711      -66,958      -63,222      -58,701      -52,643      -44,758          -382,668              -668,951
Allowances (920):
  BA........................................................      -4,938      -1,743       -2,193       -1,380       -1,674       -1,772       -1,871       -1,864        1,836            0           -11,928               -15,599
  OT........................................................      -2,420      -1,140       -1,927       -1,446       -1,563       -1,506       -1,547       -1,555          238         -456            -8,496               -13,322
Government-Wide Savings (930):
  BA........................................................     -23,894     -36,830      -53,006      -72,651      -92,587      -95,526      -98,503      -91,363     -130,709     -133,635          -278,968              -828,704
  OT........................................................     -23,894     -36,830      -53,006      -72,751      -92,687      -95,626      -98,603      -95,663     -120,107     -127,845          -279,168              -817,012
Undistributed Offsetting Receipts (950):
    BA......................................................     -83,212     -86,409      -86,316      -90,347      -93,573     -100,001     -105,371     -115,139     -117,033     -127,808          -439,857            -1,005,209
    OT......................................................     -83,212     -86,409      -86,316      -90,347      -93,573     -100,001     -105,371     -115,139     -117,033     -127,808          -439,857            -1,005,209
    BA......................................................     -17,326     -17,890      -18,472      -19,048      -19,635      -20,241      -20,865      -21,509      -22,172      -22,856           -92,371              -200,014
    OT......................................................     -17,326     -17,890      -18,472      -19,048      -19,635      -20,241      -20,865      -21,509      -22,172      -22,856           -92,371              -200,014

                      THE LONG-TERM BUDGET OUTLOOK


    The growing probability of a sovereign debt crisis is an 
urgent challenge facing the United States today. The source of 
the crisis is the drift toward ever-expanding government. The 
Congressional Budget Office [CBO] has repeatedly warned current 
laws and policies are fiscally unsustainable. That means they 
will not, in fact, be sustained. CBO cautions that high and 
rising Federal debt would have serious negative consequences 
for the budget and the Nation. Under current law policies 
Federal spending on interest payments will increase rapidly and 
mounting Federal debt will negatively affect the economy in the 
years ahead. ``Because Federal borrowing reduces total saving 
in the economy over time, the nation's capital stock would 
ultimately be smaller, and productivity and total wages would 
be lower.''\18\ CBO also cautions: ``The likelihood of a fiscal 
crisis in the United States would increase. There would be a 
greater risk that investors would become unwilling to finance 
the government's borrowing unless they were compensated with 
very high interest rates; if that happened, interest rates on 
Federal debt would rise suddenly and sharply.''\19\ To avert 
such consequences, Congress must stop government's relentless 
encroachment on Americans' lives and prosperity, and let 
American civil society flourish.
    \18\Congressional Budget Office, The Budget and Economic Outlook: 
2017 to 2027 January, 2017, pp 3-4.
    This is more than a financial problem. As noted previously, 
the government's mounting debt reflects a moral failing. In the 
past, policymakers would have considered it nothing less than 
``a sin'' to routinely spend borrowed money on ordinary 
present-day uses--forcing future generations to finance today's 
consumption. A government that promotes such practices through 
its profligacy corrodes the Nation's underlying values--an even 
more pervasive threat to America's future.\20\
    \20\James M. Buchanan, ``Clarifying Confusion About the Balanced 
Budget Amendment,'' National Tax Journal, Vol. 48, No. 3, September 
1995, page 347.
    In its latest long-term analysis, CBO projects Federal debt 
held by the public--which stands at roughly 77.5 percent of 
gross domestic product [GDP] today--will surge to 113 percent 
of GDP in the next 20 years, and 150 percent by 2047.\21\ Even 
today's debt levels are well beyond the debt target of no more 
than 60-percent of GDP adopted in the European Union's 
Maastricht Treaty; in the future they will be far worse.
    \21\Congressional Budget Office, The 2017 Long-Term Budget Outlook, 
March 2017, Data and Supplemental Information.
    The projected increase in debt is driven by spending 
growing well above historic levels of revenues. Revenues today 
stand at 17.8 percent of GDP--greater than the 50-year 
historical annual average of 17.4 percent. Revenues are 
projected to average 18.2 percent of GDP over the next 10 
years, then reach 19.0 percent in 2037 and 19.6 percent in 
2047. Spending, however, will persistently outpace revenue 
growth, averaging 22.1 percent of GDP over the next 10 years, 
then surging to 26.3 percent in 2037 and 29.4 percent in 
    The automatic spending for Federal entitlement programs, 
plus interest payments, will continue to dominate the budget. 
By 2029, entitlement spending plus net interest is expected to 
consume all Federal revenue, meaning all other government 
activities--such as national defense, education, 
infrastructure, research, and myriad others--will have to be 
financed on borrowed money. By 2039, the situation will worsen, 
as a mere handful of programs--Social Security and health care 
entitlement spending--plus net interest are expected to consume 
all Federal revenue; at that point, all other direct spending 
and all discretionary spending will have to be debt-financed. 
It is important to note these trends result not from temporary 
surges in spending or economic downturns, but from permanent 
government spending programs. This is an entrenched, structural 
excess of spending over revenues.
    CBO notes it is impossible to predict how long the Nation 
could sustain such growth in Federal debt, but at some point 
investors would be begin to doubt the government's willingness 
or ability to pay its obligations. This would require the 
government to pay much higher interest costs to borrow money, 
resulting in significant negative consequences for the economy 
and the Federal budget. This large and growing amount of debt 
would restrict policymakers' ability to use tax and spending 
policies for responding to unexpected challenges, such as 
recessions, financial crises, or national security emergencies, 
and would pose substantial risks to the Nation.\23\
    \23\Ibid., pp. 3-7.
    This budget would turn the tide. If the policies 
incorporated in the budget were enacted, they would yield $6.5 
trillion in deficit reduction (compared with current 
projections) over the next 10 years. The budget calls for 
responsible reforms of government spending programs. It 
protects key priorities while eliminating waste. It avoids 
sudden and arbitrary cuts to current services, such as those 
the country would experience in a debt crisis.
    The reductions from projected spending are hardly 
draconian. Over the years, Congress has put two-thirds of the 
budget on auto-pilot, and spending in those areas grows each 
year. Yet any effort to restrain this growth in spending is 
cast, in Orwellian fashion, as a ``cut.'' This is because the 
Federal Government describes its fiscal plans relative to 
estimates of future spending, not to the reality of actual 
current spending. This is a fundamental contributor to the 
government's bias toward higher spending.
    This budget does not make sudden ``cuts.'' Instead, it 
holds spending growth to a manageable rate. Under the CBO 
current law baseline, the Federal Government will spend $52.5 
trillion over the next 10 years.\24\ Under this budget 
proposal, it will spend roughly $46.3 trillion. Put another 
way, on its current path, Federal spending will rise by an 
unmanageable annual average of 5.1 percent, significantly 
greater than the projected growth in nominal GDP. This budget 
slows that rate of spending growth to 3.0 percent, less than 
the economy's nominal rate of expansion.
    \24\Congressional Budget Office, The Budget and Economic Outlook: 
2017 to 2027, January 2017.
    Nor is this an ``austerity'' plan. When policymakers 
restrain the growth of government, they allow more room for 
private enterprise of all kinds. With its measured spending 
restraints, this budget ensures the American economy will 
outgrow the government. Thus, the budget achieves balance in 
2027 by gradually reducing the size of government relative to 
the economy from 20.7 percent this year\25\ to 17.8 percent in 
2027. To achieve this outcome, the budget encourages a range of 
fundamental program reforms, described elsewhere in this 
report, that will improve and strengthen Federal programs and 
put the government on a sound financial footing.
    The spending path assumed in this budget will result in a 
balanced budget within 10 years and a growing surplus that will 
lead to a sharp reduction in the national debt. The Budget 
Committee estimates a small budget surplus in 2027 will 
steadily grow larger in years beyond the window. At the same 
time, debt held by the public will decline from 77 percent of 
GDP today\26\ to 61 percent of GDP in 2027, and will fall 
steadily as a percent of GDP in the subsequent 20 years--a 
glide path to fully paying off the national debt.
    Over the long term, the budget assumes revenue generally 
follows CBO's extended baseline adjusted for tax relief 
provided by the American Health Care Act. The Budget Committee 
estimates revenues under this budget will rise in nominal terms 
over the next 10 years, but will hold steady as a share of the 
economy, at about 17.8 percent of GDP. The Committee further 
assumes revenues will gradually rise over the subsequent 20 
years until eventually reaching and stabilizing at 19.0 percent 
of GDP, including the macroeconomic effects of the budget's 
pro-growth policies and the Trump Administration's regulatory 
    The United States has dealt with financial problems in the 
past. In 1997, a Democratic president and a Republican Congress 
passed the Balanced Budget Act of 1997, which resulted in four 
years of budget surpluses. It was the last period of sustained 
balanced budgets the Nation has seen. This budget follows that 
model. It incorporates ideas from both parties to address one 
of the most pressing issues of the day: America's ever-rising 
national debt.




    Direct spending remains the fastest growing part of the 
spending-driven sovereign debt crisis the Nation faces.
    The Congressional Budget Office [CBO] reports that total 
non-interest direct (or ``mandatory'') spending in fiscal year 
2016 was $2.429 trillion, and will surge to $4.305 trillion by 
2027. This reflects an average annual growth rate of 5.3 
percent--faster than both CBO's projection of 2016 nominal 
economic growth of 2.9 percent and CBO's longer-term projection 
of 3.9-percent economic growth. Within overall non-interest 
mandatory spending, the two major social insurance programs are 
projected to continue growing faster than the economy as a 
whole, with Social Security (both Old-Age and Survivors 
Insurance and Disability Insurance) expected to increase from 
$910 billion in 2016 to $1.7 trillion in 2027 and Medicare from 
$692 billion in 2016 to $1.4 trillion in 2027.\27\
    \27\Congressional Budget Office, The Budget and Economic Outlook, 
2017 to 2027, January 2017.
    Over the past 10 years, major means-tested automatic 
spending programs have grown from $385 billion in 2007 to $720 
billion in 2016. In the next decade, these programs are 
expected to grow by 4.3 percent per year--from $745 billion in 
2017 to $1.1 trillion in 2027.\28\
    A number of factors contribute to these increases. The 2008 
recession caused significant increases in spending on low-
income programs. Spending is projected to remain at elevated 
levels for several programs--most notably, the Supplemental 
Nutrition Assistance Program, or SNAP (formerly known as food 
stamps). Over the past 10 years, SNAP grew at 7.3 percent 
annually, ballooning from $35 billion in 2007 to $73 billion in 
2016. While this amount is projected to decline slightly over 
the next 10 years, it remains elevated compared to prerecession 
    Other programs have also seen large increases. Supplemental 
Security Income [SSI] was created as a needs-based program that 
provides cash benefits to aged, blind, or disabled persons with 
limited income and assets. When the program began, the majority 
of payments went toward the aged. As it matured, however, a 
much greater percentage of beneficiaries were under age 18 or 
between the ages of 18 to 64. Over the past decade, spending on 
SSI has grown by 4.4 percent per year.\30\
    The largest means-tested program in the Federal budget is 
Medicaid, the Federal-State low-income health program. Medicaid 
spending, and its related State Children's Health Insurance 
Program [SCHIP], doubled from $197 billion in 2007 to $382 
billion in 2016. Going forward, CBO projects Federal Medicaid 
and SCHIP spending, on its current path, will reach $656 
billion in fiscal year 2027. Absent structural reform, Medicaid 
will not be able to deliver on its promise to provide a sturdy 
health care safety net for society's most vulnerable. Because 
of the flawed incentives in this program, Medicaid grew at 7.4 
percent a year over the past 10 years, and it is projected to 
grow 5.3 percent a year over the next 10 years. This level of 
growth is clearly unsustainable.\31\

                      The Fiscal Year 2018 Budget

    The fiscal year 2018 budget addresses both non-means-tested 
and means-tested direct spending. Most important, it tackles 
the primary drivers of debt and deficits: the government's 
health programs. For Medicare, this budget advances policies to 
put seniors, not the Federal Government, in control of their 
health care decisions. This resolution provides future retirees 
with the freedom to choose a health plan best suited for them, 
and guarantees health security throughout their retirement 
years. Under this program, traditional Medicare and private 
plans--providing the same level of health coverage--compete for 
seniors' choices, just as Medicare Advantage does today. This 
improved Medicare program would also adopt the competitive 
structure of Part D, the prescription drug benefit program, 
providing beneficiaries with a defined contribution to purchase 
coverage and, through competition, deliver savings for seniors 
in the form of lower monthly premium costs. Allowing seniors to 
choose the best plan for themselves promotes competition among 
health insurers on price and quality. This means the program 
works better for patients and can be sustained for future 
generations of seniors. The improved program also includes 
additional protections for the most vulnerable. The Federal 
contribution would be adjusted based on the health of the 
beneficiary so those with illnesses would receive higher 
payments if their condition worsened; lower-income seniors 
would receive additional assistance to help cover out-of-pocket 
costs; and wealthier seniors would assume responsibility for a 
greater share of their premiums.
    For Medicaid, this budget converts the Federal share of 
Medicaid spending into per capita allotments, as advanced in 
the House-passed ``American Health Care Act''. This structure 
gives States the flexibility to tailor their programs in ways 
that meet their fiscal needs as well as serving the most 
vulnerable in their populations. The strategy would end the 
misguided one-size-fits-all approach that ties the hands of 
State governments trying to make their Medicaid programs as 
effective as possible. In addition, the budget proposes to 
advance a work requirement for all able-bodied adults without 
dependents who are enrolled in Medicaid. Work not only provides 
a source of income and self-sufficiency, but also has been 
demonstrated as a valuable source of self-worth and dignity for 
    Additionally, in keeping with a recommendation from the 
National Commission on Fiscal Responsibility and Reform, the 
budget recommends Federal employees--including Members of 
Congress and their staffs--make greater contributions toward 
their own retirement.
    This budget is premised on the belief that the prospect of 
upward mobility should be in the reach of every American, and 
that priority must be given to maximizing the effectiveness of 
anti-poverty programs across Federal, State, and local 
governments. Congress should remove the barriers and obstacles 
preventing the most vulnerable Americans from taking advantage 
of economic and educational opportunities. Wherever possible, 
government programs should help these individuals climb the 
ladder of self-sufficiency and join the middle class. By 
balancing the budget, implementing comprehensive tax reform, 
and reforming means-tested entitlement programs, this 
resolution is designed to accomplish exactly these goals.

                                                      [Outlays by fiscal year, billions of dollars]
                                                                                                                                    Estimated   Average
                                                                                                                                   -----------   annual
                                            2007     2008     2009     2010     2011     2012     2013     2014     2015     2016                growth
                                                                                                                                       2017   ----------
Means-Tested Programs:
  Health Care Programs:
    Medicaid............................    191      201      251      273      275      251      265      301      350      368       389           7.4
    Health insurance subsidies\a,b\.....      0        0        0        0        0        0        0       13       27       31        42          n.a.
    Medicare Part D low-income subsidies     17       17       19       21       24       20       22       22       24       29        29           5.9
    Children's Health Insurance Program.      6        7        8        8        9        9        9        9        9       14        15           9.2
      Subtotal..........................    213      225      277      302      308      279      297      346      411      443       474           8.3
  Income security programs:
    Earned income and child tax              54       75       67       77       78       77       79       82       81       81        80           3.9
    SNAP................................     35       39       56       70       77       80       83       76       76       73        71           7.3
    Supplemental Security Income........     36       41       45       47       53       47       53       54       55       59        55           4.4
    Family support and foster care\d\...     31       32       33       35       33       30       32       31       31       31        31           0.2
    Child nutrition\e\..................     13       14       15       16       17       18       19       19       21       22        23           5.8
      Subtotal..........................    169      201      216      246      259      253      265      262      263      266       260           4.4
Veterans' pensions......................      3        4        4        4        5        5        5        6        5        6         6           5.1
Pell grants\f\..........................      0        1        2        4       14       12       16        8       10        6         6          n.a.
      Subtotal, Means-Tested Programs...    385      430      500      556      586      549      583      622      689      720       745           6.8
Non-Means-Tested Programs\g,h\..........  1,243    1,350    1,788    1,554    1,649    1,710    1,753    1,754    1,865    1,946     1,989           4.8
      Total Mandatory Outlays\h\........  1,628    1,780    2,288    2,110    2,235    2,259    2,336    2,376    2,554    2,666     2,734           5.3
Pell Grants (Discretionary).............     13       15       13       20       21       21       17       23       20       22        22           5.3
Means-Tested Programs:
  Adjusted for Timing Shifts............    389      430      500      556      580      555      583      622      689      713       745           6.7
Non-Means-Tested Programs:
  Adjusted for Timing Shifts............  1,242    1,350    1,788    1,554    1,627    1,731    1,753    1,754    1,865    1,916     1,985           4.8
Sources: Congressional Budget Office; staff of the Joint Committee on Taxation.
The average annual growth rate over the 2008-2017 period encompasses growth in outlays from the amount recorded in 2007 through the amount projected for
Data on spending for benefit programs in this table exclude administrative costs that are classified as discretionary but generally include
  administrative costs that are classified as mandatory.
SNAP = Supplemental Nutrition Assistance Program; n.a. = not applicable.
Because October 1 fell on a weekend in 2007, 2012, and 2016, certain federal payments that were due on those dates were instead made at the end of the
  preceding September and thus recorded in the previous fiscal year. October 1, 2017, also will fall on a weekend, causing payments due to be made in
  fiscal year 2018 to be recorded in fiscal year 2017. Those shifts primarily affect outlays for Supplemental Security Income, veterans' compensation
  benefits and pensions, and Medicare.
a. Differs from the amounts reported for 2016 through 2027 in the line ``Health insurance subsidies and related spending'' in Table 1-2 in The Budget
  and Economic Outlook: Fiscal Years 2017 to 2027 in that it does not include payments to health insurance plans for risk adjustment (amounts paid to
  plans that attract less healthy enrollees) and reinsurance (amounts paid to plans that enroll people with high health care costs). Spending for grants
  to states to establish health insurance marketplaces also is excluded.
b. Does not include amounts that reduce tax receipts.
c. Differs from the amounts reported for 2016 through 2027 in the line ``Earned income, child, and other tax credits'' in Table 1-2 in The Budget and
  Economic Outlook: Fiscal Years 2017 to 2027 in that it does not include other tax credits that were included in that table.
d. Includes the Temporary Assistance for Needy Families program, the Child Support Enforcement program, the Child Care Entitlement program, and other
  programs that benefit children.
e. Differs from the amounts reported for 2016 through 2027 in the line ``Child nutrition'' in Table 1-2 in The Budget and Economic Outlook: Fiscal Years
  2017 to 2027 in that it does not include outlays related to the Funds for Strengthening Markets program (also known as Section 32) or the Commodity
  Assistance Program.
f. Includes mandatory spending designed to reduce the discretionary budget authority needed to support the maximum award amount set in the appropriation
  act plus mandatory spending that, by formula, increases the total maximum award above the amount set in the appropriation act.
g. Does not include offsetting receipts.
h. Does not include outlays associated with federal interest payments.

                                                      [Outlays by fiscal year, billions of dollars]
                                              2017     2018     2019     2020     2021     2022     2023     2024     2025     2026     2027   (percent)
Means-Tested Programs:
  Health Care Programs:
    Medicaid..............................    389      408      428      450      474      499      525      554      584      616      650          5.3
    Health insurance subsidies\a,b\.......     42       55       64       73       78       82       85       89       92       94       97          8.8
    Medicare Part D low-income subsidies..     29       29       33       35       38       44       45       45       53       58       62          7.9
    Children's Health Insurance Program...     15       11        6        6        6        6        6        6        6        6        6         -8.9
      Subtotal............................    474      503      530      564      596      631      661      694      735      774      815          5.6
  Income security programs:
    Earned income and child tax                80       79       81       83       84       86       88       89       91       93       94          1.7
    SNAP..................................     71       69       67       67       67       66       66       66       67       68       69         -0.2
    Supplemental Security Income..........     55       52       58       60       62       68       66       62       70       72       74          3.1
    Family support and foster care\d\.....     31       32       33       33       33       33       34       34       34       35       35          1.1
    Child nutrition\e\....................     23       24       25       26       27       28       30       31       32       34       35          4.4
      Subtotal............................    260      255      263      268      273      283      283      283      295      301      308          1.7
  Veterans' pensions......................      6        5        6        6        6        7        6        6        7        8        8          3.5
  Pell grants\f\..........................      6        7        7        7        7        7        8        8        8        8        8          3.0
      Subtotal, Means-Tested Programs.....    745      771      807      845      882      928      958      991    1,045    1,090    1,139          4.3
Non-Means-Tested Programs\g,h\............  1,989    2,064    2,221    2,356    2,503    2,703    2,811    2,921    3,137    3,347    3,546          6.0
      Total Mandatory Outlays\h\..........  2,734    2,834    3,028    3,201    3,384    3,631    3,769    3,912    4,182    4,437    4,685          5.5
Pell Grants (Discretionary)\i\............     22       24       31       24       24       24       25       25       26       26       27          2.3
Means-Tested Programs:
  Adjusted for Timing Shifts..............    745      778      807      845      882      919      958    1,000    1,045    1,090    1,139          4.3
Non-Means-Tested Programs:
  Adjusted for Timing Shifts..............  1,985    2,097    2,221    2,356    2,503    2,654    2,807    2,974    3,137    3,347    3,546          6.0
Sources: Congressional Budget Office; staff of the Joint Committee on Taxation.
The projections shown here, which exclude the effects of offsetting receipts, are the same as those reported in Congressional Budget Office, The Budget
  and Economic Outlook: Fiscal Years 2017 to 2027 (January 2017),
The average annual growth rate over the 2018-2027 period encompasses growth in outlays from the amount projected for 2017 through the amount projected
  for 2027.
Projections of spending for benefit programs in this table exclude administrative costs that are classified as discretionary but generally include
  administrative costs that are classified as mandatory.
SNAP = Supplemental Nutrition Assistance Program.
Because October 1 fell on a weekend in 2016, certain federal payments that were due on that date were instead made at the end of the preceding September
  and thus recorded in the previous fiscal year. October 1 will fall on a weekend again in 2017, 2022, and 2023, and the same shift in certain federal
  payments will occur. The payment shifts primarily affect outlays for Supplemental Security Income, veterans' compensation benefits and pensions, and
a. Differs from the amounts reported for 2016 through 2027 in the line ``Health insurance subsidies and related spending'' in Table 1-2 in The Budget
  and Economic Outlook: Fiscal Years 2017 to 2027 in that it does not include payments to health insurance plans for risk adjustment (amounts paid to
  plans that attract less healthy enrollees) and reinsurance (amounts paid to plans that enroll people with high health care costs). Spending for grants
  to states to establish health insurance marketplaces also is excluded.
b. Does not include amounts that reduce tax receipts.
c. Differs from the amounts reported for 2016 through 2027 in the line ``Earned income, child, and other tax credits'' in Table 1-2 in The Budget and
  Economic Outlook: Fiscal Years 2017 to 2027 in that it does not include other tax credits that were included in that table.
d. Includes the Temporary Assistance for Needy Families program, the Child Support Enforcement program, the Child Care Entitlement program, and other
  programs that benefit children.
e. Differs from the amounts reported for 2016 through 2027 in the line ``Child nutrition'' in Table 1-2 in The Budget and Economic Outlook: Fiscal Years
  2017 to 2027 in that it does not include outlays related to the Funds for Strengthening Markets program (also known as Section 32) or the Commodity
  Assistance Program.
f. Includes mandatory spending designed to reduce the discretionary budget authority needed to support the maximum award amount set in the appropriation
  act plus mandatory spending that, by formula, increases the total maximum award above the amount set in the appropriation act.
g. Does not include offsetting receipts.
h. Does not include outlays associated with federal interest payments.
i. The discretionary baseline does not represent a projection of expected costs for the discretionary portion of the Federal Pell Grant Program. As with
  all other discretionary programs, the budget authority is calculated by inflating the budget authority appropriated for fiscal year 2017. Outlays for
  future years are based on those amounts of budget authority and also reflect a temporary surplus of budget authority provided in 2017.



                           A Subpar Recovery

    U.S. economic performance has generally been mixed in the 
first half of 2017, and much needs to be done to return the 
economy to its previous growth potential. Since 2010, real 
growth in gross domestic product [GDP] has averaged only 
slightly better than 2.0 percent annually, well below the 3.0 
percent historical trend rate of growth in the U.S.
    This trend of prolonged subpar economic performance has 
surprised most economic forecasters. Back in 2012, the 
Congressional Budget Office [CBO] expected real GDP to grow by 
a relatively brisk 3.0-percent annual average over the 10-year 
budget window. By 2014, that projected average slipped to 2.5 
percent. In CBO's latest economic forecast, expected average 
real GDP growth fell to just 1.9 percent (see Figure 5).

        FIGURE 5

    CBO has significantly lowered its expectation of long-term 
growth in potential GDP as well, due mainly to negative 
developments in the labor market and expected sluggish 
productivity growth. CBO expects slower growth in the potential 
labor force later this decade, which is linked to the aging of 
the population and the retirement of the baby-boom generation. 
With a smaller labor force, there will also be less business 
investment and slower growth in the country's capital stock. 
This ``new normal''--if that is what it is--is especially 
troubling because without more robust growth the economy will 
struggle to support the 80 million retirees expected over the 
next couple decades, as well as the working age population. 
Standards of living will suffer, especially for middle-income 
    Government policies also play a role in this trend. The 
heavy spending of recent years drains economic resources that 
otherwise would be available for growth-producing activities. 
In addition, the sharp increase in government debt--which now 
stands at near-record post-World War II levels--will crowd out 
additional capital investment in the long term. Meanwhile, CBO 
projects the Affordable Care Act will create incentives for 
people to work fewer hours over the medium and longer term. The 
overall picture that CBO's latest economic forecast paints is 
that sluggish economic growth has evolved from mainly a 
cyclical issue to a longer-term structural problem. The clear 
downward trend in the economic forecast in recent years has 
raised the hurdle significantly for those trying to correct the 
fiscal imbalance over the next decade. As discussed below, 
however, a meaningful change in fiscal policy can repay in 
stronger economic growth and budgetary dividends.

                   The Benefits of a Stronger Economy

    A stronger economy would provide a number of tangible 
benefits for the average American. Back in the latter part of 
the 1990s, real GDP was growing at a rate of about 4.5 
percent--roughly twice the rate of growth today. From 1995 to 
1999, real median household income grew by $5,000, nearly 10 
percent. Not coincidentally, this was a time when the Federal 
budget achieved a string of surpluses. In contrast, fiscal 
policy today features large deficits combined with a 
historically large stock of government debt.
    A robust labor market also fosters more opportunity and 
upward mobility. Currently about 5.3 million Americans are 
working part-time due to poor business conditions or because 
that was the only employment option available. In the latter 
part of the 1990s, 30 percent fewer Americans faced this 
problem. A stronger economy also naturally alleviates poverty. 
By the year 2000, after multiple years of robust economic 
growth, the rate of poverty in the U.S. had declined to a 25-
year low. A more robust economy also provides more resources to 
the government to maintain a strong safety net.
    Achieving a stronger rate of growth requires the right 
economic policies. Key policies needed to bolster growth 
include fundamental tax reform to lower tax rates on 
individuals and businesses and thus reduce disincentives to 
work and invest; regulatory reforms to scale back and prevent 
regulations, such as Dodd-Frank, that fail cost-benefit tests 
and hamper economic growth; and direct spending reforms to 
prevent a debt explosion and improve incentives.

                     The Current Economic Situation

    Economic output remained sluggish in the first quarter of 
2017, growing by just 1.4 percent on a seasonally adjusted, 
annualized basis. This was better than an earlier estimate of 
0.7 percent, but still weaker than all but two quarters of the 
past two years.\32\ The tepid performance was highlighted by a 
slowdown in consumer spending, which typically accounts for 
two-thirds of overall GDP growth. Business investment, however, 
advanced in the first quarter at its strongest clip since late 
2013 and most economists expect overall GDP growth to rebound 
in subsequent quarters. Looking back, real GDP increased by 
just 1.6 percent (measured on a year-over-year basis) in 2016, 
the lowest annual growth rate in five years. Since 2010, real 
GDP growth has averaged just over 2.0 percent annually, well 
below the roughly 3.0-percent historical trend rate of growth 
in the U.S. Sluggish economic growth has contributed to the 
government's fiscal problems. It leads to lower revenue levels 
than would otherwise occur while government spending (on 
welfare programs, for example) is higher. According to CBO, if 
productivity growth, which is closely correlated with overall 
GDP growth, is just 0.1 percentage point lower per year, the 
budget deficit will be higher by $273 billion over 10 years. 
Conversely, stronger productivity and GDP growth would greatly 
improve the fiscal outlook.
    \32\Bureau of Economic Analysis release, 29 June 2017: https://
    Monthly job growth has been choppy in 2017, but the pace of 
employment gains steadied heading into mid-year. So far this 
year, monthly job increases are averaging 180,000, down 
slightly from 187,000 per month last year. In the latest month 
of June, job growth was 222,000, above market expectations. The 
unemployment rate rose slightly to 4.4 percent in June, but 
remains near the lowest rate in 16 years. When discouraged 
workers and marginally employed persons are counted, the 
broader under-employment rate is 8.6 percent, nearly double the 
headline rate.\33\ Still, this under-employment rate has now 
fallen to its lowest level since late 2007.
    \33\Bureau of Labor Statistics, U-6 Index, Table A-15, July 2017.
    Although the overall trend of job gains has still been 
solid this year, and the headline unemployment rate has dropped 
to a low level, other aspects of the labor market are not as 
robust. The labor force participation rate stands at 62.8 
percent, down a full 3 percentage points since early 2009, and 
remains near its lowest level since the late 1970s (see Figure 
6). Long-term unemployment also remains a problem. Of the 7.0 
million people who are currently unemployed, 1.7 million (24 
percent) have been unemployed for more than six months. Long-
term unemployment has genuinely corrosive consequences. For 
individuals, it erodes their job skills, further detaching them 
from employment opportunities. At the same time, it undermines 
the long-term productive capacity of the economy.
    In previous episodes when the unemployment rate was at or 
below 5.0 percent, the overall labor market was healthier than 
it is today. For instance, about a decade ago, in 2005, the 
unemployment rate was trending lower and even dipped below 5.0 
percent. Yet the labor force participation rate was 66 percent, 
more than 3 percentage points above the rate today. The number 
of people not in the labor force (or ``on the sidelines'') is 
currently about 95 million, or 24 percent higher than the 
figure back in 2005. Also, more people today are working part-
time because of poor business conditions or they can only find 
part-time work. Currently, 5.3 million Americans face this 
problem, whereas that figure was slightly more than 4 million 
in 2005.

    Wage gains have been moderate over the past year. Average 
hourly earnings of private-sector workers increased by 2.5 
percent in June from the year-earlier level. Still, prior to 
the recession, average hourly earnings were tracking closer to 
3.5 percent. Real median household income is finally on the 
upswing, but at $56,500 it is still $900, or 1.6 percent, below 
its pre-recession peak in 2007.

        FIGURE 6

    Crude oil prices had plunged from mid-2014 to early 2016, 
dropping from over $100 per barrel to just $30 per barrel. 
Since that time, however, prices have been trending higher. So 
far in 2017, crude oil prices are averaging just over $50 per 
barrel, about 50 percent higher than the level in early 2016.
    The gradual increase in the price of oil has led to a 
relative firming in headline inflation rates. For instance, the 
price index for personal consumption expenditures [PCE] has 
increased by 1.4 percent over the latest 12 months, up from 
annual growth below 1.0 percent in 2015. The so-called ``core'' 
PCE index (which excludes energy and food prices), the Federal 
Reserve's preferred inflation gauge, has also increased 1.4 
percent over the past year. These levels of inflation are still 
somewhat below the Federal Open Market Committee's 2-percent 
objective for inflation over the longer run.
    The Federal Reserve increased interest rates for the second 
time this year in June. That marked the fourth rate hike since 
late 2015. Prior to that time, the Fed had been holding 
interest rates near zero since the depths of the financial 
crisis in 2008. Looking ahead, the Fed has signaled that it 
will continue to increase interest rates at a measured pace, 
thereby normalizing monetary policy.
    The yield on the 10-year Treasury note has increased since 
last fall. The 10-year Treasury has been hovering around 2.2 
percent as of June 2017, up about 40 basis points from last 
    Many global central banks have signaled their intention to 
keep interest rates low and their overall monetary policy 
loose--in contrast to the Federal Reserve's current policy 
stance. This divergence in central bank policy stances on 
interest rates, as well as the differing economic outlook 
between the U.S. and the rest of the world, has caused the U.S. 
dollar to appreciate vis-a-vis other foreign currencies.
    The value of the U.S. dollar has been increasing gradually 
over the past 3 years. Since mid-2014, the U.S. dollar has 
appreciated by 20 percent on a trade-weighted basis.
    U.S. stock markets have increased sharply in the wake of 
the November 2016 election and the promise of pro-growth 
economic policies from Washington. Since early November, the 
S&P 500 has increased by roughly 15 percent.

                          The Economic Outlook

    The Trump Administration's economic forecast is more 
hopeful than the Obama Administration's forecast last year, and 
it is more upbeat than either CBO or the Blue Chip consensus of 
private-sector forecasters--who also are less optimistic than 
last year. Assuming full implementation of its proposed 
policies--which include reforming the tax code and health care, 
cutting regulation, slowing the growth of spending, and 
reducing deficits--the administration projects real GDP, 
measured on a year to year basis, will grow 2.3 percent in 
calendar year 2017, 2.4 percent in 2018. It will then rise to 
3.0 percent in 2021 and remain at that level in later years of 
the budget window. Assuming a continuation of current law, CBO 
projects real GDP will grow 2.3 percent in calendar year 2017, 
decline to 2.0 percent in 2018, 1.7 percent in 2019 and will 
then stabilize at 1.9 percent in 2022 and later years. CBO 
writes that its projections are generally similar to other 
forecasters: ``The economic projections in this report do not 
differ significantly from those of most other forecasters. They 
are generally similar to the Blue Chip consensus forecast that 
was published this month (January 2017) and to the latest 
forecasts by Federal Reserve officials (December 2016).''\34\
    \34\Congressional Budget Office, The Budget and Economic Outlook: 
2017 to 2027, January 2017, p.41.
    The Blue Chip consensus projects real GDP growth of 2.1 
percent in 2017, 2.4 percent in 2018, and about 2.0 percent in 
later years. Over the 10-year window of the budget resolution, 
the administration's Office of Management and Budget [OMB] 
expects real GDP growth to average 2.9 percent, significantly 
higher than the Blue Chip's 2.1 percent and a full percentage 
point higher than CBO, which projects a 1.9 percent growth rate 
average over this period.
    Like other forecasters, the administration expects the 
unemployment rate to decline gradually in the coming years. 
According to OMB, the unemployment rate will average 4.6 
percent in 2017, decline to 4.4 percent in 2018, and rise to 
4.6 percent in 2019. The administration sees the unemployment 
rate stabilizing at 4.8 percent in 2021. That path is similar 
in the near term but is more optimistic in the latter part of 
the window than the CBO forecast. CBO expects the unemployment 
rate to average 4.6 percent in 2017, 4.4 percent in 2018, 4.5 
percent in 2019, rising to 5.0 percent in 2021 through 2023 and 
stabilizing at 4.9 thereafter. The Blue Chip consensus sees a 
near-term decline in the unemployment rate similar to both CBO 
and the administration, but is closer to the administration's 
forecast in the latter part of the window. According to Blue 
Chip, the unemployment rate will average 4.5 percent in 2017, 
4.3 percent in 2018, and 4.5 percent in 2019 and will rise 
gradually in later years before leveling off at 4.7 percent in 
    The administration expects consumer price inflation, 
measured by the year-to-year percent change in the consumer 
price index, to rise to 2.6 percent in 2017 from 1.3 percent in 
2016. The administration expects price inflation of 2.3 percent 
in 2018 and later years. CBO expects price inflation of 2.4 
percent in 2017, 2.3 percent in 2018 and 2019 and 2.4 percent 
in 2020 and later years. The Blue Chip consensus expects 
inflation over the next two years that is similar to the 
administration's and CBO's forecasts. According to Blue Chip, 
price inflation will rise to 2.4 percent in 2017, range between 
2.2 percent and 2.4 percent in subsequent years and stabilize 
at 2.4 percent in 2024.
    As economic growth strengthens, OMB expects interest rates 
will rise to more normal levels in the coming years. The 10-
year Treasury note, which was 1.8 percent in 2016, is projected 
to rise to 2.7 percent in 2017, 3.3 percent in 2018, and 3.4 
percent in 2019. OMB expects the 10-year Treasury to hit 3.8 
percent in 2020 and remain there in later years. CBO expects 
interest rates to rise to more normal levels as well but more 
gradual increases and lower rates than the administration for 
most years. CBO sees the 10-year Treasury averaging 2.3 percent 
in 2017, 2.5 percent in 2018, and 2.8 percent in 2019, and 
continuing to rise gradually in subsequent years until 
stabilizing at 3.6 percent in 2023. The Blue Chip consensus 
also expects a gradual increase in interest rates over the 
budget window, but like the administration sees higher interest 
rates than does CBO over the next several years. The Blue Chip 
consensus forecasts the 10-year Treasury note to average 2.6 
percent in 2017, 3.1 percent in 2018, 3.6 percent in 2019 and 
gradually rising further until stabilizing at 3.9 percent in 
2024 and later years.

             Economic Assumptions of the Budget Resolution

    Customarily, the House budget resolution employs CBO's 
economic assumptions as its foundation, but this is not a 
requirement. The Budget Committee may use a different set of 
projections if it chooses. The Committee has made that choice 
in this case. The budget resolution calls for significant 
policy changes, including substantial reductions in deficits 
and debt that are expected to lead to improved economic 
outcomes. The resolution assumes the enactment of such policies 
and the economic benefits they would generate. In turn, the 
effects of improved economic performance are expected to ``feed 
back'' into components of the budget, producing improved fiscal 
outcomes. Put another way, the resolution rests on a ``post-
policy'' economic forecast that incorporates the effects of the 
budget's pro-growth strategy. It is the same approach that 
presidents' budgets have used for decades, and is more fully 
explained in the next section, ``Macroeconomic Feedback Effects 
of Pro-Growth Policies.''
    As noted previously, CBO projects real (inflation-adjusted) 
GDP to grow at an annual average of just 1.9 percent--more than 
a full percentage point below the 3.0-percent average of the 
past 50 years. One component of this projection is CBO's 
``current-law'' expectation for Federal policy. CBO assumes 
laws in place today will remain in place throughout the 10-year 
budget window--that major program spending and tax laws, as 
well as government regulation, will unfold as called for in 
existing law. CBO's projection also assumes the continuation of 
current regulatory regimes. This current-law framework 
contributes to CBO's dismal economic forecast.
    In contrast, the Budget Committee assumes the enactment of 
its pro-growth policies--including comprehensive tax reform and 
welfare reform, the budget's spending restraint, the 
administration's regulatory reforms, and Obamacare repeal and 
replace legislation--and the economic benefits they would 
generate. Under the ``post-policy'' perspective of this 
resolution, real GDP growth will average 2.6 percent over the 
budget window. This projected level of real economic growth is 
lower than the administration's but higher than CBO's or the 
Blue Chip's. The Committee projects that real economic growth 
rates under this year's House budget will remain near CBO's 
baseline forecast in the initial years of the window with 
larger differences in later years of the window.
    Regarding other major macroeconomic variables, the 
resolution foresees inflation, as measured by the consumer 
price index, averaging 2.4 percent for the 2018-2027 period. 
The unemployment rate is expected to remain at or below 5.0 
percent, at an average of 4.8 percent per year. The resolution 
foresees somewhat higher interest rates along with increased 
economic growth, particularly in the latter part of this ten-
year period. The rates on three-month Treasury bills under the 
resolution's assumptions rise gradually through the this 
period, reaching 3.1 percent in 2024 and average 2.7 percent 
over 2018-2027, similar to the Administration and Blue Chip but 
higher than CBO's 2.5 percent. The rates on 10-year Treasury 
note under the House budget rise gradually from 2.6 percent in 
2018 to 4.0 percent in 2027 and average 3.6 percent over the 
10-year period, similar to the administration and Blue Chip but 
higher than CBO's 3.3 percent.
    It is important to note that this improved growth rate 
stems from the combination of policies assumed in the budget 
resolution. It cannot be separated into separate legislative 
initiatives considered in isolation. Further, maintaining pro-
growth fiscal policies is critical for keeping their benefits 

                                                                    [Calendar years]
                                                          2016     2017    2018    2019    2020    2021    2022    2023    2024    2025    2026    2027
                                                              Year to Year, Percent Change
Real GDP:
  Administration Budget..............................       1.6     2.3     2.4     2.7     2.9     3.0     3.0     3.0     3.0     3.0     3.0     3.0
  CBO (Jan. 2017)....................................       1.6     2.3     2.0     1.7     1.5     1.8     1.9     1.9     1.9     1.9     1.9     1.9
  Blue Chip (March and May 2017).....................       1.6     2.1     2.4     2.1     2.0     2.0     2.0     2.1     2.0     2.0     2.0     2.0
Consumer Price Index:
  Administration Budget..............................       1.3     2.6     2.3     2.3     2.3     2.3     2.3     2.3     2.3     2.3     2.3     2.3
  CBO (Jan. 2017)....................................       1.3     2.4     2.3     2.3     2.4     2.4     2.4     2.4     2.4     2.4     2.4     2.4
  Blue Chip (March and May 2017).....................       1.3     2.4     2.2     2.3     2.4     2.3     2.3     2.3     2.4     2.4     2.4     2.4
                                                                 Annual Average, Percent
Unemployment Rate:
  Administration Budget..............................       4.9     4.6     4.4     4.6     4.7     4.8     4.8     4.8     4.8     4.8     4.8     4.8
  CBO (Jan. 2017)....................................       4.9     4.6     4.4     4.5     4.9     5.0     5.0     5.0     4.9     4.9     4.9     4.9
  Blue Chip (March and May 2017).....................       4.9     4.5     4.3     4.5     4.6     4.6     4.7     4.7     4.7     4.7     4.7     4.7
3-Month Treasury Bill:
  Administration Budget..............................       0.3     0,8     1.5     2.1     2.6     2.9     3.0     3.0     3.1     3.1     3.1     3.1
  CBO (Jan. 2017)....................................       0.3     0.7     1.1     1.7     2.3     2.7     2.8     2.8     2.8     2.8     2.8     2.8
  Blue Chip (March and May 2017).....................       0.3     1.0     1.8     2.4     2.7     2.8     2.8     2.8     2.9     2.9     2.9     2.9
10-Year Treasury Note:
  Administration Budget..............................       1.8     2.7     3.3     3.4     3.8     3.8     3.8     3.8     3.8     3.8     3.8     3.8
  CBO (Jan. 2017)....................................       1.8     2.3     2.5     2.8     3.1     3.4     3.5     3.6     3.6     3.6     3.6     3.6
  Blue Chip (March and May 2017).....................       1.8     2.6     3.1     3.6     3.7     3.8     3.8     3.8     3.9     3.9     3.9     3.9
Sources: Congressional Budget Office, Office of Management and Budget, and Blue Chip Economic Indicators.

                                        TABLE 7.--ECONOMIC ASSUMPTIONS OF THE FISCAL YEAR 2018 BUDGET RESOLUTION
                                                                    [Calendar years]
                                                               2017    2018    2019    2020    2021    2022    2023    2024    2025    2026    2027   2027
---------------------------------------------------------------------------------------------------------------------------------------------------- ------
                                                              Year to Year, Percent Change
Real GDP:
  HBC (June 2017)...........................................    2.3     2.3     2.4     2.5     2.7     2.9     2.9     2.8     2.6     2.6     2.6
Consumer Price Index:
  HBC (June 2017)...........................................    2.4     2.3     2.3     2.4     2.4     2.4     2.4     2.4     2.4     2.4     2.4
                                                                 Annual Average, Percent
Unemployment Rate:
  HBC (June 2017)...........................................    4.6     4.4     4.5     4.9     5.0     5.0     5.0     4.9     4.9     4.9     4.9
3-Month Treasury Bill:
  HBC (June 2017)...........................................    0.7     1.2     1.9     2.6     2.9     3.0     3.0     3.1     3.1     3.1     3.2
10-Year Treasury Note:
  HBC (June 2017)...........................................    2.3     2.6     3.0     3.4     3.7     3.8     3.8     3.9     3.9     3.9     4.0

                         OF PRO-GROWTH POLICIES


    Economic growth is one of the major determinants of revenue 
and spending levels--and therefore the size of budget 
deficits--over a given period. For instance, a higher rate of 
gross domestic product [GDP] growth can lead to lower projected 
spending if it translates into reduced burdens on government 
safety net programs. It can also generate higher revenue due to 
increases in taxable incomes. Naturally, such a pattern would 
cause a reduction in Federal deficits and debt relative to 
current estimates. Conversely, lower rates of growth can cause 
the opposite outcomes: higher rates of spending increases and 
lower revenue growth.
    On the other hand, Federal policies themselves--including 
tax policy, regulations, and rising deficits and debt--can 
affect the economy's potential to grow. They can generate 
changes in economic performance that ``feed back'' into 
budgetary outcomes. Consequently, fiscally responsible policies 
that improve the economy's long-term growth prospects can help 
reduce the size of budget deficits over a given period.
    As noted in the previous section, this resolution is based 
on a post-policy perspective, incorporating the macroeconomic 
feedback effects of its spending and deficit reduction, as well 
as its assumed tax reform and other policies. Although a 
departure from normal practice, it is justified based on 
analyses by a range of economists.
    The Congressional Budget Office [CBO] has written 
extensively on the risks to the economy of deficits and debt, 
and how reducing them has economic benefits. Other policies 
likely to boost economic growth include fundamental tax reform, 
increasing domestic energy production, regulatory reform, and 
the restoration of incentives for people to work, save, and 
invest. At present, however, CBO projects real (inflation-
adjusted) [GDP] to grow at an annual average of just 1.9 
percent--more than a full percentage point below the 3.0-
percent average of the past 50 years.
    These outcomes are at least partly due to the policies of 
the previous administration, starting with the overall fiscal 
legacy after former President Obama's tenure. It is ``genuinely 
unsustainable,'' according to Douglas J. Holtz-Eakin, President 
of the American Action Forum and former CBO Director. Absent 
reform, he says, the government's direct spending programs will 
inevitably lead to a crisis or a sharp increase in taxes--both 
of which would hamper growth. Holtz-Eakin also contends the 
government's high-spending policies under the Obama 
Administration--which he describes as a ``misguided reliance on 
temporary, targeted piecemeal policymaking''--failed to 
stimulate the economy as their advocates promised. ``Even if 
one believed that countercyclical fiscal policy (``stimulus'') 
could be executed precisely and had multiplier effects, it is 
time to learn by experience that this strategy is not 
    \35\Douglas J. Holtz-Eakin, testimony to the Committee on the 
Budget, U.S. House of Representatives, 7 June 2017.
    A second drag on the economy is the corporate income tax. 
``It doesn't raise that much revenue, drives production in 
headquarters overseas, and is incredibly costly to comply with 
and administer,'' Holtz-Eakin says.
    A third problem is an increasing Federal Government 
regulatory burden on the private sector under Obama. Over the 
past eight years, Holtz-Eakin says, ``the agencies have put in 
place new major regulations with a cumulative increase in 
compliance costs totaling $800 billion.'' He suggests this has 
an economic impact comparable to a $100-billion tax increase 
every year for eight years.\36\
    The current historically low labor force participation rate 
also plays a role in the economic outlook. About half the 
reduction in the labor force participation rate since 2009 is 
due to people leaving the labor force voluntarily, according to 
economist John W. Diamond of Rice University--and ``this is 
largely because of policies such as the Affordable Care Act 
that is basically a large implicit tax on work and so people 
are choosing not to work as much.''\37\
    \37\John W. Diamond, testimony to the Committee on the Budget, U.S. 
House of Representatives, 7 June 2017.
    In any event, continuing the economic pattern is 
unacceptable. ``[T]he recent economic performance is 
insufficient to improve standards of living at a rate to which 
most Americans are accustomed. And it is at odds with a society 
that promises opportunity and upward mobility for the next 
generation * * *. The conduct of economic policies during the 
past several years * * * has failed to address structural 
impediments to more rapid growth in productivity and 
    \38\John F. Cogan, R. Glenn Hubbard, John B. Taylor, Kevin M. 
Warsh, On the Prospects for Higher Economic Growth, Hoover Institution, 
Stanford University, and the American Enterprise Institute, 18 July 
    All these economists agree the right set of Federal 
policies could lead to stronger economic growth than CBO 
projects. Among these policies are spending restraint, deficit 
reduction, tax reform, and regulatory reform--the strategy of 
this budget resolution. ``The policy changes of the kind 
proposed by the Congress and the [Trump] Administration, if 
enacted, would significantly improve the economy's growth 
    In some respects, the reasons are not difficult to 
understand. For instance, every dollar the government spends is 
a dollar drawn from the economy and therefore not available for 
growth-producing private-sector activities. This might be an 
entirely rational choice. Americans surely support devoting 
economic resources, through the government, to protecting the 
Nation's security and enforcing its laws. The construction and 
maintenance of infrastructure may also be judged a worthwhile 
government activity--one that can itself help maintain 
conditions for growth. On the other hand, if government spends 
on activities that readily could be managed in the private 
sector, or merely transfers resources from one sector to 
another, there is little benefit to the economy. Such spending 
tends to create costs that actually impede growth. 
Consequently, limiting government spending to the extent 
possible, and focusing resources on truly essential government 
activities, leaves room for the economy to expand. Spending 
restraint is itself a pro-growth policy.
    Similarly, deficit reduction can be an aid to growth. When 
the government borrows, it draws resources from the pool of 
savings--resources that otherwise would go toward investments 
leading to enhanced productivity. Chronic government borrowing 
dampens this potential.
    Another example is tax reform. When there are many tax 
brackets, and increasingly high marginal rates, workers 
experience less and less benefit from working additional hours. 
This is because the next dollar earned may be taxed at a higher 
rate and therefore yield less growth in household incomes. 
Higher marginal tax rates also encourage people to leave the 
workforce earlier than would otherwise be the case. 
Consequently, such a rate structure reduces incentives to work. 
The complexity of the tax code aggravates its anti-growth 
effects. The tax code is honeycombed with special-interest 
exclusions, exemptions, deductions, credits, and so on. Nearly 
all of them are aimed at encouraging some government-approved 
activity. That is, however well-intentioned such provisions 
might be, they are motivated by political interests, not 
necessarily their potential for promoting economic growth. They 
can even distort economic decisions by causing taxpayers to 
divert resources to tax-advantaged options rather than 
activities that could contribute to growth.
    These are among the reasons for the policies of this budget 
resolution--spending restraint, deficit reduction, and tax 
reform, along with others.
    The economists identified in this discussion believe 
returning to the Nation's historical growth rate of 3.0-percent 
per year, while ambitious, is conceivable under these policies. 
``Could implementation of such a comprehensive economic plan 
raise the economic growth rate to 3 percent? We believe it 
can.''\40\ Nevertheless, the assumptions of this budget 
resolution are more conservative than that, though more 
positive than those of CBO.
    The Budget Committee estimates that under the pro-growth 
policies in this year's House budget resolution--including 
Obamacare repeal and replace legislation, comprehensive tax 
reform, welfare reform, net deficit reduction of $5.0 trillion 
from spending restraint, and the Trump Administration's 
regulatory reforms--real economic growth can average 2.6 
percent over the budget window, 0.7 percentage point higher 
than the CBO baseline's 1.9 percent average. This higher growth 
rate is consistent with what Holtz-Eakin, Diamond, Cogan, 
Hubbard, Taylor, and Warsh all say is achievable if these pro-
growth policies are enacted and implemented.
    According to the CBO, productivity growth is an important 
determinant of real economic growth over time. Productivity 
growth that is just 0.1 percentage point higher than expected 
over the 10-year window would translate into annual rates of 
real economic growth that are about 0.1 percentage point higher 
than those underlying the baseline. CBO estimates that such 
productivity growth increase would reduce the cumulative 
deficit by $273 billion over 10 years, mostly because of higher 
revenues--without tax increases.\41\ An increase in the labor 
force participation rate is another important determinant of 
real economic growth over time. According to CBO, if labor 
force growth is just 0.1 percentage point higher than expected 
cumulative deficits would fall by $185 billion over 10 years, 
mostly because of higher revenues resulting from an increase in 
labor compensation due to greater hours worked.\42\
    \41\Congressional Budget Office, The Budget and Economic Outlook: 
2017 to 2027, ``Appendix B, How Changes in Economic Projections Might 
Affect Budget Projections,'' January 2017.
    \42\Congressional Budget Office, How Economic Changes Affect CBO's 
Budget Projections, 24 April 2017 post on the CBO blog.
    Applying the CBO economic rules of thumb to 2.6 percent 
average economic growth yields a macroeconomic effect on the 
budget of $1.8 trillion over 10 years assuming that most of the 
0.7 percentage point increase in average annual growth is due 
to higher productivity and the remaining portion of higher 
growth is due to higher labor force growth compared to the 
January 2017 CBO baseline. The budget assumes that $1.5 
trillion of this total reduces the deficit.\43\ Not taking this 
$300 billion into account in the deficit calculation is based 
on HBC staff's review of several estimates by non-governmental 
and governmental entities of the growth potential for various 
tax reform proposals.
    \43\This estimate includes debt service effects due to higher 
interest rates and also debt service effects due to non-interest 
deficit reduction.
    The Committee also projects the increased economic growth 
expected under this budget will result in interest rates that 
are somewhat higher than those underlying the CBO baseline. The 
net effect of these macroeconomic changes on the Federal budget 
will be significantly positive, primarily due to higher 
revenues that result from greater growth--without tax 
    Maintaining pro-growth fiscal policy, however, entails a 
broad and long-term commitment, not simply individual 
initiatives. ``Economic growth policy is more a philosophy than 
a piece of legislation. It is a commitment at every juncture in 
the policy process to evaluate tradeoffs between social goals, 
environmental goals, special interest goals and economic 
growth--and err on the side of growth.''\44\
    \44\Op cit., Holtz-Eakin.

                        FUNCTIONAL PRESENTATION


    The construction of reports such as this has typically 
followed the sequence of functional categories in the budget 
resolution itself. These categories aim to reflect major 
activities of the government, and they have changed little 
since enactment of the Congressional Budget Act of 1974.
    This budget resolution retains these conventional 
categories, as do the summary tables in the report. The 
narrative discussion below, however, takes a different 
approach. As with the House budget resolutions of the 114th 
Congress, it arranges the functions differently to reflect two 
important governing considerations. First is the distinction 
between the proper roles of State and local governments and 
those of the Federal Government--commonly known as 
``federalism.'' The second is the growing burden of mandatory, 
or direct, spending programs, which are increasingly dominating 
the budget.
    The standard budget resolution format presents the range of 
government activities largely without distinguishing those of 
principal importance to the national government from those that 
may draw greater initiative from States and localities or the 
private sector. While National Defense and International 
Affairs appear first--as is appropriate for two of the national 
government's main responsibilities--the sequencing of the 
remaining functions appears to reflect no order of priorities 
for the Federal Government. There is no reason, for example, 
why Energy (Function 270) should appear before Health (Function 
550), or Veterans Benefits and Services (Function 700) before 
Administration of Justice (Function 750).
    The narratives below are arranged to make such a 
distinction. The presentation retains the content of each 
functional category, just as in the conventional format, but 
organizes the functional discussions in four broader categories 
as described below. The intent is to provoke a re-evaluation of 
the roles of different layers of government through the 
structure of the report itself. Put another way, the format 
encourages lawmakers and the public to think differently about 
spending priorities by looking at the budget differently.
    The groupings are as follows:

    Principal Federal Responsibilities. The first group 
consists of those activities clearly associated with the 
national level of government. Defending the country and 
conducting international diplomacy are obvious components here, 
as directed by the Constitution itself. Those categories do 
not, however, acknowledge several other areas for which the 
Federal Government also has the central responsibility. These 
include veterans' benefits (an aspect of the compensation for 
military service), Federal courts and law enforcement, and 
general government, the last of which mainly finances the 
Legislative and Executive Branches of the Federal Government. 
Also included here are Overseas Contingency Operations/Global 
War on Terrorism, which provides funds for non-recurring 
military and diplomatic activities in the Middle East.\45\ 
Finally, the section reflects government-wide policies--
policies that cut across functional categories and Executive 
Branch agencies.
    \45\The Budget Control Act of 2011 employs the term Overseas 
Contingency Operations/Global War on Terrorism. This resolution uses 
the original Bush Administration term, Global War on Terrorism.
    The overall grouping, using the formal functional titles, 
is as follows:

     LNational Defense

     LInternational Affairs

     LOverseas Contingency Operations/Global War on 

     LVeterans Benefits and Services

     LAdministration of Justice

     LGeneral Government

     LGovernment-Wide Policy

    Domestic Priorities. The second set of categories consists 
mainly of the discretionary spending in Functions 250 through 
650 of the conventional format. These are activities that may 
be best administered or initiated by State and local 
governments or the private sector. In addition, most of these 
activities would exist even if there were no Federal Government 
(schools, hospitals, roads, and so on). This does not suggest 
they are of lesser priority. The arrangement simply aims to 
encourage greater recognition of States and localities in 
America's governing system--that is, the principle of 
federalism. Although the discussion here focuses on annually 
appropriated discretionary spending, two categories--Energy and 
Transportation--retain both the discretionary and direct 
spending components. This is because in these areas, the two 
forms of spending are intertwined in ways unlike those of other 
functional categories. In Energy, for example, what appears as 
``negative'' direct spending mainly reflects the incoming 
repayment of loans and receipts from the sale of electricity 
produced by Federal entities, as well as rescissions of 
unobligated balances in green energy loan programs. These are 
fundamentally different from most direct spending, which 
applies to government benefit programs. Transportation has a 
split treatment of its funding. Its budget authority is a kind 
of mandatory spending called contract authority, while its 
outlays--controlled by annual limitations on obligations set in 
appropriations acts--are treated as discretionary spending; the 
two cannot really be separated.
    Overall, this grouping of domestic priorities consist of 
the following (discretionary spending only, unless indicated 

     LGeneral Science, Space, and Technology

     LEnergy (both discretionary and direct spending)

     LNatural Resources and Environment


     LCommerce and Housing Credit

     LTransportation (both discretionary and direct 

     LCommunity and Regional Development

     LEducation, Training, Employment, and Social 


     LIncome Security

     LOther Domestic Discretionary (mainly the 
administration of the Social Security and Medicare Programs)

    Direct Spending Programs. This group generally presents the 
direct spending in the same functional categories as in the 
Domestic Priorities group. The aim is to reflect the growing 
magnitude of these programs--mostly social insurance and safety 
net programs--in the overall budget. This form of spending is 
largely open-ended and flows from effectively permanent 
authorizations. Most of the programs funded this way pay 
benefits directly to groups or individuals without an 
intervening appropriation. They spend without limit, and their 
totals are determined by numerous factors outside the control 
of Congress: caseloads, the growth or contraction of gross 
domestic product, inflation, and many others. These are the 
areas driving the government's uncontrolled spending, deficits, 
and debt. Addressing them is indispensable to managing fiscal 
policy and balancing the budget.

     LSocial Security


     LMedicaid, the American Health Care Act, and 
Related Programs

     LIncome Support, Nutrition, and Related Programs

     LFarm Support

     LBanking, Housing, and the Postal Service

     LStudent Loans, Social Services, and Related 

     LFederal Lands and Other Resources

     LOther Direct Spending (science, natural 
resources, and community and regional development)

    Financial Management. This final grouping consists of those 
functions that round out the budget's overall financing.

     LNet Interest


     LUndistributed Offsetting Receipts

                   Principal Federal Responsibilities


    The two most obvious responsibilities of the Federal 
Government are providing for the common defense of all the 
constituent States, and conducting diplomacy on behalf of the 
Nation as a whole. Related to these two is the supplemental 
spending for Overseas Contingency Operations/Global War on 
Terrorism. Nevertheless, there are other activities intrinsic 
to the national government's responsibilities. For example, as 
part of the compensation for military service, the government 
also offers a range of benefits specifically for veterans. The 
category called Administration of Justice mainly reflects 
funding for Federal law enforcement agencies--such as the 
Federal Bureau of Investigation and the Drug Enforcement 
Administration, among others--as well as the Federal judiciary. 
The vast majority of funding for the General Government 
function supports the Executive and Legislative Branches of the 
Federal Government. Finally, there are activities and policies 
that cut across agencies and functional categories.

                            NATIONAL DEFENSE

                            Function Summary

    Eight years of the Obama Administration's feckless foreign 
policy have left the global security environment more dangerous 
and less stable, as the United States faces increasingly 
complex and evolving threats around the world. U.S. military 
forces continue to battle terrorist groups, including a 
reinvigorated Al Qaeda and the Islamic State in Afghanistan, 
Iraq, Syria, the Horn of Africa, and Libya. Potential 
adversaries continue to exhibit aggressive behavior that needs 
to be countered. These include China's efforts to expand its 
military footprint in the South China Sea and Russia's unlawful 
intrusion of sovereign countries in Europe. Meanwhile, Iran 
aspires to be a ``regional hegemon'' and ``poses the most 
significant threat'' to the United States and its allies in the 
Middle East.\46\ North Korea is actively developing an 
intercontinental ballistic system to carry nuclear warheads 
that can strike the United States and its allies in the Korean 
    \46\Statement of General Joseph L. Votel, Commander, U.S. Central 
Command, Appropriations Subcommittee on Defense, House of 
Representatives, hearing on ``The Posture of U.S. Central Command,'' 28 
March 2017:
    On 1 February 2017, former Central Intelligence Agency 
Director General David H. Petraeus testified before the House 
Armed Services Committee that the United States is ``under 
unprecedented threats from multiple directions'' and that 
``perhaps even more pernicious * * * [the world order has been 
undermined by] a loss of self-confidence, resolve, and 
strategic clarity on America's part about our vital interest in 
preserving and protecting the system we sacrificed so much to 
bring into being and have sacrificed so much to preserve.''\47\ 
Even more recently, on 12 June 2017, Secretary of Defense 
Mattis stated: ``[A] * * * concurrent force acting on the 
Department is the worsening global security situation. Our 
challenge is characterized by a decline in the long-standing 
rules-based international order, bringing with it a more 
volatile security environment than any I have experienced 
during my four decades of military service.''\48\
    \47\Committee on Armed Services, U.S. House of Representatives, 
hearing on ``The State of World: National Security Threats and 
Challenges,'' 1 February 2017.
    \48\Statement of Secretary of Defense James N. Mattis, Committee on 
Armed Services, House of Representatives, hearing on ``The Fiscal Year 
2018 National Defense Authorization Budget Request from the Department 
of Defense,'' 12 June 2017:
    While the national security environment, both at home and 
abroad, continues to grow more dangerous and unpredictable, the 
U.S. military has grown smaller and less capable of deterring 
and meeting these threats. ``We have the smallest Air Force 
since 1947 * * * the Navy will be retiring ships faster than 
they can be replaced * * *. Alarmingly, for today's defense 
budget we are fielding 35% fewer combat brigades, 53% fewer 
combat ships, 63% fewer combat aircraft squadrons.''\49\ The 
reduction in the size and capability of U.S. armed forces has 
resulted mainly from the automatic enforcement procedure of the 
Budget Control Act [BCA] of 2011--a procedure known as 
``sequestration.'' The national defense budget has carried the 
bulk of sequestration's effects. Relative to the fiscal year 
2012 defense budget request by then-Defense Secretary Gates, 
defense spending has been reduced by $460 billion. By 2021, 
sequestration will arbitrarily cut almost $1 trillion from 
defense spending, eroding critical warfighting capabilities, 
modernization, and readiness across all the services. Every 
year since the BCA was enacted, budgetary prescriptions have 
been shaping national defense strategy, not the other way 
around. This has resulted in higher risks for service members 
and the Nation.
    \49\Statement of General John M. Keane, USA (Ret), Committee on 
Armed Services, US Senate, hearing on ``Emerging US Defense Challenges 
and Worldwide Threats,'' 6 December 2016: https://www.armed-
    According to the House Armed Services Committee, increased 
threats to national security at home and abroad, coupled with 
the concurrent military drawdown, have resulted in ``a 
significant gap between what the American people expect of the 
military and what it actually could do effectively if called 
upon today.''\50\ The Heritage Foundation rated the U.S. 
military posture, in aggregate, as ``Marginal'' and trending 
toward ``Weak,'' the same rating as in 2016.\51\ This budget 
calls for reversing the defense sequester and beginning the 
process of rebuilding our military.
    \50\Committee on Armed Services, U.S. House of Representatives, 
Views and Estimates, 3 March 2017.
    \51\Heritage Foundation, 2017 Index of U.S. Military Strength: 
Assessing America's Ability to Provide for the Common Defense, 2017:
    For National Defense (Function 050 in the summary tables), 
the budget resolution calls for $621.5 billion in discretionary 
budget authority and $599.4 billion in discretionary outlays in 
fiscal year 2018. When combined with military resources for the 
Overseas Contingency Operations/Global War on Terrorism 
(Function 970), total discretionary defense spending is 
consistent with that of H.R. 2810, the ``National Defense 
Authorization Act for Fiscal Year 2018''\52\ which passed the 
House on 14 July 2017 by a vote of 344 to 81, and the 
associated fiscal year 2018 defense-related appropriations 
bills. These amounts include funding to compensate, train, 
maintain, and equip the military forces of the United States. 
More than 95 percent of the funding in this function goes to 
Department of Defense [DOD] activities. The remainder finances 
the atomic energy defense programs of the Department of Energy, 
and other defense-related activities (primarily in connection 
with homeland security).
    \52\See Committee on Armed Services, U.S. House of Representatives, 
Chairman's Mark Summary for H.R. 2810.
    Direct spending in fiscal year 2018 for this category--
which includes allowances, offsetting receipts, and retirement 
payments--is $8.1 billion in budget authority and $8.4 billion 
in outlays in fiscal year 2018. The 10-year totals for the 
entire defense category are $7.2 trillion in budget authority 
and $7.0 trillion in outlays.

                      Illustrative Policy Options

    Policy development in this area rests primarily with the 
Committee on Armed Services and the Appropriations Subcommittee 
on Defense. They have maximum flexibility in determining 
priorities for maintaining robust national defense capabilities 
while responsibly managing taxpayer resources. Some 
illustrative options the committees might consider include the 

    Budget Transparency. Like all government agencies, DOD has 
a responsibility to account for and effectively manage its 
taxpayer-provided resources. The 2010 National Defense 
Authorization Act (Public Law 111-84) required the Department 
to implement the Financial Improvement and Audit readiness 
plan, and the Department expects to be fully auditable by the 
end of fiscal year 2017.\53\ DOD's size and complexity make the 
endeavor difficult, but ``that is not a reason to delay the 
audit--it is the reason to begin.''\54\ In addition, President 
Trump has called for ``conducting a full audit of the 
Pentagon.''\55\ This budget expects DOD to be audit-ready by 
the end of fiscal year 2017 and for it to execute a Department-
wide audit on all financial statements of fiscal year 2018. An 
inability to produce an auditable financial statement by the 
statutory deadline would undermine defense reform efforts.\56\ 
Any continued failure of the DOD to perform a complete audit 
not only limits transparency and congressional oversight of 
defense programs, but also erodes public confidence in the 
Department's ability to effectively manage taxpayer resources.
    \53\Public Law 111-84
    \54\Statement of David L. Norquist, Committee on Armed Services, 
U.S. Senate, hearing on ``Nominations--Norquist, Daigle, McCusker,'' 9 
May 2017:
    \55\Donald J. Trump's Vision National Defense, 14 October 2016:
    \56\Committee on Armed Services, U.S. House of Representatives, 
Views and Estimates, 3 March 2017.

    Defense Industrial Base and Sustainment. A robust 
industrial base is vital to military readiness and, therefore, 
the national security of the United States. As defense budgets 
have declined, the acquisition of new weapons systems has 
received much-needed focus. Little attention, however, has been 
given to the fact that sustainment is 60 percent to 80 percent 
of the total lifecycle cost of a weapon system, according to 
the Department of Defense.\57\ Therefore, the ongoing health of 
the defense industrial base, in its entirety, also must be 
carefully considered.
    \57\Government Accountability Office, Weapon Systems Management: 
DOD Has Taken Steps to Implement Product Support Managers but Needs to 
Evaluate Their Effects, April 2014; and, Capt. Gary Jones, USAF, Edward 
White, Lt. Col Erin T. Ryan, USAF, and Lt. Col Jonathan D. Ritschel, 
USAF, Investigation into the Ratio of Operation and Support Costs to 
Life-Cycle Costs for DoD Weapons Systems, Defense Acquisition 
University, January 2014.
    The sustainment industrial base comprises both private 
sector and military facilities, each serving a unique and vital 
role in the maintenance, repair, and overhaul of weapons, 
weapons systems, components, subcomponents, parts, and 
equipment. As budget resources become more scarce, the military 
facilities and private sectors should focus on the areas in 
which each excels, entering into public-private partnerships, 
as appropriate, to save taxpayer dollars and increase military 
readiness. Furthermore, the Department should learn from recent 
mistakes and failed policies, which include the unnecessary 
furlough of working capital fund employees or managing by end 
strength. Workload should be one of the key drivers when 
managing depots, arsenals, and ammunition plants to ensure the 
lowest cost to the taxpayer.
    Military depots are the backbone of the organic industrial 
base and are the Nation's insurance policy against economic 
uncertainty, changes in the defense industry, and wartime 
demands. Additionally, military depots serve as the appropriate 
location for maintaining command and control of the majority of 
warfighting systems. The B-52 bomber program, as one example, 
is a reminder that sustainment of weapons systems for decades 
beyond their initially projected lifecycle is feasible and 
likely will be essential to meeting military readiness needs. 
Military depots have proven their value to the taxpayer for 
efficiently sustaining systems that are no longer profitable or 
no longer cost-effective to maintain in the private sector. 
During peacetime or war, military depots meet military 
readiness requirements and provide critical and necessary skill 
sets on time and on budget.
    Acquisition reform should reaffirm the value of military 
core statutes and the longstanding balance of workload between 
military depots and the private sector. These key provisions in 
existing law, when vigorously enforced, will ensure that the 
vital security interests of the United States military are met 
through the maintenance of a healthy defense industrial base, 
even during a time of declining budgets. These laws were 
written for just such a time.

    Major Range and Test Facility Base. Major Range and Test 
Facility Bases [MRTFBs] are a designated set of DOD 
installations, ranges, and facilities used for Test and 
Evaluation missions. In 1983, under the authority of DOD 
Directive 3200.11, the Under Secretary of Defense for Research 
and Engineering directed the Office of the Secretary of 
Defense, the Military Service Branches, the Joint Chiefs of 
Staff, and Defense Agencies, that major ranges and test 
facilities constitute a ``national asset'' due to their unique 
capabilities in support of DOD, other U.S. government agencies, 
allied foreign governments, and private organizations.\58\ 
MRTFBs are DOD's core testing and evaluation facilities to 
assess weapon system capabilities before being provided to the 
military and the warfighter. The budget recommends MRTFBs 
continue to be the tip of the spear on weapons testing and 
capabilities evaluation to ensure the services are provided the 
most effective weapon systems the United States can produce.
    \58\Isham Linder, Major Range and Test Facility Base Summary of 
Capabilities (DoD 3200.11-D), Department of Defense, June 1983.

    Defense Acquisition Reform. Since 1990, DOD weapon systems 
acquisition has been on the Government Accountability Office 
[GAO] ``high-risk'' list for its continued failure to meet 
cost, schedule, and performance expectations. As a result, 
``DOD pays more than anticipated, can buy less than expected, 
and, in some cases, delivers less capability to the 
warfighter.''\59\ In May 2017, House Armed Services Chairman 
Thornberry introduced H.R. 2511, the ``Defense Acquisition 
Streamlining and Transparency Act,'' to address the 
Department's acquisition problems. The bill, the provisions of 
which are also included in the House-passed ``Fiscal Year 2018 
National Defense Authorization Act'', continues the committee's 
efforts to ``streamline bureaucracy, drive efficiency through 
competition, and give the Pentagon the tools it needs to make 
better business decisions.''\60\ Preceded by acquisition 
reforms enacted in the fiscal year 2016 and 2017 National 
Defense Authorization Acts, the legislation represents the 
third installment of Chairman Thornberry's defense acquisition 
reform effort.\61\ Over time, defense acquisition reforms will 
provide a better return-on-investment for the taxpayer, while 
also allowing DOD to be more agile in a changing technology 
environment. The Budget Committee applauds the House Armed 
Services Committee's efforts to address much-needed acquisition 
reform, which will ultimately help the warfighter and result in 
the most effective and efficient use taxpayer dollars.
    \59\Government Accountability Office, DOD Weapon Systems 
Acquisition, May 2017:
    \60\Committee on Armed Services, House of Representatives, 
``Thornberry Introduces Acquisition Reform Bill,'' 18 May 2017.

                         INTERNATIONAL AFFAIRS

                            Function Summary

    The United States remains the world's indispensable 
Nation--vital to global peace, security, stability, and the 
spread of freedom.\62\ With this comes great challenges and 
responsibilities. In the absence of American leadership, others 
will not uphold their responsibility to advance these shared 
interests and values.\63\ Therefore, to remain an effective 
leader, the United States should ensure that its military 
strength, diplomatic corps, and civilian agencies are aligned 
in the task of protecting American interests around the globe.
    \62\The Foreign Policy Initiative, Foreign Policy 2016, 2 May 2016,
    According to the Committee on Foreign Affairs, advancing a 
comprehensive State Department Authorization bill in 2017 will 
be important in countering America's threats, while holding 
accountable the perpetrators of war crimes and human rights 
atrocities. At the same time, the Department should build on 
common-sense efforts to eliminate duplication and waste.\64\ 
Reducing poverty through economic growth remains a key 
objective, but Federal agencies must remain vigilant to ensure 
taxpayer funds are spent efficiently and achieve measurable 
    \64\Committee on Foreign Affairs, U.S. House of Representatives, 
Views and Estimates, 3 March 2017.
    The international affairs budget is critical in advancing 
U.S. strategic priorities and interests, especially those 
relating to economic opportunities, national security, and 
American values. Nevertheless, inefficiencies, duplicative 
programs, and those unrelated to vital U.S. national interests 
remain prevalent and are ripe for reform. The fiscal year 2018 
budget resolution represents a thorough re-evaluation of 
accounts in this category and gives priority to programs that 
are both integral to the core mission and that effectively and 
efficiently achieve desired outcomes.
    For this budget category (Function 150 in the summary 
tables), the budget resolution proposes a total of $41.5 
billion in budget authority and $43.6 billion in outlays for 
fiscal year 2018. This funding covers the following: 
international development, food security, and humanitarian 
assistance; international security assistance; the conduct of 
foreign affairs; foreign-information and exchange activities; 
and international financial programs. The primary agencies 
responsible for executing these programs are the Departments of 
State, Agriculture, and the Treasury; the U.S. Agency for 
International Development [USAID]; and the Millennium Challenge 
Corporation. Over 10 years the budget totals are $398.5 billion 
in budget authority and $395.5 billion in outlays.
    The majority of the funding is discretionary spending, 
which is $36.3 billion in budget authority and $47.3 billion in 
outlays for fiscal year 2018. Direct spending in this 
function--totaling $5.2 billion in budget authority and -$3.7 
billion in outlays for fiscal year 2018--includes loan 
guarantee programs, payments to the Foreign Service Retirement 
and Disability Fund, and foreign-military sales programs. The 
negative figures reflect receipts from foreign-military sales 
and financing programs.
    As with National Defense, funding for the State Department 
and USAID's incremental, non-enduring civilian activities in 
the frontline states of the global war on terrorism is 
reflected in the Global War on Terrorism account.

                        Refocusing the Strategy

    The Trump Administration presents an opportunity to 
fundamentally rethink the way the Federal Government's civilian 
agencies approach defense, diplomacy, and development 
overseas.\65\ From workforce modernization to cyber security 
and embassy security--the United States ``bears special 
responsibility for protecting the men and women of the United 
States'' in the 285 U.S. embassies and consulates around the 
    Fine-tuning U.S. foreign assistance while imposing 
strategic cuts to ineffective, duplicative, or wasteful 
programs is no simple task. It requires planning, and is in the 
interest of the United States to clearly define and articulate 
its mission.\67\ For instance, systemic shortcomings in the 
implementation of U.S. security assistance will remain a 
problem until overall planning, coordination, and evaluation of 
U.S. security assistance are more closely examined.\68\ 
Strengthening alliances through security assistance is a tool 
the U.S. uses to mitigate threats to peace and stability around 
the globe.

           Illustrative Discretionary Spending Policy Options

    The committees of jurisdiction--the Committees on Foreign 
Affairs and Agriculture, as well as the Appropriations 
Subcommittee on State, Foreign Operations, and Related 
Programs--should continue effective oversight of international 
affairs programs to ensure resources are used efficiently to 
achieve desired results that ultimately support U.S. national 
interests. Those committees have complete authority in 
determining policies in this area. Nothing in the discussion 
below binds them to any particular course. That said, some 
illustrative options they might wish to consider include the 

    Eliminate Funding for Peripheral Foreign-Affairs 
Institutions. The United States funds multiple independent 
agencies and quasi-private institutions through the foreign-
affairs budget. Included in this list are the Inter-American 
Foundation, the African Development Foundation, and the East-
West Center. These institutions all engage in activities that 
overlap the State Department and USAID activities. For 
instance, the East-West Center was established in 1960 to 
promote a better understanding between the U.S. and nations of 
the Asia-Pacific region. Over the past 57 years, a number of 
factors, including the development of the Internet, increased 
trade, and cultural diversity here at home, have led to the 
creation of private institutions that serve similar purposes as 
the East-West Center.\69\
    Consolidating and eliminating funding for multiple 
institutions that perform similar tasks will make U.S. 
engagement with the world more efficient and cost-effective. 
Further, some of these organizations already receive private 
funding and could continue with non-government funds.

    Reduce Contributions to International Organizations and 
Programs. The United States makes voluntary contributions to 
more than 40 multilateral organizations and programs. These 
often duplicate funding provided in the Contributions to 
International Organizations account, which makes payments to 
organizations pursuant to treaties and conventions the United 
States has signed. Programs such as the United Nations 
Population Fund and United Nations Development Program [UNDP] 
flow through the voluntary contributions account. The Special 
Inspector General for Afghanistan Reconstruction has found 
weaknesses in the UNDP's oversight and management of the Law 
and Order Trust Fund for Afghanistan--to which the United 
States and other donors have contributed more than $3 billion 
since 2002. This makes taxpayer dollars susceptible to fraud, 
waste, and abuse.\70\ This budget funds the organizations the 
United States is required to by treaty, while reducing 
voluntary funding made in the International Organizations and 
Programs account.
    \70\John F. Sopko, Special Inspector General for Afghanistan 
Reconstruction, letter to Helen Clark, UNDP Administrator, 12 September 

    Reform Food Aid. One of the areas where the international 
affairs budget fails to use taxpayer dollars efficiently and 
effectively is the U.S. international food aid program, 
including Food for Peace (Public Law 480, Title II). Food for 
Peace provides emergency food assistance abroad and supports 
development programs in developing nations. Its failings result 
primarily from enduring program constraints, including the 
cargo preference (which dictates at least 50 percent of food 
aid must be shipped on U.S. flagged vessels). To keep pace with 
rising demands and finite resources, U.S. food aid programs 
must be efficient and adaptable.\71\ Several bipartisan efforts 
have called for reforming food programs. According to a 2011 
report by the Government Accountability Office [GAO], the 
practice of monetization loses an average of 25 cents of every 
dollar spent on food aid.\72\ This budget calls for food aid 
reforms to get the maximum benefit out of every dollar spent on 
this program.
    \71\Committee on Foreign Affairs, U.S. House of Representatives, 
Views and Estimates, 3 March 2017.
    \72\Government Accountability Office, International Food 
Assistance: Funding Development Projects through the Purchase, 
Shipment, and Sale of U.S. Commodities Is Inefficient and Can Cause 
Adverse Market Impacts, 23 June 2011.

    Overhaul the Broadcasting Board of Governors. For years, 
the Office of the Inspector General and GAO have noted 
inefficiencies and redundant bureaucratic structures within the 
Broadcasting Board of Governors [BBG]. The fiscal year 2017 
National Defense Authorization Act's codification of the Global 
Engagement Center created overlap with the BBG, specifically 
The Voice of America. This is an area in which Congress can and 
should clarify lines of responsibility and eliminate 
duplications.\73\ BBG is mostly known for programs that educate 
the world on American culture, society, and governance, in 
addition to promoting democratic principles such as human 
rights and religious freedom. In the 114th Congress, the House 
Foreign Affairs Committee passed H.R. 2323, the ``United States 
International Communications Reform Act of 2015'', a bipartisan 
bill that addresses these problems by improving the management 
and effectiveness of BBG programs. Subsequently, the ``Fiscal 
Year 2017 National Defense Authorization Act'' included BBG 
consolidation reforms. This budget supports a reduction in 
funding for BBG until significant reforms are made to safeguard 
taxpayer dollars from continued waste at the hands of 
governmental mismanagement.
    \73\Committee on Foreign Affairs, U.S. House of Representatives, 
Views and Estimates, 3 March 2017.

    Eliminate Contributions to the Clean Technology Fund and 
the Strategic Climate Fund. The Obama Administration created 
the Clean Technology and Strategic Climate Funds in 2010. They 
provide foreign assistance to support energy-efficient 
technologies intended to reduce energy use and mitigate climate 
change. Borrowing funds abroad to provide financial assistance 
in this area is not a core U.S. foreign policy function--
especially in this period of large and mounting debt. In 
addition, the U.S. government should not attempt to pick 
winners and losers in terms of which technologies and companies 
to favor and advance abroad. This budget recommends eliminating 
funding for both programs.

    Reinstate the Mexico City Policy. The Mexico City Policy, 
originally adopted by President Reagan in 1984, prohibits non-
governmental organizations receiving U.S funding from 
performing or promoting abortion. In addition, on 9 May 2017, 
Secretary of State Tillerson approved a plan to implement the 
manner in which U.S. Government departments and agencies will 
apply these provisions to grants, cooperative agreements and 
contracts with foreign non-governmental organizations that 
receive U.S. funding for global health assistance.\74\
    \74\Presidential Review Memorandum, 15 May 2017.


                            Function Summary

    This category reflects non-enduring funding for the 
execution of Overseas Contingency Operations/Global War on 
Terrorism [OCO/GWOT] and other closely related activities. It 
provides funding for Department of Defense military operations, 
primarily in Iraq and Afghanistan, and civilian activities led 
by the Department of State and the U.S. Agency for 
International Development [USAID]. The funding is entirely 
discretionary, with no direct spending components. OCO/GWOT 
funding is not subject to statutory discretionary spending 
limits established by the ``Budget Control Act of 2011''.
    The resolution calls for $86.6 billion in total budget 
authority and $45.8 billion in new outlays in fiscal year 2018 
for the OCO/GWOT (shown in Function 970 in the summary tables). 
This total OCO/GWOT funding level is a 16.5 percent reduction 
from the enacted fiscal year 2017 level of $103.7 billion. 
About $75 billion of the total OCO/GWOT budget authority is 
dedicated to military activities by the Department of Defense. 
When combined with defense discretionary spending in Function 
050, total defense resources in the resolution are consistent 
with those provided for in the House Armed Services House-
passed fiscal year 2018 ``National Defense Authorization Act'' 
and the associated fiscal year 2018 defense-related 
appropriations bills.

                         Policy Considerations

    The criteria DOD has been using to determine whether war-
related funding belongs in the base budget or the OCO/GWOT 
funding request has not been updated since 2010. Consequently, 
DOD's fiscal year 2018 OCO/GWOT request is based on dated 
standards ``when military operations in Iraq and Afghanistan 
were the principal contingency operations supported by 
DOD.''\75\ The current criteria do not address the expanded 
scope of OCO/GWOT operations including: ``new geographic areas 
such as Syria and Libya, the department's deterrence and 
counterterrorism initiatives, or requests for OCO amounts to 
fund base budget requirements, such as readiness.''\76\ 
According to the GAO: ``DOD officials agree that updated 
guidance is needed but note that the Office of Management and 
Budget has deferred the decision to update the criteria until a 
new administration is in place in 2017.''\77\ This budget calls 
for the Office of Management and Budget, in conjunction with 
DOD, to re-evaluate and update the OCO/GWOT criteria as soon as 
possible to ensure budget transparency and accountability 
regarding this cap adjustment.
    \75\Government Accountability Office, Overseas Contingency 
Operations: OMB and DOD should revise the criteria for determining 
eligible costs and identify the costs likely to endure long term, 
January 2017.
    For the longer term, this budget supports gradually phasing 
out the separate Overseas Contingency Operations/Global War on 
Terrorism designation for both military and civilian 
activities, and assumes a transition to base budget funds in 
the future. While this budget fully supports OCO/GWOT efforts 
and sufficient funding to execute contingency missions, funding 
provided in the OCO/GWOT budget will take place 18 years after 
the 9/11 terrorist attacks on the United States, which 
triggered wars in Afghanistan and Iraq. If these are to be 
ongoing activities--which may well be the case in the 21st 
Century security environment--Congress should assume them as 
part of the Nation's overall defense strategy, and budget 
accordingly. This would be consistent with past Republican 


                            Function Summary

    Americans' respect for those who serve the Nation in its 
armed forces is reflected partly through bipartisan support for 
service veterans. This support follows a long tradition that 
can be traced as far back as 1636, when the Pilgrims of 
Plymouth Colony were fighting the Pequot Indians. ``The 
Pilgrims passed a law that stated that disabled soldiers would 
be supported by the colony. Later, the Continental Congress of 
1776 encouraged enlistments during the Revolutionary War, 
providing pensions to disabled soldiers. In the early days of 
the Republic, individual states and communities provided direct 
medical and hospital care to veterans. In 1811, the federal 
government authorized the first domiciliary and medical 
facility for veterans. Also in the 19th century, the Nation's 
veterans assistance program was expanded to include benefits 
and pensions not only for veterans, but for their widows and 
dependents.'' Many States created veterans' homes after the 
Civil War. When the U.S. entered World War I, Congress 
broadened the system of veterans' benefits to include 
disability compensation and educational rehabilitation.\78\
    \78\Department of Veterans Affairs, ``History--Department of 
Veterans Affairs'':
    On 9 August 1921, veterans' benefits were consolidated into 
a Veterans Bureau, which launched a wave of hospital 
construction. In July 1930, President Hoover elevated the 
bureau to a full administrative agency called the Veterans 
    After World War II, with an immense wave of veterans 
returning home, Congress vastly expanded benefits, most 
significantly with the World War II GI Bill. ``It is said the 
GI Bill had more impact on the American way of life than any 
law since the Homestead Act of 1862.''\80\ Veterans benefits 
continued expanding in the subsequent decades until, in 1989, 
President Reagan raised the Veterans Administration to Cabinet 
status as the Department of Veterans Affairs [VA].
    Today the Department offers an array of assistance to 
veterans and their families, and provides its range of benefits 
through three agencies: the Veterans Health Administration 
[VHA], the Veterans Benefits Administration [VBA], and the 
National Cemetery Administration [NCA]. Congress remains 
committed to ensuring the VA's roles are carried out 
effectively, and this budget maintains that commitment, giving 
priority to veterans' benefits and services. Part of that 
commitment entails effective and efficient management of VA 
services. In this regard, the Department is long overdue for 
many program and management reforms to health care, 
readjustment benefits, disability compensation rating schedule 
and disability compensation benefit program.
    The VA budget includes both discretionary and direct 
spending. Discretionary accounts fund medical care, medical 
research, construction programs, information technology, and 
general operating expenses, among other activities. Direct 
spending accounts fund disability compensation, pensions, 
vocational rehabilitation and employment, education, life 
insurance, housing, and burial benefits, among other benefits 
and services. In 2014, Congress enacted the Veterans Access, 
Choice and Accountability Act of 2014\81\ and established a new 
fund, classified as direct spending, to provide care under the 
Veterans Choice Program [VCP]. Recently, the VA notified 
Congress that additional funding would be needed to continue 
VCP past August 2017.
    \81\Public Law 113-146.
    For fiscal year 2018, the budget resolution calls for 
discretionary spending of $79.1 billion in budget authority--
about 6 percent higher than the fiscal year 2017 enacted 
level--and $77.9 billion in outlays. These figures match 
President Trump's budget request. Direct spending in fiscal 
year 2018 is $97.6 billion in budget authority and $100.2 
billion in outlays. The 10-year direct spending totals for 
budget authority and outlays are $1.2 trillion and $1.2 
trillion, respectively. This resolution accommodates up to 
$70.7 billion for fiscal year 2019 in discretionary advance 
appropriations for medical care.\82\
    \82\Public Law 111-81.

                 The Challenge of Veterans' Health Care
                         and Benefits Programs

    The Federal Government's obligation to veterans is to 
assist in their readjustment into society and to help them 
overcome any significant barriers that may have arisen as a 
consequence of their military service.\83\ After many decades 
of trial and error, the government has developed a reasonably 
successful VA health care system and set of benefit programs to 
meet the needs of veterans with service-connected conditions or 
disabilities. Nevertheless, both need improvement.\84\ The 
leading problems are decades of traditional philosophy and a 
failure to adjust to current service-connected veterans' 
needs.\85\ According to the Government Accountability Office 
[GAO]: ``VA faces challenges regarding the reliability, 
transparency, and consistency of its budget estimates for 
medical services, as well as weakness in tracking obligations 
for medical services and estimating budgetary needs for future 
    \83\Clarence Adamy, William Donovan, Paul Hawley, Martin Jenkins, 
Theodore Petersen, John Thompson, Veterans' Benefits in the United 
States, April 1956.
    \86\Government Accountability Office, VA's Health Care Budget, June 
    The Veterans Access, Choice and Accountability Act set in 
motion an examination of the underlying causes of failures of 
the VA health care system. Both the Independent Assessment and 
the Commission on Care established as a result of the statute 
made a series of recommendations to reform the VA health care 
delivery system. The Independent Assessment found that ``the 
organization is plagued by many problems: growing bureaucracy, 
leadership and staffing challenges, and an unsustainable 
trajectory of capital costs.''\87\ The Independent Assessment 
also made numerous recommendations including a systematic 
approach to aligning demand, resources, and eligibility for 
care; developing a patient-centered operation that balances 
local autonomy with appropriate standardization across the VA 
health care system; developing data and tools; and improving 
    \87\The CMS Alliance to Modernize Healthcare, Centers for Medicare 
and Medicaid Services, Veterans Choice Act Independent Assessment 
(Section 201)-
    Integrated Report, prepared for the U.S. Department of Veterans 
Affairs, 1 September 2015, p. xii.
    \88\Committee on Veterans Affairs, U.S. House of Representatives, 
hearing on ``Independent Assessment of the Health Care Delivery Systems 
and Management Processes of the Department of Veterans Affairs,'' 7 
October 2015.
    Health care delivery and financing have evolved 
significantly since the Federal Government began providing care 
to veterans after World War I and it continues to evolve. As 
stated by the Commission on Care eligibility for VA health care 
has not been examined since 1996. ``[A]dditionally, the 
enrollment system the department established is not being used 
today to calibrate supply and demand as envisioned.''\89\ As 
recommended by the Commission, Congress should emphasize 
reforming an inadequate health care priority system and 
``identify who VHA will serve, and what services it will 
provide.''\90\ The growth of VA's health care and benefit 
programs are straining budgetary resources in a tight fiscal 
climate due to an unprecedented expansion in their scope, 
liberalization of eligibility conditions, and broad 
interpretation of laws.\91\
    \89\Commission on Care, Commission on Care Final Report, 30 June 
    \91\Op. cit., Adamy; Nina Owcharenko, Proceed with Caution: The 
Unintended Consequences of Expanding VA Access, 17 March 2006.
    VA's program structure is largely based on precedents built 
up over decades of piecemeal laws.\92\ The health care and 
benefits provided to recent veterans ``were built upon those 
provided for their predecessors.''\93\ While, the majority of 
these services are well-intentioned, they are long overdue for 
revision and modernization to ensure they address today's 
overall needs.\94\ The VA needs a clear philosophy or guiding 
principle governing its health care and benefits programs.
    \92\Op. cit., Adamy.
    \94\United States Code: Title 38--Veterans' Benefits.
    If traditional patterns continue, the magnitude and scope 
of VA programs will continue to grow so large in future years 
that the ``moral and economic stability of our whole society 
can be adversely affected.''\95\ Yet any discussion on the 
future of the VA health care system and benefit programs should 
be based solely on facts that can lead to a more equitable and 
rational system.\96\ If the ``goal is not to get veterans off 
disability and to become active, contributing members of 
society then what is the goal?''\97\
    \95\Op. cit., Adamy.
    \96\James D. Ridgway, The Splendid Isolation Revisited: Lessons 
from the History of Veterans' Benefits Before Judicial Review, Veterans 
Law Review [Vol 3. 2011], 10 February 2011.
    \97\Committee on Veterans' Affairs, U.S. House of Representatives, 
hearing on ``Overcoming PTSD: Assessing VA's Efforts to Promote 
Wellness and Healing,'' 7 June 2017:
    Congress needs to thoroughly reassess the structure, scope, 
philosophy, and administration of the VA health care system and 
benefit programs that veterans and their families use.\98\
    \98\Op. cit., Adamy; John S. O'Shea, Reforming Veterans Health 
Care: Now and for the Future, Heritage Foundation, 24 June 2016; and, 
James D. Ridgway, The Splendid Isolation Revisited: Lessons from the 
History of Veterans' Benefits Before Judicial Review, Veterans Law 
Review [Vol 3. 2011], 10 February 2011.

                            The Way Forward

    VA needs to adopt a new way of thinking to address its most 
challenging problems, such as access to health care, the 
quality and delivery of programs, and cost management. All 
programs should maximize net benefits for the veterans, and be 
cost and target efficient.
    Reducing moral hazard on the part of government agencies 
and program beneficiaries is one of many ways to improve VA 
programs.\99\ All VA programs vulnerable to significant moral 
hazard should require adequate cost-sharing to assure that 
beneficiaries commit enough of their own resources to act 
responsibly, with amounts scaled to what they can afford.
    Additionally, as large number of veterans age, they become 
entitled to Medicare. Some veterans also qualify for Medicaid 
based on income. Based on the 2014 survey results, VHA reported 
that 78 percent of veterans enrolled in the VA health care 
system had another form of health care coverage as well. If 
veterans are provided greater access to care in the community, 
imposing health insurance elements such as premiums, 
deductibles, or coinsurance to control costs and to restrain 
spending may be considered.\100\
    \100\Congressional Research Service, Do Veterans Have Choices in 
How They Access Health Care? 13 June 2016:
    Since 2015, GAO has included the VA's Information 
Technology [IT] systems and VA and DOD interoperability on its 
``high-risk'' list.\101\ In 2017, Acting Assistant Secretary 
for Information Technology and CIO for the Office of 
Information and Technology at the VA, acknowledged VA's 
previous failures to modernize their IT system and build them 
from the ground up.\102\ In 2013, VA and DOD decided to abandon 
an initiative to create a joint medical health sharing record 
system, citing ``different system needs and a projected total 
price tag of $28 billion.''\103\ On 5 June 2017, VA Secretary 
Shulkin announced VA would adopt DOD's MHS Genesis Electronic 
Health Record IT platform at an estimated cost of at least $4 
billion and abandon VA's VistA platform after spending billions 
of taxpayer dollars on upgrading a failed VistA EHR 
interoperable IT system.\104\ After IT, construction, and 
health care modernization attempts, failures, and billions of 
taxpayer dollars wasted, Congress should require any VA rule or 
regulation with an annual economic impact of $100 million or 
more to come before Congress for an up-or-down vote before 
    \101\Government Accountability Office, Improving the Management of 
IT Acquisitions and Operations, January 2017:
    \102\Committee on Veterans' Affairs, U.S. House of Representatives, 
hearing on ``Assessing the VA IT Landscape: Progress and Challenges,'' 
7 February 2017.
    \103\Patricia Kime, ``Pentagon, VA health records systems still far 
from interoperable,'' Military Times, 28 October 2015.
    \104\Leo Shane, ``VA to use DOD's electronic medical records 
system,'' Military Times, 5 June 2017.
    \105\There is a precedent with VA major construction projects over 
$100 million. VA needs Congressional certification to move forward with 
construction projects over $100 million threshold. Neil Siefring, ``The 
REINS Act will keep regulations and their costs in check,'' The Hill. 
16 February 2016:
250178-the-reins-act-will-keep-regulations-and-their-costs-in; and 
Passage of H.R. 427 (H. Rept. 114-214), the Regulations from the 
Executive in Need of Scrutiny Act of 2015 (REINS Act), (H.R. 427, H. 
Rept. 114-214):
    Congress and the Executive Branch should conduct a thorough 
analysis of VA and reassess its missions based on their 
importance, difficulty, and past success. One area of likely 
consensus lies in personnel reforms. VA's workforce is in 
serious crisis, experiencing a long-term decline in quality, 
accountability, vision, energy, and professional commitment. No 
organization or Federal agency can function properly without 
maintaining an effective workforce--and that includes 
disciplining employees when necessary.
    Since its creation in 1946, the VA's personnel system has 
been based on the urgent need to recruit physicians, dentists, 
and nurses. That has come to be a problem in itself. A 
personnel system built to expedite VA hiring has led to a 
``lengthy disciplinary board process that prevents timely--and 
thus, effective--imposition of discipline, particularly of the 
more minor corrective actions.''\106\ The personnel system 
desperately needs an overhaul to address its failures and 
deficiencies. Additionally, Congress and the Executive Branch 
can achieve greater reform if the VA begins to thin out its 
bureaucracy, consolidating the number of VA layers between top 
and bottom employees, reducing the number of managers, 
accelerating the hiring and appointment processes (working 
alongside the Congress where appropriate), streamlining the 
disciplinary process, refining performance measure metrics, and 
strengthening oversight and contract administration of private 
employee contracts.\107\
    \106\Keith Bell, A Special Study: The Title 38 Personnel System in 
the Department of Veterans Affairs: An Alternate Approach, April 1991:
    Without these steps, the consequences will be an 
increasingly demoralized, poorly equipped, and undisciplined VA 
workforce. These employees are, after all, the implementers and 
ultimate instruments of the VA's policies, and if they are not 
up to the job, then neither is the VA.

                      Illustrative Policy Options

    The committees of jurisdiction--the Committee on Veterans' 
Affairs and the Appropriations Subcommittee on Military 
Construction, Veterans Affairs, and Related Agencies--should 
continue effective oversight of the Department of Veterans 
Affairs and Department of Labor Veterans' Employment and 
Training Service programs to ensure resources are used 
efficiently to achieve desired results. The Budget Committee's 
authority applies solely to the budgetary parameters for each 
committee of jurisdiction. The final policy choices will lie 
with the committees, some options worthy of consideration to 
achieve the budgetary goals of the resolution are described 

                         DISCRETIONARY SPENDING

    Address the `High-Risk' Status of VA Health Care. Every two 
years, at the start of a new Congress, the Government 
Accountability Office [GAO] releases a ``high-risk'' list that 
calls attention to Federal programs vulnerable to fraud, waste, 
abuse, mismanagement, or needing transformation. In 2015, VA 
health care was placed on the list for its inability to ensure 
allocated resources are being used ``cost-effectively and 
efficiently to improve veterans''' health care access, safety, 
and quality.\108\ VA health care remains on the list today. 
``[W]e continue to be concerned about VA's ability to ensure 
its resources are being used cost-effectively and efficiently 
to improve veterans' timely access to health care, and to 
ensure the quality and safety of that care.''\109\ GAO notes 
that although VA medical caseloads increased significantly over 
the past decade, VA facilities often failed to keep up. ``In 
some cases, the delays in care or VA's failure to provide care 
at all reportedly have resulted in harm to veterans.''\110\ The 
``Veterans Access, Choice, and Accountability Act of 2014'' 
(Public Law 113-146) provided $10 billion in additional 
spending authority--to last through August 2017--to help 
alleviate the problem, and led to the creation of the Veterans 
Choice Program in November 2014. This has been only partly 
successful. According to GAO: ``With the increased utilization 
of community providers that has occurred as a result of the 
``Veterans Access, Choice, and Accountability Act'', veterans 
are required to navigate multiple complex health care systems--
the VA health care system and those of community providers--to 
obtain needed health care services.''\111\ VA also suffers 
problems ``regarding the reliability, transparency, and 
consistency of its budget estimates for medical services, as 
well as weaknesses in tracking obligations for medical services 
and estimating budgetary needs for future years.''\112\
    \108\Government Accountability Office, Managing Risks and Improving 
VA Health Care, March 2017:
    \109\Government Accountability Office, High Risk List, 1 March 
    Additionally, as the Commission on Care highlighted in its 
    ``Choice involves tradeoffs. Reducing drive times to see a 
doctor may lead to longer wait times, for example, if it 
induces substantially more veterans to seek more care. VHA 
reliance on contracting could also have unintended consequences 
for already underserved communities. Providers in such 
communities who join the local VHA network may decide to limit 
the number of Medicare and Medicaid patients they accept into 
their practices. In other, highly concentrated health care 
markets, which are increasingly common throughout the United 
States, VHA may not be able to contract for care in the 
community except at higher prices. Such circumstances 
underscore the importance of VHA retaining the option of 
building its own capacity.''\113\
    \113\Commission on Care, Commission on Care Final Report, 30 June 
    This budget option calls for the VA to review and implement 
GAO's recommendations to update and improve VA's disability 
compensation benefit program and health care system to remove 
these items from GAO's ``high-risk'' list.

    Reduce Improper Payments. Improper payments--payments made 
in the wrong amounts, to the wrong people, or for the wrong 
reasons--have consistently been a government-wide problem (see 
discussion in separate section of this report). For fiscal year 
2016, the VA reported $5.5 billion in improper payments, 
principally in its Community Care and Purchased Long-Term 
Services and Support programs.\114\
    \114\Government Accountability Office, ``Veterans Affairs: Improper 
Payment Estimates on Ongoing Efforts for Reduction,'' testimony to the 
House Veterans Affairs Subcommittee on Oversight and Investigation, 24 
May 2017.
    Agencies with program(s) reported as noncompliant with the 
``Improper Payments Elimination and Recovery Act of 2010'' 
[IPERA] for three consecutive years are required to propose to 
their committees of jurisdiction statutory changes to bring the 
program into compliance.\115\ IPERA compliance review serves as 
a critical tool to ensure taxpayer dollars are not misspent and 
to guarantee Federal agencies are proactive in addressing 
program(s) with high improper payment error rates.\116\ This 
budget option recommends the VA adhere to the requirement, 
striving to mitigate, reduce, or eliminate future improper 
    \115\Public Law 111-204
    \116\Nicholas Pacifico, Federal Improper Payments Are Significant, 
Costing Taxpayers Billions, Project on Government Oversight, 12 July 
    \117\Public Law 111-204.

    Sunset Advisory Committees. Federal advisory committees are 
defined as ``any committee, board, commission, council, 
conference, panel, task force, or other similar group'' that 
dispenses ``advice or recommendations'' to the President and/or 
Cabinet Secretaries.\118\ VA currently has 15 advisory 
committees established by statute, and 10 non-statutory 
panels.\119\ In 2015, for example, VA created a new initiative 
called ``MyVA'' that focused on ``customer service from a 
veteran's perspective.''\120\ The Appropriations Subcommittee 
on Military Construction, Veterans Affairs, and Related 
Agencies raised concerns with the funding and full-time 
equivalent employees [FTEs] allocation to the new 
initiative.\121\ The new initiative required a budget of $76.3 
million and 204 FTEs for activities to support ``planned 
customer data integration and Department-wide 
reorganization.''\122\ The VA has yet to submit information 
about the MyVA office, its mission, action plan, and cost of 
such an undertaking.
    \118\Public Law 92-463.
    \119\U.S. Department of Veterans' Affairs, Advisory Committee Names 
and Objectives, 3 January 2017.
    \120\Public Law 114-92.
    To ensure advisory committees are not inefficient or 
duplicative of VA efforts, this illustrative option calls for 
VA to ``review and eliminate advisory committees that are 
obsolete, duplicative, low priority or serve a special, rather 
than national interest,'' and sunset all committees after two 
years of enactment, unless the Legislative Branch has specified 
    \123\U.S. Office of Management and Budget, OMB Circular No. A-135 
as Applied to Federal Advisory Committee Act, 28 June 1994: https:// and Public Law 92-463.

    Consolidate Transition Assistance Program Goals, Plans, 
Success Program. Redundant Federal programs are leading to 
millions, if not billions, in wasteful spending. At a time of 
increased budget pressure, American taxpayers cannot afford to 
keep buying the same service twice. The Transition Assistance 
Program Goals, Plans, Success Program [TAP GPS] is designed to 
facilitate service members' transition to civilian life and is 
governed by a working group representing five agencies: the 
Department of Defense, the Department of Education, the 
Department of Labor [DOL], the Small Business Administration, 
and the Office of Personnel Management. The working group 
designs the curriculum composed of a five-day core class 
focused on job-hunting skills and VA benefits. In addition, an 
optional two-day course focuses on education, small business, 
and trades training. TAP GPS is taught largely by contractors 
hired by DOL and VA. Instead of combining the training 
curricula requirements into one overarching contract, however, 
VA and DOL have awarded separate contracts, thus doubling the 
overhead costs. Veterans Benefits Administration leaders have 
shifted TAP GPS funding to cover the costs of other VA non-
statutory job placement programs unrelated to the TAP GPS 
program. This budget option recommends consolidating TAP 
programs to achieve greater service-member and veterans' 
transition results.

                            DIRECT SPENDING

    Reform VA's Rating Schedule for Disability Compensation. 
The Department of Veterans Affairs administers one of the 
largest Federal disability compensation benefit programs, based 
on the loss of earning potential as a result of service-
connected disability.\124\ Under sections 1110 and 1155 of 
Title 38, VA is required to ``adopt and apply a schedule of 
ratings of reductions in earning capacity from specific 
injuries or combination of injuries'' to determine the 
veteran's disability compensation amount.\125\ In fiscal year 
2016 (the most recent figures available), VA provided $64.7 
billion in disability compensation payments to 4.3 million 
veterans with service-connected disabilities.\126\ Currently, 
the VA uses the ``1945 Rating Schedule and its medical criteria 
with some revisions to evaluate veterans for disability 
compensation.''\127\ Over the years, VA's rating schedule 
criteria to assign degree of work disability have not been 
consistent with ``changes in medicine and the labor market''--
leading some experts to believe some veterans with service-
connected injuries are being overcompensated or 
undercompensated.\128\ In 2003, GAO designated VA's disability 
compensation rating program as ``high-risk'' due in part to 
VA's relying on outdated criteria to determine whether 
recipients should qualify for disability compensation benefits 
in relation to advances in ``medicine, technology, or changes 
in the modern work environment.''\129\ The program remains on 
the high-risk list today.
    \124\Government Accountability Office, VA Disability Compensation: 
Actions Needed to Address Hurdles Facing Program Modernization, 
September 2012:
    \125\38 U.S. Code Sec. 1110 and 38 U.S. Code Sec. 1115
    \126\Department of Veterans Affairs, VBA Annual Benefits Report, 
    \127\H.R. 5149, to govern the effective dates of ratings and awards 
under the Veterans' Administration revised Schedule for Rating 
Disabilities, 1945, and for other purposes, 79th Congress: 2nd Session, 
4 June 1946:
1417.pdf and Institute of Medicine; Board on Military and Veterans 
Health; Committee on Medical Evaluation of Veterans for Disability 
Compensation; Michael McGeary, Morgan A. Ford, Susan R. McCutchen, and 
David K. Barnes, A 21st Century System for Evaluating Veterans for 
Disability Benefits, 2007.
    \128\Op. cit. Government Accountability Office, VA Disability 
Compensation: Actions Needed to Address Hurdles Facing Program 
Modernization, September 2012:
    \129\Op. cit. Government Accountability Office, Improving and 
Modernizing Federal Disability Programs (also appears in the 2015 High 
Risk Report), February 2015:
    The rating schedule needs a systematic overhaul to align 
with present-day accepted medical principles and medical 
standards, and to address whether disabilities lower than 30 
percent constitute material impairment of earning 
capacity.\130\ This budget option calls for reforming the 
rating schedule.
    \130\Op. cit. VA Disability Compensation: Actions Needed to Address 
Hurdles Facing Program Modernization, Institute of Medicine; Board on 
Military and Veterans Health; Committee on Medical Evaluation of 
Veterans for Disability Compensation; Michael McGeary, Morgan A. Ford, 
Susan R. McCutchen, and David K. Barnes, A 21st Century System for 
Evaluating Veterans for Disability Benefits, 2007.

    Reform VA's Disability Compensation Program. In 1924, 
through Public Law 68-242, the ``World War Veterans Act of 
1924'', Congress established veterans' benefits program and 
today's VA disability compensation program.\131\ Disability 
compensation provides a monthly cash benefit to veterans who 
have incurred an injury or disease contracted in, or aggravated 
by, active military service.\132\ The disability compensation 
program does not always reflect ``recent medical and 
technological advances, and their impact on medical conditions 
that affect potential earnings.''\133\ VA's disability 
compensation program has not kept pace with changes in the 
labor workforce from a ``manufacturing-based jobs to service--
and knowledge-based'' market, and changes in skillsets has also 
evolved.\134\ These labor market changes are not reflected in 
VA's rating for disability compensation.\135\ This budget 
option recommends Congress direct VA to evaluate ``whether the 
ratings for conditions in the schedule correspond to veterans' 
average loss in earnings due to these conditions and adjust 
disability ratings accordingly,'' and that VA conduct a study 
and report to Congress on the effects and impact medical 
advancements and technology would have on VA's disability 
compensation program and benefit package.\136\ VA should also 
refine the current Disability Presumption Process to avoid 
listing ``conditions that are associated with age and 
lifestyle--as opposed to chemical exposure'' on the presumptive 
    \131\Department of Veterans Affairs, VA Disability Compensation 
Program: Legislation History, December 2004:
    \132\38 U.S.C. Sec. 1131.
    \133\Committee on Veterans' Affairs, U.S. Senate, hearing on 
``Proposals to Limit Eligibility for VA Compensation to Veterans with 
Disabilities Directly Related to the Performance of Duty,'' 23 
September 2003.
    \137\Congressional Research Service, Veterans Affairs: Presumptive 
Service Connection and Disability Compensation, 18 November 2014:

    Update VA's Individual Unemployability Benefits. The VA's 
Individual Unemployability [IU] program pays certain veterans 
disability compensation at the 100-percent rate, even though VA 
has not rated the veteran at that level.\138\ In 2003, GAO 
designated VA's IU program as high-risk, and it remains on the 
list today.\139\ In September 2015 (the most recent figures 
available), more than 60 percent of veterans receiving VA's IU 
supplemental benefit were 65 or older.\140\ From fiscal year 
2009 through 2013, the VA's IU benefit program increased by 22 
percent with a ``73 percent increase in the subgroup of 
beneficiaries aged 65 and older.''\141\ Moreover, about 2,800 
of new first time beneficiaries were 75 years of age and 
older--with 400 of them 90 and older.\142\ These trends have 
raised the question of what constitutes ``unemployability'' in 
today's economy.\143\ This budget option recommends the 
following: 1) institute an application restriction to veterans 
age 70 and older from applying for the first time to the VA's 
IU benefit program; 2) revise VA regulations to require all 
veterans applying for IU be referred to the vocational 
rehabilitation unit for work potential evaluation before being 
considered for IU benefits; 3) codify the IU program into law 
(it is currently regulatory, not statutory) to ensure it 
functions appropriately through congressional oversight; 4) 
update the IU program to reflect today's economy; and 5) means 
test the program.\144\ This budget recommendation also assumes 
beneficiaries who were enrolled before enactment would not be 
affected by any policy change.
    \138\Department of Veterans Affairs, Individual Unemloyability, 
    \139\Government Accountability Office, High Risk List, January 
    \140\Congressional Budget Office, Options for Reducing the Deficit: 
2017 to 2026, 8 December 2016.
    \141\Government Accountability Office, Veterans' Disability 
Benefits: VA Can Better Ensure Unemployability Decisions Are Well 
Supported, 2 June 2015:
    \144\General Accounting Office, Veterans Benefits: Improving the 
Integrity of VA's Unemployability Compensation Program, September 1987:; and, 38 CFR Sec. 4.16a.

    Slow the Growth of Education Tuition Increases. The Post-9/
11 GI Bill covers veterans' tuition, fees, and textbook costs, 
in addition to providing a monthly living stipend. Veterans' 
education benefits became significantly more generous following 
the 2008 passage of the Post-9/11 GI Bill. Over the past 
decade, education tuition annually on average have been higher 
than the average rate of inflation--increasing VA's education 
payments on an annual basis.\145\ The rapidly increasing 
tuition cost nationwide is causing substantial, unexpected 
increases in education benefit spending, putting future 
benefits at risk. In 2011, the House and Senate Veterans' 
Affairs Committees' letter to the Joint Select Committee on 
Deficit Reduction [JSCDR] recommended this policy proposal to 
slow the rate of education growth.\146\ This budget option 
would cap the increase in tuition assistance at 3 percent, 
providing sustainability of the program in the out years. This 
budget recommendation also assumes beneficiaries who were 
enrolled before enactment would not be impacted by any policy 
    \145\Saving for College, The Real Cost of Higher Education, 2016:
    \146\Chairs and Ranking Members of the Veterans' Affairs Committees 
letter to the Joint Select Committee on Deficit Reduction, 14 October 

    Reform VA Home Loan Guaranty Funding Fee Rates. The VA's 
home loan guaranty funding fee was first established through 
the ``Omnibus Budget Reconciliation Act of 1982'' (Public Law 
97-253).\147\ Under current law, VA may guarantee a home loan 
to eligible service members, veterans (with both service-
connected and non-service-connected injuries), reservists, and 
certain unmarried surviving spouses to purchase houses, 
condominiums, and manufactured homes.\148\ In addition, the VA 
may not collect a funding fee from a service-connected-injured 
veteran.\149\ The VA funding fee percentage varies from 0.5 
percent to 3.3 percent depending on several factors. Among 
these factors are whether the veteran is a first-time homebuyer 
or if the veteran is making a down payment.\150\
    \147\Public Law 97-253:
    \148\Subchapter III of title 38, United States Code.
    \149\Subsection (C)(1), section 3729 of title 38, United States 
    \150\Public Law 113-146
    Since 1982, the VA Home Loan Guaranty funding fee rates 
have been adjusted to pay for other VA programs.\151\ Current 
VA funding fees are lower than other Federal housing programs, 
such as the Federal Housing Administration. This budget option 
calls for the VA Home Loan Guaranty funding fee rates for non-
service-connected veterans be reformed at a reasonable rate, 
while ensuring the integrity and sustainability of the program 
stays intact. This budget recommendation also assumes 
beneficiaries who were enrolled before enactment would not be 
affected by any policy change.
    \151\The VA Home Loan Guaranty funding fee was used as an offset in 
Public Law 97-253, The Omnibus Budget Reconciliation Act of 1982, and 
Public Law 113-146, Veterans Access, Choice and Accountability Act of 

    Reform Dependent Housing Stipend. The GI Bill's primary use 
is assisting a veteran's reintegration into civilian life by 
providing the education and skills necessary to gain meaningful 
employment after military service. To provide both a recruiting 
and retention incentive, the Post-9/11 GI Bill allows each 
military service to determine which service members who meet 
the statutory eligibility requirements to transfer all or some 
of their education benefits to their dependents. Instead of 
targeting the benefit to retain service members with critical 
needed skills, the services have made eligible all service 
members who qualify under the time-in-service requirements. 
This budget option calls for the Post-9/11 GI Bill to restore 
its original intent by focusing resources on veterans 
readjusting into society after their military career, and for 
VA and DOD to assess the transferability's impact on 
recruitment and retention. This budget recommendation also 
assumes beneficiaries who were enrolled before enactment would 
not be affected by any policy change.

    Prevent VA from Providing Unlimited Amounts for Flight 
Training at Public Schools. Brought to Congress' attention by 
the VA, Veterans Service Organizations, and the National 
Association of State Approving Agencies [NASAA], some flight 
schools are exploiting an aviation training tuition loophole in 
the Post-9/11 GI Bill.\152\ Some institutions of higher 
learning have applied extreme costs for flight fees as there 
are no caps in place for such institutions with third-party 
flight contractors. According to representatives from NASAA, 
some student veterans are taking flight classes as electives 
with no cost cap for flight fees.\153\ In response to concerns 
from stakeholders regarding this loophole, in 2016 the House 
Veterans Affairs Subcommittee on Economic Opportunity 
introduced H.R. 3016, the ``Veterans Employment, Education, and 
Healthcare Improvement Act'', which grandfathered current 
flight school students' tuition for two years and made 
improvements to veterans' educational assistance. In 2016, the 
measure passed the House on a bipartisan basis. This budget 
option reflects a provision in H.R. 3016 that applies a tuition 
cap for flight programs at public institutions of higher 
learning that is consistent with other veterans' educational 
programs.\154\ This budget recommendation also assumes 
beneficiaries who were enrolled before enactment would not be 
affected by any policy change. This policy recommendation is 
also included in President Trump's fiscal year 2018 budget 
    \152\Curtis L. Coy, Deputy Under Secretary for Economic 
Opportunity, Veterans Benefit Administration, testimony before the 
House Veterans' Affairs Subcommittee on Economic Opportunity, 19 
November 2014:
l-coy-7. The Iraq and Afghanistan Veterans of America, the American 
Legion, and the Veterans of Foreign Wars all support closing this 
    \154\``Veterans Employment, Education, and Healthcare Improvement 
Act'' (H.R. 3016):

    Round Down Annual Cost-of-Living Allowance to the Next 
Lower Whole Dollar. This option would require VA to round down 
increases in the monthly compensation rate resulting from an 
annual cost-of-living adjustment [COLA] to the next lower whole 
dollar. The VA would apply this round down to both disability 
compensation and dependency and indemnity compensation 
payments. A similar requirement expired at the end of 2013 and 
this budget option recommends a reinstatement of this policy. 
This policy recommendation is also included in President 
Trump's fiscal year 2018 budget request.

    Reform Chapter 33, Post-9/11 GI Bill, Monthly Housing 
Allowance Rate. Under current law, the Post-9/11 GI Bill 
housing allowance is based on the Department of Defense monthly 
housing allowance [MHA] for a service member in pay grade E-5 
with dependents.\155\ The housing allowance is equal to the MHA 
payment for the military housing area in which the institution 
of higher learning is located, and reduced according to the 
beneficiary's enrollment rate.\156\
    \155\Section 403 of title 37 (The E-5 with dependents BAH is the 
monthly basic allowance for housing for a member of the Armed Forces 
with dependents in pay grade E-5) and subsection (B)(i)(I), Section 
3313 of title 38.
    \156\Cassandria Dortch, The Post-9/11 Veterans Educational 
Assistance Act of 2008 (Post-9/11 GI Bill): Primer and Issues, 
Congressional Research Service, 28 July 2014.
    The current Post-9/11 GI Bill policy for MHA payment does 
not take into account that not every Post-9/11 GI Bill 
beneficiary has a dependent. The Post-9/11 GI Bill is the only 
Federal program to pay individuals with a dependent who do not 
warrant such a payment (e.g., Active Duty MHA and IRS filings). 
The Post-9/11 GI Bill MHA should be aligned with other federal 
programs. This budget option recommends a change to the current 
policy to require that beneficiaries verify their dependent to 
collect Post-9/11 GI Bill BAH at the E-5 with dependent pay 
rate. Should the beneficiary be unable to verify their 
dependent, they will be paid at E-5 without dependent pay rate, 
and dependents will be paid at the E-5 without dependent pay 
rate. This budget recommendation also assumes beneficiaries who 
were enrolled before enactment would not be affected by any 
policy change.

                       ADMINISTRATION OF JUSTICE

                            Function Summary

    While freedom is Americans' most cherished possession, 
their personal safety and equal protection under the law are 
instrumental in securing it. Therefore, over the Nation's 
history, States, localities, and the Federal Government have 
written laws and established institutions to ensure their 
enforcement. As in so much of the American system, States and 
localities are better suited to enforcing laws of more local or 
regional character. The Federal Government's main role is to 
address security issues that affect the entire Nation, such as 
terrorism and border security. Yet vast amounts of Federal 
resources are shipped back to the States and localities they 
came from, typically with strings attached by domineering 
Washington bureaucracies.
    The ongoing risk of domestic terrorism, and the tidal wave 
of government debt, call for better targeting of Federal law 
enforcement funds. Federal tax dollars for the Department of 
Justice [DOJ] and the Department of Homeland Security [DHS] 
should be focused on administering justice, arresting and 
prosecuting terrorists, protecting and securing the Nation's 
borders, investigating Federal crimes, and seeking punishment 
for those guilty of unlawful behavior. Local law enforcement, 
in contrast, is the responsibility of the States and local 
communities, and they should determine the best course of 
action in deterring local crime.
    In 2016, the Federal Government provided States and 
localities with more than $666 billion in grants.\157\ Of that 
amount, $2.4 billion went to three agencies in the Department 
of Justice: the Office of Justice Programs, the Office on 
Violence Against Women, and the Community Oriented Policing 
Services Office. The Government Accountability Office reported 
in 2012 that many of DOJ's roughly 11,000 annual grants are 
awarded without consideration of overlap or duplication with 
other grant programs, and that DOJ should better target its 
grants. GAO's 2015 update of that report states that DOJ had 
only partially addressed this area of potential 
duplication.\158\ In former President Obama's last budget 
proposal, Washington was to award $7.2 billion in total justice 
and homeland security grants to State and local governments. It 
is not the function of the Federal Government to finance State 
and local governments. Federal law enforcement needs to focus 
on its core responsibilities. The Executive Branch needs clear 
guidance from Congress in facing the Nation's continuing 
security threats.
    \157\Government Accountability Office, DOJ Grants Management: 
Justice Has Made Progress Addressing GAO Recommendations, testimony 
before the House Oversight and Government Reform Subcommittee on 
Government Operations, 14 July 2016.
    \158\Government Accountability Office, 2015 Annual Report: 
Additional Opportunities to Reduce Fragmentation, Overlap, and 
Duplication and Achieve Other Financial Benefits, April 2015, p. 209:
    The principal activities in this category (Function 750 in 
the summary tables) include Federal law enforcement programs, 
litigation and judicial activities, correctional operations, 
and border security. The function includes most of the 
Department of Justice and several components of the DHS. Other 
agencies funded here include the Federal Bureau of 
Investigation [FBI]; the Drug Enforcement Administration; the 
Bureau of Alcohol, Tobacco, Firearms and Explosives; the United 
States Attorneys; legal divisions within the Department of 
Justice; the Legal Services Corporation; the Federal Judiciary; 
and the Federal Bureau of Prisons.
    The vast majority of this category's funding is 
discretionary, provided by the Appropriations Subcommittees on 
Commerce, Justice, Science and Related Activities, and Homeland 
Security. The Committee on the Judiciary and the Committee on 
Homeland Security have the main authorizing duties. The 
resolution calls for $54.0 billion in discretionary budget 
authority and $55.2 billion in outlays for fiscal year 2018. 
The small amount of direct spending in the category--which 
funds certain immigration activities, the Crime Victims Fund, 
the Assets Forfeiture Fund, and the Treasury Forfeiture Fund, 
among others--totals -$2.6 billion in budget authority and $5.9 
billion in outlays for fiscal year 2018. The 10-year totals for 
the function are $628.6 billion in budget authority and $637.8 
billion in outlays.


    In the 16 years since 9/11, Americans have grown accustomed 
to living in an environment of enhanced security. Airports, 
government buildings, major sporting venues, and myriad other 
public facilities now feature the instruments of vigilance that 
have become necessarily common. Yet despite these measures, 
terrorism continues to lurk in the shadows, striking out all 
too unexpectedly--from San Bernardino to Orlando, Chattanooga 
to the campus of Ohio State University. Terrorists need to 
succeed only once to inflict their damage; the vigilance needed 
to stop them must be tireless and ongoing. Yet this must not 
entail any sacrifice of personal freedoms so easily at risk in 
today's high-technology environment. The words of the Fourth 
Amendment are unconditional: ``The right of the people to be 
secure in their persons, houses, papers, and effects, against 
unreasonable searches and seizures shall not be violated * * 
*'' [emphasis added].


    The ongoing debate over America's troubled immigration 
processes demonstrates the numerous vexing challenges in 
addressing the issue. All too often, the current system rewards 
those who enter the United States illegally, while doing little 
to recognize those who spend years waiting in line to immigrate 
properly. While specific immigration policies debated in 
previous years provided for semi-legal protections for 
undocumented residents already present within the United 
States, comprehensive reforms must make security a paramount 
concern. Whether it is enhanced protection, increased 
enforcement, or more robust cooperation between Federal and 
local jurisdictions, immigration reform policies cannot proceed 
until all Americans have confidence in the security of the 
Nation's borders.

                            SANCTUARY CITIES

    A ``sanctuary city'' is one that has adopted a policy of 
protecting undocumented immigrants, which runs contrary to 
Federal immigration law. These cities not only fail to 
prosecute violations, in specific situations they have enabled 
criminal activity. As stated by Immigration and Customs 
Enforcement [ICE]: ``A significant factor impacting removal 
operations has been the number of state and local law 
enforcement jurisdictions that have limited or declined 
cooperation with ICE, due to the enactment of numerous state 
statutes and local ordinances reducing and/or preventing 
cooperation with ICE, in addition to federal court decisions 
that created the perception of liability concerns for 
cooperating law enforcement agencies. Declined detainers result 
in convicted criminals being released back into U.S. 
communities with the potential to re-offend. Moreover, they 
draw resources away from other ICE efforts to protect public 
safety, by requiring ICE to expend additional resources to 
locate and arrest convicted criminals at-large rather than 
safely taking custody of such individuals in jails.''\159\ 
President Trump has criticized such ``sanctuary cities'' and 
has pledged to defund them. Withholding Federal funds from 
these cities may be initiated by placing an amendment in the 
Commerce, Justice, and Science Appropriations bill that blocks 
grants from the Department of Justice to local law enforcement 
agencies that engage in sanctuary practices. Congress could 
take action on one or both of the following pieces of 
legislation introduced in the 115th Congress. H.R. 83, the 
``Mobilizing Against Sanctuary Cities Act'', would prohibit a 
State or local government from receiving Federal funds for a 
minimum of one year if it interfered with immigration laws. 
Similarly, H.R. 3003, the ``No Sanctuary for Criminals Act''--
cosponsored by Representatives Goodlatte (R-VA), King (R-IA), 
and Biggs (R-AZ)--restricts sanctuary jurisdictions from 
receiving Federal law enforcement grants while protecting 
jurisdictions who comply with immigration law from being sued. 
The bill also has the potential to decrease government spending 
and lower the deficit by as-yet-undetermined amounts, according 
to the Congressional Budget Office.
    \159\Department of Homeland Security, DHS Releases End of Fiscal 
Year 2016 Statistics, 30 December 2016:

                           THE JUDGMENT FUND

    The Judgment Fund was created in 1956 to pay judgments and 
settlements of lawsuits against the Federal Government. The 
fund is a permanent appropriation, and payments do not require 
congressional notification or approval. Simply put, it is a 
limitless bank account shielded from congressional oversight.
    Due to the fund's design, the Obama Administration was able 
to pay billions of dollars in interest payments to Iran, 
sidestepping Congress. On 17 January 2016, the State Department 
announced the U.S. Government agreed to pay the Iranian 
government $1.7 billion to settle a case related to the sale of 
military equipment prior to the Iranian revolution, and $1.3 
billion was sourced through the Judgment Fund.
    The Obama Administration's ability to unilaterally draw 
from the fund for its agenda without congressional oversight or 
approval illustrates the fund's inherent structural flaws. 
Several long-term solutions are available for consideration 
that would reassert Congress's Article I power of the purse, 
reining in automatic spending that currently occurs through 
this program, and closing the administrative loophole. Congress 
could require a Joint Resolution of Approval for any sum of 
payments over a certain amount, increased transparency, and 
agency reimbursements to the fund over a fixed time period. 
Short-term solutions include H.R. 1096 and S. 565, the 
``Judgement Fund Transparency Act of 2017'', which requires to 
the Department of the Treasury to publically disclose details 
after payments are made.

                      Illustrative Policy Options

    In developing policies to meet their budget targets, the 
committees of jurisdiction cited above should give priority to 
those activities that are essential for the Federal Government. 
This does not necessarily require more funding in each area; it 
means addressing those Federal responsibilities first. The 
committees have sole authority in determining the policy 
choices and priorities in these areas. The discussions below 
are illustrative, intended to indicate policy options or 
directions the committees might consider.

                         DISCRETIONARY SPENDING

    Consolidate Justice Grants. In fiscal year 2016, DOJ 
awarded $2.4 billion in grants to conduct research, provide 
training assistance, and support the State and local criminal 
justice system. The Congressional Research Service and GAO have 
identified overlap and duplication within many of these grant 
programs, and it is clear they fund law enforcement activities 
that are primarily State and local responsibilities. In 
addition, Federal grants should not be awarded to State and 
local law enforcement agencies unless they comply with the 
Federal law. This includes jurisdictions that refuse to honor 
Federal detainers, harbor illegal aliens, or fail to share 
information on criminal illegal aliens. This option streamlines 
grants into three categories--first responders, law 
enforcement, and victims--while eliminating waste, 
inefficiency, and bureaucracy.

    Eliminate Unnecessary Headquarters and Construction Funding 
for DHS, DOJ, and the Judiciary. Construction funding for 
various agencies within this budget function have increased 
without due oversight and cost-benefit analysis, though the 
committees of jurisdiction have focused on addressing cost 
overruns and increasing accountability. This budget recommends 
reducing DHS and DOJ construction budgets by 15 percent to rein 
in unnecessary construction projects, exempting those agencies 
involved with border security and immigration enforcement. The 
budget recommends additional scrutiny of cost overruns of DHS's 
St. Elizabeth's project, the largest Federal building project 
in the District of Columbia since the Pentagon. Another major 
concern is the mishandling of taxpayer funds by the General 
Services Administration for giving priority to green energy 
projects over security and life safety issues at Federal 
courthouses. The renovation of the Poff Federal Building is a 
prime example of this wasteful spending. A sum of $51 million 
was used to make this building more energy-efficient, money 
that was critically needed to address security and public 
safety at other sites.

    Eliminate the Legal Services Corporation. It is the duty of 
State and local governments to provide legal services to those 
individuals unable to provide it for themselves. Local 
jurisdictions are more aware of their citizens' needs and can 
provide more responsive service than the Federal Government. 
Critics have argued that despite restrictions already in place, 
the Legal Services Corporation too often focuses on social 
activist causes rather than advocating for those persons 
needing legal help the most.

                            DIRECT SPENDING

    Permanently Extend Customs User Fees. Continuing the policy 
of the ``Emergency Unemployment Compensation Extension Act of 
2014'', the budget assumes the Bureau of Customs and Border 
Protection continues to collect customs user fees through 
fiscal year 2027, the last year of the budget window. With the 
passage of the ``Emergency Unemployment Compensation Extension 
Act of 2014'', authority to collect these fees expires in 2024. 
The Bipartisan Budget Agreement of 2015 extended customs user 
fee collections through 2025. This budget assumes making these 
customs user fees permanent.

                           GENERAL GOVERNMENT

                            Function Summary

    As government strives to make its programs more effective 
and efficient, it must also do so with its own internal 
operations. One cannot be achieved without the other. Yet this 
has not been the case with many of the Federal Government's 
agencies. Funding in the category of General Government 
(Function 800 in the summary tables) has increased by roughly 
30 percent in the past 10 years, but no one would contend the 
additional resources have yielded commensurate gains in 
productivity or effectiveness. Across the Nation, startups and 
existing companies continue to innovate, replacing outdated 
business practices and sectors of industry, but the Federal 
Government remains entrenched in bloated bureaucracies, legacy 
technology, and obsolete procedures. To respond to the Nation's 
needs in the 21st Century, the Federal Government must 
constantly improve operations, remove practices that stand in 
the way of innovation, and maximize the return on taxpayers' 
dollars. To this end, the budget resolution aims to eliminate 
waste across all Federal Government branches and agencies, and 
provide resources for necessary reforms to all facets of 
government operations. If a program or activity is poorly 
targeted, ineffective, duplicative of other efforts, requires 
updated technology, or could be better performed by the private 
sector, it is a candidate for elimination or restructuring.
    This budget category mainly provides funding for the 
Legislative and Executive Branches of the Federal Government. 
On the legislative side, these funds support the operations of 
Congress, including the Congressional Budget Office, the 
Library of Congress, and the Government Accountability Office. 
In the Executive Branch, the category finances the Executive 
Office of the President, including the Office of Management and 
Budget, the Council on Environmental Quality, White House 
salaries, and White House building repair; general tax 
administration and fiscal operations of the Department of the 
Treasury (including the Internal Revenue Service); the Office 
of Personnel Management; the real-property and personnel costs 
of the General Services Administration; general-purpose fiscal 
assistance to States, localities, the District of Columbia, and 
U.S. territories; and other general government activities.
    Most of this funding comes through annual appropriations 
(discretionary spending), which in fiscal year 2018 totals 
$15.9 billion in budget authority and $15.5 billion in outlays. 
Budget authority for direct spending in this area will total 
$7.7 billion, with $7.6 billion in accompanying outlays. Over 
10 years, the budget anticipates $248.5 billion in total budget 
authority and $245.8 billion in outlays.

           Illustrative Discretionary Spending Policy Options

    While specific policy decisions are entirely under the 
authority of the committees of jurisdiction--which include the 
Committees on Transportation and Infrastructure, House 
Administration, Ways and Means, Natural Resources, and 
Oversight and Government Reform--the discussion below offers 
illustrative options they might consider. Funding for Federal 
operations and property management are just a few areas where 
savings should be achieved. This resolution also urges the 
Office of Management and Budget and relevant agencies to make a 
top priority of implementing the data aggregation and 
transparency initiatives in the ``Digital Accountability and 
Transparency Act'', as well as information technology upgrades 
and the retirement of legacy systems via the Technology 
Modernization Fund provided by the ``Modernizing Government 
Technology Act of 2017''. The budget resolution also supports 
the House Majority Leader's ``Innovation Initiative'', focusing 
on modernizing the information and technology systems within 
the Federal government to bring about greater efficiency and 
    Some specific options worthy of consideration are described 

    Terminate the Election Assistance Commission. This 
independent agency was created in 2002 as part of the ``Help 
America Vote Act'' to provide grants to States to modernize 
voting equipment. Its mission has been fulfilled. The National 
Association of Secretaries of State, the association of State 
officials responsible for administering elections, has passed 
resolutions stating the Election Assistance Commission [EAC] 
has served its purpose, and funding is no longer necessary. The 
EAC should be eliminated and any valuable residual functions 
should be transferred to the Federal Election Commission.

    Accompany Pro-Growth Tax Reform with Responsible Reductions 
to the Internal Revenue Service. The Internal Revenue Service 
[IRS] has nearly 90,000 employees and spends in excess of $12 
billion annually. Additionally, the Internal Revenue Code now 
contains approximately four million words, and each year 
taxpayers and businesses spend more than six billion hours 
complying with filing requirements.\160\ The investigation 
related to the IRS targeting American citizens demonstrates 
that the massive budget has not resulted in better service to 
taxpayers; rather, it has created a bloated bureaucracy filled 
with inefficiency and abuse. A simplified tax code would have 
the dual benefits of reducing both the time taxpayers devote to 
complying with an overly complex code, and the taxpayer dollars 
needed to administer and enforce it.
    \160\National Taxpayer Advocate, 2016 Annual Report to Congress, 
December 2016.

    Make More Efficient Use of Legislative and Executive Branch 
Resources. The budget for the House of Representatives today is 
$188 billion less than it was when Republicans assumed the 
majority in 2011. This budget resolution aims to scale back 
government wherever it has expanded needlessly or beyond its 
proper role. That includes within government operations and 
offices themselves. It also could include reforms such as 
scaling back pensions of former U.S. presidents--recognizing 
their ability to support themselves primarily through other 
means of employment--while providing for their security and 
pensions for any surviving spouses. The resolution recommends 
treating the Legislative and Executive Branch appropriations 
the same as other Federal agencies and programs, and paring 
costs where possible. As taxpayers are required, at times, to 
do more with less, so too must Congress and the Executive 
Branch. The budget supports cost-cutting efforts and reforms 
that require better priority-setting for Legislative and 
Executive Branch funds.

    Further Consolidate Federal Data Centers. This budget 
supports the bipartisan Federal Data Center Consolidation 
Initiative, which was created in 2010 to reverse the widespread 
escalation of Federal data center construction, acquisition, 
management, and maintenance. By increasing efficiencies and 
continued efforts to incorporate cloud computing technologies, 
the Federal government can significantly decrease taxpayer 
spending on underused infrastructure.\161\
    \161\Chief Information Officer [CIO], Federal CIO Council, ``Data 
Center Consolidation and Optimization'':

    Modernize Federal Information Technology. OMB and multiple 
agencies could help the Federal Government realize savings by 
strengthening oversight and taking steps to implement H.R. 
2227, the ``Modernizing Government Technology Act of 2017''. 
This bipartisan-supported process provides agencies with the 
ability to upgrade their information technology investments 
through a Technology Modernization Fund.\162\ This budget 
supports the work of the White House Office of American 
Innovation, a group of private sector and administration 
officials responsible for updating the technology and data 
infrastructure of the Federal Government. The President's 
executive order establishing the American Technology Council is 
also a welcome move to create a resource of data and IT 
infrastructure innovation for the Federal Government. Regarding 
previous measures, OMB launched the PortfolioStat initiative in 
2012, to maximize the return on IT investments across the 
Federal Government's portfolio. Nevertheless, the Government 
Accountability Office has listed a variety of IT reforms from 
various agencies that need of attention. The following examples 
were identified in the testimony of Gene L. Dodaro, Comptroller 
General, before the Committee on the Budget on 3 May 2017.\163\
    \162\The ``Modernizing Government Technology Act of 2017'' (H.R. 
2227) 28 April 2017.
    \163\Gene L Dodaro, Comptroller General of the United States, 
testimony before the Committee on the Budget, U.S. House of 
Representatives, 3 May 2017.

      Department of Defense contract management for 
information technology. GAO has found that DOD department 
components have employed strategic sourcing for only 10 percent 
and 27 percent of their $8.1 billion IT service contracts. 
Strategic sourcing is an approach to supply chain management 
that allows organizations to use information to leverage their 
consolidated purchasing power, thereby realizing the best 
values in the marketplace.

      The Department of Veterans Affairs outdated 
financial IT systems. While the VA has examined options to 
upgrade its financial systems and IT infrastructure, GAO has 
raised concerns regarding the fiscal year 2020 completion date 
and the amount of resources required to implement the 

      OMB's PortfolioStat initiative. GAO has provided 
OMB with several recommendations regarding the transparency and 
accountability of the initiative. While OMB has taken steps to 
publicly disclose planned and actual data consolidation 
efforts, OMB needs to improve its ability to track planned cost 
savings and cost avoidance figures.

      The Federal Government's geospatial investments. 
While the government collects, manages, and uses a variety of 
geospatial information to assist and aid in decision-making 
across the Federal Government, GAO has recommended to OMB that 
better coordination and data sharing among agencies could 
eliminate duplicative spending on similar geospatial 
information systems and IT investments, and achieve annual 
savings of billions of dollars.

                         GOVERNMENT-WIDE POLICY

                            Function Summary

    A number of policies assumed in the budget resolution cut 
across agencies or functional categories, and have government-
wide effects. These include changes in the Federal civilian 
workforce or reductions in the government's improper payments. 
For ease of understanding, the budget resolution employs this 
category, Government-Wide Policy, to describe these 
assumptions. For fiscal year 2018, the resolution calls for 
$34.1 billion in budget authority and $2.8 billion in outlays. 
The 10-year totals for budget authority and outlay savings are 
-$1.4 trillion and -$1.3 trillion, respectively. (The figures 
appear in Function 930 in the summary tables.) As is true 
elsewhere, specific policies will be determined by the 
appropriate committees of jurisdiction.

                      Illustrative Policy Options

    The options discussed below are for illustrative purposes 
only. The committees of jurisdiction will determine actual 
policy changes, and they have maximum flexibility in deciding 
what those policies are.

                         DISCRETIONARY SPENDING

    The total base discretionary budget authority for fiscal 
year 2018 assumed in the resolution is $1.132 trillion. The 
resolution calls for approximately $60.0 billion in fiscal year 
2018 non-defense discretionary savings in several budget 
functions should Congress choose to enact additional deficit 
reduction for that year. Because these additional savings would 
cause the resolution to display a lower total base 
discretionary level than contemplated in the resolution, $60.0 
billion in non-defense discretionary spending is added back to 
Function 930 to make the total budget resolution base 
discretionary level match the amount specified.
    Additional illustrative savings options, of a government-
wide nature, are presented below.

    Reduce the Federal Civilian Workforce Through Attrition. 
The budget assumes discretionary savings through a 10-percent 
reduction in certain agencies of the Federal civilian workforce 
through attrition. Under the assumed strategy, the 
administration would be permitted to hire one employee for 
every three who leave government service. National security 
positions would be exempt.

    Reform Civil Service Pensions. The policy described in the 
Income Support, Nutrition, and Related Programs section of this 
report would increase the share of Federal retirement benefits 
funded by the employee. This policy has the effect of reducing 
the personnel costs for the employing agency. The budget 
assumes savings from a reduction in agency appropriations 
associated with the reduction in payments that agencies make 
into the Civil Service Retirement and Disability Fund for 
Federal employee retirement.

    Implement Federal Transition to Shared Services. ``Shared 
Services'' is a proven, ``best practice'' business model, in 
both the public and private sectors, for delivering common 
administrative services (e.g., human resources, financial 
management, acquisition, supply chain, IT services, and so on). 
The shared services approach allows a government enterprise to 
offer customer agency services from third-party service 
providers with high-capacity platforms. These providers can 
serve multiple agencies more cost-effectively than if the 
individual agencies operated the same services themselves in-
house. After decades of evolution, shared services has become 
the delivery model of choice for common business transactions 
in leading public- and private-sector organizations throughout 
the world. Global experience demonstrates typical cost savings 
of 25 percent to 45 percent, and significant service 
improvements through leveraging economies of scale and skill 
over decentralized or self-service models. The advent of 
``cloud'' technologies is creating ever-increasing 
opportunities to drive ``commodity'' transactions to shared 
service business platforms.
    Shared services, also known as ``line of business'' 
modernization, has been under way in the Federal Government for 
several decades, with support from administrations of both 
parties. Nevertheless, progress has been extremely slow and 
disjointed across administrations and the 24 Chief Financial 
Officers Act (1990) departments and agencies. The leading 
success story to date has been payroll shared services, but it 
took more than 25 years to consolidate from dozens of agency-
specific arrangements to today's four government-wide 
platforms.\164\ The Office of Personnel Management has 
estimated cumulative savings of $1.6 billion to date from 
payroll consolidation\165\--but the government has only 
scratched the surface of the full potential across the entire 
Federal back office.
    \164\The four Federal payroll providers are: USDA's National 
Finance Center; the Interior Business Center; the Defense Finance and 
Accounting Service; and the General Services Administration.
    \165\Office of Personnel Management, HR Line of Business: FY 2011 
Cost Benefit Analysis Report, May 2012.
    A report published by the non-partisan Partnership for 
Public Service in 2015 estimated Federal agencies spend about 
$125 billion per year on their individual back offices, and 
that full implementation of shared services across these common 
functions could produce savings of nearly $50 billion by 
eliminating wasteful duplication and improving efficiency.\166\ 
The Shared Services Roundtable's cost savings estimate was 
endorsed in a report issued by the Technology CEO Council in 
January 2017.\167\ Shared services can not only improve 
efficiency and effectiveness, but can also enable improved 
transparency, accountability and a more secure cyber 
environment in government business operations.
    \166\Partnership for Public Service, Shared Services Roundtable, 
``Building a Shared Services Marketplace,'' March 2015.
    \167\Technology CEO Council, ``The Government We Need,'' January 

                            DIRECT SPENDING

    Reduce Improper Payments/Program Integrity. This budget 
calls for program integrity savings by assuming that Continuing 
Disability Reviews and Supplemental Security Income 
Redeterminations are fully funded and that additional steps are 
taken to reduce improper payments in Medicare, Medicaid, 
Unemployment Insurance [UI], the Earned Income Tax Credit 
[EITC], and other programs (see the separate discussion of 
improper payments elsewhere in this report). By ensuring all 
benefits are targeted toward the appropriate households, this 
budget will reduce fraud and improper payments in these 
    ``Improper payments'' are defined as any government payment 
made in an incorrect amount (mostly overpayments), to the wrong 
individual or entity, or for the wrong reason. According to the 
Government Accountability Office, these payments totaled a 
stunning $144.3 billion in 2016, up from $107.1 billion in 
2012. Worse, this figure likely understates the full extent of 
the problem; 18 government programs deemed susceptible to 
improper payments did not even submit error estimates last 
year, according to GAO. Thus, the estimated total may very well 
represent a floor rather than a ceiling.\168\
    \168\Government Accountability Office, briefing to the House Budget 
Committee, 29 March 2017.
    These payment errors occur widely throughout government, 
including 112 government programs across 22 agencies, GAO 
reports. More than 75 percent of the problem, however, lies 
with three large programs: Medicare, Medicaid and the Earned 
Income Tax Credit [EITC]. In fact, the EITC program has an 
estimated payment error rate of 24.0 percent, meaning that 
nearly one in four dollars that leaves the Treasury for this 
program is deemed to be incorrect. Other notable government 
programs with improper payment problems include UI, Direct 
Student Loans, and the National School Lunch Program. One 
example of an improper payment would be a UI check going to 
someone who has already returned to work. Another example would 
be an EITC payment going to an individual who has earned income 
above the program's qualifying amount.\169\
    Since 2002, Congress has passed several legislative 
measures to address the problem, with little tangible success. 
This is an issue the Budget Committee intends to pursue 
aggressively in the future under the leadership of 
Representative Palmer (R-AL) and other Committee members. The 
Committee believes those departments and agencies that cannot 
decrease the amount of improper payments should be held 
accountable for their inability to stop these inappropriate 
expenditures. The Budget Committee will work with the 
appropriations and authorizing committees exploring numerous 
ideas to effectively address this problem.
    GAO reported that agencies continue to face difficulties in 
reducing improper payments. In addition, GAO found that sharing 
death data can help prevent improper payments to deceased 
individuals or those who use deceased individuals' identities, 
but the Social Security Administration has trouble maintaining 
these data, and other Federal agencies face difficulty 
obtaining them.\170\
    \170\Government Accountability Office, ``Improper Payments, 
Government-Wide Estimates and Use of Death Data to Help Prevent 
Payments to Deceased Individuals,'' testimony before the U.S. Senate 
Committee on Homeland Security and Governmental Affairs, 16 March 2015:

    Align the G-Fund Investment Return with an Appropriate Risk 
Profile. The resolution assumes savings by correctly aligning 
the rate of return on U.S. Treasury securities within the 
Federal Employee Retirement System's Thrift Savings Plan with 
its investment risk profile. Securities within the G-Fund are 
not subject to risk of default. Payment of principal and 
interest is guaranteed by the U.S. Government. Yet the interest 
rate paid is equivalent to a long-term security. As a result, 
those who participate in the G Fund are rewarded with a long-
term rate on what is essentially a short-term security.

    Assume Savings in Budget Control Act Continue. The BCA 
established an automatic enforcement mechanism--commonly known 
as a sequester--to ensure a promised level of savings from that 
law was actually realized. These savings were first implemented 
in 2013 and are scheduled to last through 2025. The resolution 
proposes to extend the savings created by the BCA through 2027, 
although the budget calls on Congress to replace the automatic 
sequester with specific, targeted reforms.

                          Domestic Priorities


    The budget resolution provides funding for a range of 
priority activities and services that are domestic in nature. 
Although all of them have national importance--that is why they 
appear in the Federal budget in the first place--they bear a 
special connection to the States and localities that constitute 
the Nation, as well as the vast array of non-government 
institutions throughout the country. K-12 education, for 
instance, is a quintessentially local priority. Because most 
Americans do most of their traveling in or near their own 
communities, their own roads and bridges are a fundamental 
local concern. Health care is provided mainly through local 
hospitals and private physicians. All these activities, and 
many others, would exist even if there were no Federal 
Government. Washington did not create them; States and 
localities and the private sector did. The concept on which 
America was founded--commonly known as federalism--recognizes 
that fact, and encourages the diversity of approaches best 
furnished by layers of government or non-government 
institutions closer to the people served. In grouping these 
activities together, the discussion below seeks to recognize 
the initiative of States and localities in finding new, better, 
and more efficient ways to provide these services. The Federal 
Government can assist these efforts through judicious 
allocation of supporting resources.
    The activities presented here are mainly the discretionary 
spending components in Function 250 through 650 in the 
conventional budget format. In two areas, however--Energy 
(Function 270) and Transportation (Function 400)--both the 
discretionary and direct spending components are presented. 
This is because in these areas, the two forms of spending are 
intertwined in ways unlike those of other functional 
categories. In Energy, for example, what appears as 
``negative'' direct spending mainly reflects the incoming 
repayment of loans and receipts from the sale of electricity 
produced by Federal entities, as well as rescissions of 
unobligated balances in green energy loan programs. These are 
fundamentally different from most direct spending, which 
applies to government benefit programs. Transportation has a 
split treatment of its funding. Its budget authority is a kind 
of mandatory spending called contract authority, while its 
outlays--controlled by annual limitations on obligations set in 
appropriations acts--are treated as discretionary spending; the 
two cannot really be separated.


                Function Summary: Discretionary Spending

    The largest component of this category--about half its 
total spending--is for the space-flight, research, and 
supporting activities of the National Aeronautics and Space 
Administration [NASA]. The function also contains general 
science funding, including the budgets for the National Science 
Foundation [NSF] and the Department of Energy's Office of 
    The budget reduces questionable and unjustified spending, 
while supporting core government responsibilities. The 
resolution provides stable funding for NSF to refocus on 
priority basic research in the Mathematical and Physical 
Sciences, Engineering, Computer and Information Science, and 
the Biological Sciences. As part of the criteria in the just-
enacted ``American Innovation and Competitiveness Act,'' the 
NSF needs to restore its grant making process to better align 
with one national interest, and remain accountable to the 
American public.\171\ The budget provides continued support for 
NASA and recognizes the vital strategic importance of the 
United States remaining the preeminent space-faring nation. 
This budget aligns funding in accordance with NASA's core 
principles: to support robust space capability, to allow for 
exploration beyond low Earth orbit, and to support the Nation's 
scientific and educational base.
    \171\The ``American Innovation and Competitiveness Act'' (Public 
Law 114-329):
    The budget resolution also calls for consistent funding for 
the basic research programs in the Department of Energy Office 
of Science. The Office of Science is the lead Federal agency 
for basic research in the physical sciences, and hosts more 
than 30,000 researchers per year at national laboratories and 
user facilities across the country. The fundamental research 
conducted by the Office of Science has provided the foundation 
for groundbreaking discoveries about the universe, innovative 
new technologies, and private sector achievements. In 
particular, this budget resolution will give priority to the 
Department of Energy's science infrastructure to ensure 
American leadership in scientific discovery.
    The vast majority of this category's funding is 
discretionary, provided by the House Committee on Science, 
Space, and Technology and the Appropriations Subcommittee on 
Commerce, Justice, Science, and Related Activities. The 
resolution calls for $28.4 billion in discretionary budget 
authority and $30.0 billion in outlays in fiscal year 2018. The 
10-year totals for discretionary budget authority and outlays 
are $313.3 billion and $307.5 billion, respectively.

           Illustrative Discretionary Spending Policy Options

    The committees of jurisdiction will determine policies to 
align with the spending levels in the resolution. They have 
complete authority to make those determinations, and maximum 
flexibility in doing so. The options below are offered as 
illustrations of the kinds of proposals that can help meet the 
budget's fiscal guidelines.

    Restore Core Government Responsibilities. Spending in 
research and development between NASA and the NSF is projected 
to reach $16.3 billion in 2017.\172\ The resolution's levels 
support preserving the Federal scientific community's original 
role as a venue for groundbreaking discoveries and a driver of 
innovation and economic growth. It responsibly pares back 
applied and commercial research and development and areas of 
wasteful spending that do not provide a high return on taxpayer 
resources. The proper role of the Federal Government is to 
support basic research, and funding should be distributed 
accordingly. For example, the NSF needs to be more transparent 
and accountable to the taxpayer. Every grant issued should be 
accompanied by an explanation of the project's scientific 
merits and how it serves the national interest as prescribed in 
the recently enacted American Innovation and Competitiveness 
Act. NSF-funded studies--such as a $300,000 grant to study 
whether girls are more likely to play with Barbie dolls than 
boys,\173\ $40 million investigating social media's obsession 
with Ebola, coined ``Fearbola,''\174\ $565,000 to study how 
long Mudskipper Fish could run outside the water,\175\ and a 
$450,000 project to study whether dinosaurs had the ability to 
sing\176\--do not serve a vital national interest. Funding for 
these programs and similarly wasteful or low-return social and 
behavioral studies should be redirected to scientific research 
that better serves the national interest.
    \172\Office of Management and Budget, Budget of the U.S. 
Government--Fiscal Year 2017: Historical Tables, Table 9.8: Outlays for 
Research and Development:
    \173\Senator Jeff Flake, Wastebook: The Farce Awakens, December 
2015, p. 62.
    \174\Ibid., p. 106.
    \175\Ibid., p. 17.
    \176\Ibid., p. 72.
    Similarly, spending for Biological and Environmental 
Research within the DOE Office of Science has eclipsed $600 
million per year. While much of the research conducted within 
the Office of Science is critical basic research in the 
physical sciences, using taxpayer dollars allocated for basic 
science research on duplicative climate change research is not. 
The previous administration also neglected programs within the 
core mission of the Department at BER, like the Low Dose 
Radiation Research Program, in order to fund climate change 
    Finally, NASA's spending on earth science has increased 
significantly in recent years, almost doubling, while funding 
for other activities have remained flat or decreased. This 
spending should return to previous funding levels so NASA can 
maintain a balanced portfolio of activities by reconstituting 
NASA's unique capabilities in Exploration, Planetary Science, 
Astrophysics, Heliophysics, and Aeronautics.

    Reduce Expenses for the Department of Homeland Security's 
Directorate of Science and Technology. The budget recommends 
reductions in management and administrative expenses for the 
Department of Homeland Security's Directorate of Science and 
Technology, while shifting funding to frontline missions and 


                            Function Summary

    Regulations placed on the private sector paired with ill-
advised investments have hampered the Nation's ability to 
effectively address its energy security needs. The government 
continues to pick winners and losers in energy markets, hoping 
that flooding money into politically connected private 
companies to deploy energy technology will produce greater 
results than getting the government out of the way for 
innovators. The Department of Energy [DOE] has an exemplary 
track record in the basic research that facilitates technology 
development led by the private sector. When limited Federal 
research dollars are used to fund loans, loan guarantees, 
commercial-scale demonstration projects, or the deployment of 
energy technology, there are fewer funds for this basic 
research. The fact is, the private sector is better suited to 
commercialize and deploy energy technology than the federal 
government. The DOE needs to focus on three primary missions; 
maintaining and modernizing the national nuclear supply, 
environmental cleanup, and the basic research programs that 
ensure American leadership in discovery science and energy 
    The Office of Energy Efficiency and Renewable Energy has 
grown by almost 50 percent in the past decade, and is currently 
funded at more than the budgets for applied research in nuclear 
energy, fossil energy, and electricity combined. In March 2017, 
CBO testified before the Energy and Commerce Committee, 
concluding that ``energy related R&D funding by the DOE has had 
mixed results.''\177\ CBO found that federal funds are most 
cost effective when it supports research that profitable firms 
would not take on their own, such as the basic research 
conducted by the DOE Office of Science. While there are 
certainly benefits to using Federal funds for conducting basic 
research, spending on technology deployment, loans and loan 
guarantees, and commercial scale-demonstration projects for 
technologies that are backed by mature industries in the 
private sector is highly questionable.
    \177\Congressional Budget Office Testimony before Subcommittee on 
Energy, Federal Support for Developing, Producing, and Using Fuels and 
Energy Technologies, 29 March 2017.
    In addition to significant Federal investment through R&D 
spending, renewable energy receives an overwhelming benefit 
through the U.S. tax code. In 2016, energy-related tax 
preferences totaled $18.4 billion.\178\ $10.9 billion of this 
total was directed towards renewable energy.
    The DOE loan and loan guarantee programs are another 
example of DOE's intervention in the energy market. The 
Department's current loan programs portfolio consists of 34 
loans and loan guarantees that total approximately $28 billion 
in support of 30 projects.\179\ To date, borrowers have 
defaulted on loans for five projects, at a cost of $807 million 
to the taxpayer, including two solar manufacturing projects, 
two advanced automotive manufacturing projects, and one energy 
storage project.\180\
    \179\Government Accountability Office, DOE Loan Programs: Current 
Estimated Net Costs Include $2.2 Billion in Credit Subsidy, Plus 
Administrative Expenses, GAO-15-438, 7 April 2015:
    \180\Ibid., (emphasis added).
    According to the Government Accountability Office, between 
2008 and 2014, administrative costs totaled approximately $312 
million, or $251.6 million for loan guarantees and $60.6 
million for the Advanced Technology Vehicles Manufacturing loan 
program, a cost that has been partially offset by the 
approximately $196 million in fees collected under the loan 
guarantee program in the same period.\181\ GAO estimates that 
the total credit subsidy cost (the expected net cost of 
subsidizing loans over their duration) for the current 
portfolio to be $2.21 billion.\182\
    Projects that received loan guarantees have also been given 
preferential treatment by the previous administration. Abound 
Solar, which received $400 million in loan guarantees, was 
cited by the Colorado Department of Public Health and 
Environment for hazardous waste left from its failed solar 
    \183\Michael Sandoval, ``Bankrupt Abound Solar to Bury Unused Solar 
Panels in Cement,'' The Daily Signal, The Heritage Foundation, 26 
February 2013.
    Another grant recipient, A123, was given permission to hand 
out as much as $3.7 million in bonuses to top executives as a 
part of its bankruptcy proceedings.\184\ And in the 
Department's most high profile failure, Solyndra, the DOE 
Inspector General found that DOE officials had many 
opportunities to validate claims of success, but repeatedly 
failed to conduct due diligence and ``critically analyze 
problematic information that Solyndra had provided to the 
    \184\Paul Chesser, ``A123's Executives Get Their Richly Undeserved 
Bonuses,'' National Legal and Policy Center, 13 November 2012: http://
    \185\Department of Energy Office of the Inspector General, Special 
Report: The Department of Energy's Loan Guarantee to Solyndra, Inc. 24 
August 2015:
    This is particularly problematic, because unlike the 
private sector, in which this company would eventually be held 
accountable to its investors for these failures, taxpayers have 
no way of holding the Federal Government accountable for each 
    The Advanced Research Projects Agency-Energy [ARPA-E] is 
also a misuse of federal research dollars. ARPA-E was intended 
to provide investment in high risk, high reward energy 
technologies that are too innovative to gather private 
financing. While some of ARPA-E's funding has gone to 
innovative technology projects, GAO has found that a 
significant portion of ARPA-E awards went to companies that had 
already received private sector financing for similar 
    A number of ARPA-E funded projects have also exemplified 
the Obama Administration's tendency toward crony capitalism and 
the picking of winners and losers in support of its ``green 
energy'' agenda, with the winners often conveniently being 
supporters of the previous administration's political agenda. 
Simply put, the late stage, venture-capital-style funding 
allocated through ARPA-E distorts the energy market and extends 
far beyond the appropriate role of the Federal Government in 
energy R&D. The new administration should strive to reverse the 
Obama agenda.
    After eight years, the verdict is in: increased oil and 
natural gas production by private sector companies on private 
land has made the U.S. the world's number one energy producer. 
The world has experienced an energy boom that continues to 
drive gas and other energy prices lower. Yet billions of 
dollars of government spending has brought the Nation no closer 
to cost-effective zero-carbon energy. Instead of prioritizing 
the basic research that can lead to technology breakthroughs, 
DOE has spent limited research dollars on picking winners and 
losers in the energy market. Technological breakthroughs will 
continue to occur--such as the combination of horizontal 
drilling and hydraulic fracturing that built off early stage 
research in the DOE national labs to revolutionize oil and gas 
production in the mid-2000s--but the Federal Government must 
resist the temptation to intervene at taxpayers' expense.
    These collective failures are only made worse by the 
failure to dispose of the spent nuclear fuel that is stuck at 
the country's nuclear power plant sites. GAO has recently 
reported that the Federal Government's environmental liability 
is up to $447 billion, compared to $212 billion in 1997.\186\ 
The Nuclear Waste Policy Act of 1982 obligated the government 
to dispose of the spent fuel by 1998, yet nearly 20 years later 
the material sits scattered around the country. Taxpayers 
remain on the hook for the Federal government's broken 
promises. The Obama Administration's negligence concerning the 
Yucca Mountain program, the designated disposal site, leaves 
our country with a challenging pathway to dispose of the 
growing amount of spent nuclear fuel. In the meantime, 
taxpayers have already paid more than $4.4 billion to cover the 
cost of the government's failed promises,\187\ with a $25-
billion bill coming due in the future.\188\ This will continue 
to rise until the government begins meeting these obligations.
    \186\GAO High-Risk Series: Progress on Many High-Risk Areas, While 
Substantial Efforts Needed on Others. February 15, 2017.
    \187\CBO testimony before the Subcommittee on Environment and the 
Economy, 3 December 2015.
    \188\DOE FY16 Agency Financial Report:
    Last year, the Department of Energy was provided with $29.7 
billion, a 6.4-percent increase over the previous year. In 
particular, the Office of Energy Efficiency and Renewable 
Energy was given a budget of $2.07 billion, an 18-percent 
increase since 2013. Many of DOE's national security, defense 
and civilian programs, environmental cleanup activities, and 
the basic research programs that ensure American leadership in 
discovery science and energy security remain worthy of support; 
significantly increasing funding for the expedited 
commercialization of costly technologies that put taxpayer 
dollars at risk is of dubious value.
    The Trump Administration is committed to changing how we 
handle energy policy. Lowering costs at the pump, maximizing 
domestic resources, lessening U.S. dependence on foreign oil, 
and eliminating unnecessary regulations on American industry 
have been a staple of the President's vision for the country. 
He plans to eliminate harmful and unnecessary policies such as 
the Climate Action Plan and the Waters of the U.S. rule. 
``Sound energy policy begins with the recognition that we have 
vast untapped domestic energy sources and reserves right here 
in America.''\189\
    \189\The White House:
    Discretionary spending in this category includes some of 
the civilian energy and environmental programs of the 
Department of Energy. It also includes funding for the 
operations of the Nuclear Regulatory Commission [NRC]. A large 
majority of the DOE discretionary budget is allocated to 
applied research and development [R&D], commercialization, and 
deployment of energy technologies in renewable energy, energy 
efficiency, fossil energy, nuclear energy, and electricity 
delivery and energy reliability. Beyond the early stage applied 
research that cannot be accomplished by the private sector--
like research in cybersecurity for electrical systems and 
nuclear energy research requiring access to controlled nuclear 
research reactors--these activities are better left to the 
private sector. Spending also includes operations and 
maintenance accounts for some of DOE's direct spending 
programs, like the Power Marketing Administrations.
    According to the National Science Foundation, private 
sector companies in the U.S. spent more than $341 billion on 
research and development in 2014 (the most recent figures 
available).\190\ While these efforts focus on more than energy, 
detailed NSF surveys indicate that funding for more efficient 
fuel consumption, electric vehicles, energy efficiency, and 
fossil fuel R&D total billions of dollars' worth of private 
sector capital per year. As a result, DOE's civilian research 
should focus solely on basic research and early stage applied 
research of breakthrough, innovative technologies.
    Direct spending in this category includes the remaining 
civilian energy and environmental programs at the DOE. It also 
includes the Rural Utilities Service of the U.S. Department of 
Agriculture [USDA], the Tennessee Valley Authority, and the 
Federal Energy Regulatory Commission. (It does not include 
DOE's national security activities, conducted by the National 
Nuclear Security Administration, which are in Function 050, or 
its basic research and science activities, which are in 
Function 250.)
    For fiscal year 2018, the budget resolution provides $3.4 
billion in discretionary budget authority, with $5.7 billion in 
related outlays (shown in Table 2, Function 270). Direct 
spending figures (shown in Table 3, Function 270) are -$6.5 
billion in budget authority and -$3.1 billion in outlays. The 
negative balances reflect the incoming repayment of loans and 
receipts from the sale of electricity produced by Federal 
entities, which are accounted for as ``negative spending,'' as 
well as rescissions of unobligated balances in green energy 
loan programs. Over 10 years, the resolution provides 
discretionary budget authority of $33.5 billion and $38.0 
billion in outlays. Ten-year totals for direct spending are 
-$36.8 billion in budget authority and -$44.0 billion in 

           Illustrative Discretionary Spending Policy Options

    In the House, discretionary spending energy programs 
(Function 270 in Table 2) fall under the jurisdiction of the 
Committee on Energy and Commerce and the Committee on Science, 
Space, and Technology. Funding for these programs comes from 
the Appropriations Subcommittees on Energy and Water 
Development, and Related Agencies, and Interior, Environment, 
and Related Agencies.
    These committees will determine specific policy options to 
meet the budget's fiscal guidelines. Nothing in this report 
binds the committees to any specific policy direction; they 
have complete flexibility in making those determinations. 
Nevertheless, a central aim for them to consider is ensuring 
private sector capital is not crowded out by government 
intervention in the energy market and bureaucratic waste. They 
should also seeks to protect taxpayers from poor government 
decision-making that wastes Federal dollars, increases energy 
prices, and picks winners and losers in the energy market. 
Finally, streamlining R&D activities across the Department of 
Energy to prioritize basic and early stage applied research 
will increase efficiency, consolidate operations, and reduce 
costs, while ensuring American leadership in energy technology 
and discovery science. The following illustration reflects this 

    Reduce Funding for Commercial Research and Development. The 
resolution supports maintaining current funding levels for 
basic R&D activities within the DOE, while significantly 
reducing funding for applied R&D. Focusing on basic R&D will 
allow DOE to zero in on cutting-edge discoveries in the 
physical sciences that may lead to major improvements in 
society, such as the Internet, while leaving the application, 
commercialization, and deployment of new technologies to the 
private sector.

              Illustrative Direct Spending Policy Options

    In the process of transforming policy in this area, the 
Committee on Energy and Commerce and the Committee on Science, 
Space, and Technology can be guided in part by seeking to 
reverse the damage caused by the previous administration's 
spending priorities. They can also evaluate each program's 
merit by asking two simple questions: If this program did not 
exist, would there be a private sector industry or entity that 
would fund similar activities? Does this program align with 
DOE's mission? Unless the answers are ``no and yes,'' the 
program should be viewed as ripe for reform or elimination. The 
options below indicate some possible directions the Energy and 
Commerce Committee and the Science, Space, and Technology 
Committee could take.

    Rescind Unobligated Balances from the Stimulus Bill's Green 
Energy Programs. The budget recommends rescinding unobligated 
balances in DOE's loan portfolio. Since implementation of the 
``American Recovery and Reinvestment Act of 2009'', or the 
stimulus bill, these programs have spawned numerous failures, 
such as Solyndra and Abound Solar. The government cannot undo 
the harm that has been done or recover taxpayer dollars from 
failed entities. It can, however, reclaim all of the spending 
authority the DOE has not yet obligated to ensure that 
taxpayers are not exposed to further risk for renewable energy 
projects that would not otherwise be market-viable.

    Rescind Unobligated Balances from the Title XVII Loan 
Guarantee Program. The budget recommends rescinding unobligated 
balances in DOE's Title XVII Section 1703 loan guarantee 
program. The Department has over $25 billion in remaining loan 
guarantee authority, which includes over $12.5 billion in 
authority for advanced nuclear energy, $8.5 billion for 
advanced fossil energy, and $4.5 billion for renewable energy 
and energy efficiency projects.\191\ Despite high-profile 
project failures, the office also lacks transparency and has 
been slow to implement management recommendations made by the 
GAO.\192\ The government must continue to manage the existing 
portfolio of loan guarantees, but it should not put additional 
tax dollars at risk by issuing new loan guarantees. The Federal 
Government should reclaim the remaining spending authority the 
DOE has not yet obligated to ensure that taxpayers are not 
exposed to further financial risk.
    \191\U.S. Department of Energy Loan Programs Office, ``Investing in 
American Energy.'' March 2016:
    \192\Frank Rusco, ``Testimony before the Subcommittees on Energy 
and Oversight, Committee on Science, Space, and Technology, House of 
Representatives,'' Government Accountability Office, 3 March 2016:

    Rescind Unobligated Balances from the ATVM direct loan 
program. The budget recommends rescinding unobligated balances 
in DOE's Section 136 Advanced Technology Vehicles Manufacturing 
[ATVM] direct loan program. Since 2007, DOE has awarded $8.4 
billion in loans to five companies (Fisker, Ford, Nissan, 
Tesla, and the Vehicle Production Group). Two companies were 
unable to continue payments on their loans, resulting in $181 
million in losses to the American taxpayers.\193\ DOE has over 
$16 billion in remaining loan authority under the ATVM program. 
While DOE should continue to provide responsible management and 
oversight for the existing loan portfolio, the Federal 
Government should rescind the remaining loan authority and 
protect the taxpayer from future loss.
    \193\Department of Energy Loan Program Office, ``ATVM Program 

    Rescind Funding for Biomass Research and Development. The 
Biomass Research and Development program is a joint initiative 
of the USDA and DOE intended to ``carry out research on and 
development and demonstration of (1) biofuels and biobased 
products, and (2) the methods, practices, and technologies, for 
the production of biofuels and biobased products.''\194\ In 
fiscal year 2016, DOE received $225 million for the Bioenergy 
technologies program within the Office of Energy Efficiency and 
Renewable Energy in order to accelerate ``the development and 
commercialization of cost-competitive technologies'' for 
    \194\Department of Agriculture, ``Biomass Research and Development 
Initiative Competitive Grants Program,'' Catalog of Federal Domestic 
    \195\Department of Energy, ``FY 2017 Congressional Budget Request: 
Volume 3,'' February 2016:
    Unreasonable mandates in the Renewable Fuel Standard have 
already forced private sector gasoline refiners and importers 
to spend billions of dollars of their own money to assist 
bringing uneconomic biofuels to market. Piling on millions of 
Federal dollars only perpetuates the problem and exposes 
taxpayers to financial risk. This program is a prime example of 
late stage commercialization activities at the Department that 
take away funding for basic research at DOE.

    Repeal Stimulus-Driven Borrowing Authority Specifically for 
Green Transmission. The $3.25 billion in borrowing authority in 
the Western Area Power Administration's Transmission 
Infrastructure Program provides loans to develop new 
transmission systems aimed solely at integrating renewable 
energy. This authority was inserted into the 2009 stimulus bill 
without the opportunity for debate. Of most concern, the 
authority includes a bailout provision that would require 
American taxpayers to pay outstanding balances on projects that 
private developers fail to repay. The budget recommends the 
rescission of the program's unobligated funds, which could save 
taxpayers almost a billion dollars.


                Function Summary: Discretionary Spending

    America's heritage thrives on the Nation's stunning 
landscapes and resources. Among these are its inspiring parks 
and forests, countless species of wildlife, bountiful rivers 
and lakes, and land, water, and mineral resources. All call for 
responsible stewardship as a moral obligation to today's 
generation, and those of the future. It does not require a 
domineering Federal Government twisting the aims of 
preservation into an excuse for ever more centralized 
    Yet too often this is precisely what happens. As one 
example, the primary role of the Environmental Protection 
Agency [EPA] is to ensure the air Americans breathe and the 
water they drink is clean and unpolluted. Instead, however, the 
EPA for too long has viewed itself as an energy policy 
authority, regulating low-cost, reliable energy sources out of 
the market and mandating increased use of uncompetitive and 
less reliable ones. Any EPA funding should require the EPA 
Administrator to certify the availability to the public of all 
scientific and technical information and data relied on to 
support a risk, exposure, limitation, regulation, regulatory 
impact analysis, or guidance.
    The budget focuses on paring back unnecessary spending used 
to carry out overreaching regulatory expansion. It supports the 
recent actions taken by Congress and the Executive Branch to 
pass ``Congressional Review Act'' [CRA] resolutions of 
disapproval, repealing onerous and unnecessary regulatory 
barriers that have handcuffed the Nation's economy and its 
ability to achieve domestic energy independence. The following 
resolutions of disapproval illustrate just a small amount of 
the burdensome regulatory overreach that the Obama 
Administration attempted to leave in its wake. Nevertheless, a 
proactive Congress and Trump Administration have worked 
diligently to rein in the regulatory state that has negatively 
impacted the lives of everyday Americans.

      H.J. Res. 38, the Stream Protection Rule. This 
joint resolution nullifies the Stream Protection Rule finalized 
by the Department of the Interior's Office of Surface Mining 
Reclamation and Enforcement on 20 December 2016. The rule, a 
highlight of the Obama Administration's regulatory state, 
required more than seven years to finalize and precluded input 
from major stakeholders and even State parties that would be 
affected. The rule would have prohibited surface mining across 
large sectors of the Nation, including Appalachia, and would 
have resulted in thousands of lost jobs and economic malaise.

      H.J. Res. 44, the Bureau of Land Management's 
[BLM] Land Use Planning Rule. This joint resolution nullifies 
the rule finalized by the Department of the Interior on 12 
December 2016, relating to regulations that establish the 
procedures used to prepare, revise, or amend land use plans 
pursuant to the ``Federal Land Policy and Management Act of 
1976''. The rule, also referred to as the ``BLM Planning 2.0 
rule'', was intended to improve BLM's ability to administer 
public lands. The reality, however, is that the rule would have 
reduced local and State authority to determine the best uses 
for public lands in their States. By consolidating authority 
over resource management plans with BLM, the rule would have 
given Washington bureaucrats sole authority over 175 million 
acres of lands in 11 western States.

      H.J. Res. 69, the Alaska National Wildlife 
Refuges Rule. This joint resolution nullifies the rule 
finalized by the Department of the Interior on 5 August 2016, 
relating to non-subsistence takings of wildlife and public 
participation and closure procedures on National Wildlife 
Refuges in Alaska. The rule significantly reinterpreted Federal 
law to effectively sharply limit recreational and subsistence 
hunting of fish and wildlife in the State. The State of Alaska 
had previously filed a lawsuit against the rule, arguing that 
it would upend the traditional State-Federal jurisdictional 

    This budget also emphasizes core government 
responsibilities, while reducing spending in areas of 
duplication or non-core functions. Pursuant to these 
guidelines, the resolution provides $31.3 billion in 
discretionary budget authority for fiscal year 2018, with $34.6 
billion in related outlays (see Function 300 in Table 2). These 
funds will finance programs within the Departments of Interior, 
Agriculture, Commerce, and Transportation, as well as the Army 
Corps of Engineers, and the EPA.
    Some of the larger spending programs subject to 
appropriations are the EPA's clean water and drinking water 
programs, as well as the agency's environmental programs and 
management account.
    The Army Corps of Engineers' construction and operations 
and maintenance accounts also fall under this function. 
Congress most recently authorized the Corps' Civil Works 
Program to perform a range of water resources development 
activities within its mission, which includes navigation, flood 
and storm damage reduction, and aquatic ecosystem restoration--
in 2016 legislation. The Committee on Transportation and 
Infrastructure intends to take up another Water Resource 
Development Act authorization bill this Congress.\196\
    \196\Committee on Transportation and Infrastructure, Views and 
Estimates for Fiscal Year 2018, 28 February 2017: https:// 
    Given the Panama Canal expansion and rapidly increasing use 
of larger, cost-efficient post-Panamax vessels that require 
deeper draft harbors and channels, the Corps' port maintenance 
and dredging activities have received renewed attention from 
policymakers and stakeholders. Congress passed legislation in 
2014 and 2016 aimed at maintaining and improving the Nation's 
port infrastructure so they can accommodate post-Panamax 
vessels. A number of U.S. ports have achieved depths and widths 
necessary to receive these larger vessels; some other domestic 
ports, however, are seeking to increase their depths and widths 
so they can accommodate such vessels in the future. A number of 
factors affect port maintenance and capital improvement 
projects. Stakeholder views on future needs vary, but encompass 
the following: increased coordination of Federal or local 
spending; ways of lowering project costs; determining project 
priorities and moving them through the Corps' project 
authorization queue more efficiently; and reviewing statutes 
governing port maintenance and dredging. It is important for 
U.S. ports to be capable of meeting the needs of 21st-Century 
maritime trade and remain competitive in the global economy. 
The budget envisions that the committees of jurisdiction will 
consider cost-effective, market-based solutions to meet the 
Nation's port maintenance and capital improvement project 
needs. In doing so, the authorizing committees can promote 
innovation and spur domestic job creation and economic growth.
    Another large discretionary part of this function consists 
of accounts responsible for operation of the National Park 
Service and Wildland Fire Management in the U.S. Forest Service 
and the Department of the Interior. The Forest Service and the 
Interior Department have used a large amount of their overall 
budget allocations toward wildfire suppression in the Western 
region of the U.S. Under the ``Budget Control Act of 2011'' 
(Public Law 112-25) the Disaster Relief Fund [DRF] has received 
appropriations first through the Disaster Relief Allowable 
Adjustment (``Disaster Cap''), then through the Emergency 
Requirements Adjustment. Supplemental wildfire funding has been 
made available in previous years due to the difference between 
the annual appropriation amount to the DRF and the total 
Disaster Cap funding limit. This allows for additional funding 
without using the Emergency Requirements Adjustment. As the 
Disaster Cap decreases, however, allowable funding under the 
BCA will be insufficient to meet both the Federal Emergency 
Management Agency's disaster needs and supplemental wildfire 
funding.\197\ The frequency and severity of these wildfires 
pose a risk to the citizens, water, and wildlife in the region. 
Borrowing for wildfires is detrimental to the long-term 
planning of these agencies. This budget acknowledges the need 
to minimize the adverse effects of fire transfers on the 
budgets of other fire and non-fire programs, and the need to 
responsibly budget for wildfires. The budget recommends 
responsible forest management and supplemental wildfire funding 
solutions. Congress and the Trump Administration must work to 
find a viable solution to the forthcoming Disaster Cap 
reduction that will allow supplemental wildfire suppression to 
continue to be funded without having to compete with other 
Disaster Relief Fund activities and regular operations.
    \197\The Disaster Cap is limited by a formula calculated with the 
rolling average of the past ten years' appropriations to the Disaster 
Relief Fund, with the maximum and minimum years subtracted, and 
includes last year's average minus the actual DRF appropriation.

           Illustrative Discretionary Spending Policy Options

    The Committee on Natural Resources is the primary 
authorizer in this area. The Appropriations Subcommittees on 
Energy and Water Development, and Related Agencies, and 
Interior, Environment and Related Agencies are responsible for 
annual funding. These committees have complete authority and 
maximum flexibility in determining the policies in their 
jurisdictions. The Budget Committee's role is solely to 
recommend spending parameters. The discussion below suggests 
illustrative options the committees may wish to consider. In 
doing so, the committees may be guided by the budget's effort 
to focus on core government activities and reduce duplication 
and waste.

    Reduce and Refocus Environmental Protection Agency Funding. 
The EPA continues to use its budget to implement its 
unprecedented activist regulatory policy to the detriment of 
States, localities, small businesses, and energy consumers. 
This is evidenced in the many ongoing legal challenges facing 
EPA's proposed regulations. The budget calls for reducing 
annual funding levels for the EPA to allow the agency to focus 
on its core mission of simply enforcing laws passed by Congress 
rather than continually attempting to re-write them through 
regulations. The budget recommends no funding reductions to the 
EPA's Regional Geographic Initiative Program, which encompasses 
a dual mandate of improving the environment while 
simultaneously spurring economic development. Specific 
programs, such as the Great Lakes Restoration Initiative and 
the Chesapeake Bay Program, not only support efforts to restore 
the health of many of the Nation's most treasured water 
ecosystems, but also provides domestic jobs in communities that 
depend on these natural landmarks.

    Eliminate the EPA Office of Regulatory Policy and 
Management. This office manages the regulatory development 
process for the EPA by providing support and guidance for the 
agency's national and regional offices in developing 
regulations. According to the EPA website, a primary function 
of this office is to ``manage the Agency's policy priority 
agenda.''\198\ As an executive agency created to enforce 
congressional statutes, the EPA should have no policy priority 
agenda at all.
    \198\Environmental Protection Agency, ``About the Office of 
Policy,'' February 2016:

    Streamline Climate-Change Activities Across Government. 
This budget resolution reduces spending for numerous climate-
change-related activities and research within this function, 
primarily by reducing overlapping or unproductive policies. It 
also recommends better coordination of programs and funds to 
eliminate duplicative and unnecessary spending. Many of these 
programs are funded within the National Oceanic and Atmospheric 
Administration [NOAA], as well as the EPA.

    Eliminate the National Sea Grant College and Fellowship 
Programs. Since 1966, NOAA has provided Federal funds to 
various universities and academic research organizations across 
33 States to sponsor a variety of marine research, outreach, 
and education projects. The program also funds a National Sea 
Grant Office, which offers fellowship opportunities for 
graduate students. While the premise of these programs is 
reasonable, they illustrate a growing trend within individual 
agencies to offer and fund education-based grants and 
fellowships that are better suited for either the Department of 
Education or provided by State and local government.

    Eliminate Funding for EPA Armed Enforcement Division. The 
EPA is one of nearly 70 Federal agencies that employs armed 
agents. This troubling trend of militarization extends to many 
Federal agencies that most Americans would never associate with 
law enforcement. Federal agencies should be required to clearly 
demonstrate their need for armed personnel. Absent such a 
demonstration, agencies should rely on local law enforcement 
when there is a need for armed protection.

    Reduce Funding for the Office of Surface Mining Reclamation 
and Enforcement [OSMRE]. OSMRE's budget and resources are well 
above current and foreseeable needs, as the number of mines and 
coal miners has declined by 35 percent since 2011. Under the 
``Surface Mining Control and Reclamation Act'', States perform 
the daily permitting and regulation for 97 percent of all coal 
mines within the country, while OSMRE is tasked with a 
secondary role of performing oversight of State implementation 
of their programs. This budget helps ensure OSMRE's resources 
are spent on core, non-duplicative functions--not direct 
enforcement or permitting actions that the States perform.

    Give Priority to Army Corps of Engineers Civil Works. This 
budget encourages prioritization of the Army Corps of Engineers 
Civil Works program, which supports water resources, 
development, management, and restoration through investigations 
and surveys, engineering and design, construction, and 
operation and maintenance as authorized by Congress. To rebuild 
the Nation's infrastructure, it is imperative to furnish the 
Army Corps with the resources to continue to complete this 
necessary work. Additionally, giving priority to projects of 
regional or national significance that feature robust State and 
local investment will boost domestic manufacturing and expand 
American exports.


                Function Summary: Discretionary Spending

    Discretionary funding in the agricultural category supports 
agricultural research, education, and economics; direct and 
guaranteed farm operating and ownership loans; operating 
budgets of the Farm Service Agency, Foreign Agricultural 
Service, and Risk Management Agency; marketing and information 
services; animal and plant health inspection services; 
Department of Agriculture administration; and a variety of 
related programs and activities.
    The budget provides for fiscal year 2018 discretionary 
spending in these areas totaling $6.4 billion in budget 
authority and $6.2 billion in outlays. Over the 10-year period 
of 2018 through 2027, the budget assumes discretionary spending 
of $71.6 billion in budget authority and $70.6 billion in 
outlays. (See Function 350, Table 2).

           Illustrative Discretionary Spending Policy Options

    Funding for discretionary agriculture programs and 
activities will be determined by the Appropriations 
Subcommittee on Agriculture, Rural Development, Food and Drug 
Administration, and Related Agencies. Like last year's budget, 
this resolution recommends giving a higher priority to 
competitive grant-based agricultural research. This type of 
research funding, in contrast to formula-based and other forms, 
is most likely to spur agricultural productivity growth, which 
is important to enhancing the international competiveness of 
U.S. agriculture over the longer term. Also, continued 
attention should be given to streamlining and, where possible, 
consolidating operations and activities across U.S. Department 
of Agriculture agencies, including in its large network of 
county field offices.

                      COMMERCE AND HOUSING CREDIT

                Function Summary: Discretionary Spending

    Supporting commerce--maintaining an environment that allows 
ingenuity and free enterprise to flourish--is a worthy and 
important role of government. This includes providing necessary 
oversight and regulation of business and commerce. As in many 
other areas, however, the Federal Government has too often 
taken the approach that more money, more red tape, and more 
bureaucracy can answer every problem. A fundamental government 
role is to maintain competitive markets that encourage 
innovation and creativity, and promote efficiency, thereby 
stimulating an expanding range of products and services at 
lower costs for consumers.
    When the Federal Government creates artificial barriers to 
entry for entrepreneurs and startups, it is consumers who pay 
the price. The government should not be in the business of 
picking winners and losers. The Federal regulatory regime of 
the previous administration allowed the rulemaking process to 
protect established corporate actors to the detriment of 
innovative small businesses. When the costs of regulatory 
compliance become onerous, sectors of the economy are ruled by 
federally mandated oligopolies. To stem the tide of the ever-
growing regulatory state, this budget supports the recent 
Presidential directives established by the Trump administration 
to combat the regulatory burden placed on manufacturers and 
streamline the permitting review and approval processes. The 
Memorandum on Streamlining Permitting and Reducing Regulatory 
Burdens for Domestic Manufacturing (``Memorandum on 
Manufacturing'') provides for stakeholder engagement and 
feedback from the Nation's domestic manufacturers in an effort 
to highlight unnecessary regulatory burdens and other 
administrative policies, practices, and procedures that inhibit 
economic growth and job creation.
    Another example of smart regulatory reform is H.R. 5, the 
``Regulatory Accountability Act of 2017'' (115th Congress). It 
is a comprehensive package of rulemaking and administrative 
changes focused on government transparency, public input, and 
regulatory overreach. This budget supports enacting the bill 
into law and implementing the following provisions as soon as 

      ``Require agencies to choose the lowest-cost 
rulemaking alternative that meets statutory objectives, 
permitting costlier rules only when cost-justified and needed 
to protect public health, safety, or welfare;

      ``Require greater opportunity for public input 
and vetting of critical information--especially for major and 
billion-dollar rules;

      ``Repeal the Chevron and Auer doctrines to end 
judicial deference to overreaching agency statutory and 
regulatory interpretations;

      ``Require agencies to account for the direct, 
indirect, and cumulative impacts of new regulations on small 
businesses--and find flexible ways to reduce them;

      ``Prohibit new billion-dollar rules from taking 
effect until courts can resolve timely-filed litigation 
challenging their promulgation;

      ``Force agencies to publish online, timely 
information about regulations in development and their expected 
nature, cost and timing;

      ``Publish plain-language, online summaries of new 
proposed rules, so the public can understand what agencies 
actually propose to do.''\199\
    \199\Representative Bob Goodlatte, ``Goodlatte Praises Passage of 
Major Regulatory Reform Legislation,'' 11 January 2017.

    These kinds of activities on the Federal level are 
supported through discretionary spending in the Commerce and 
Housing Credit category (Function 370 in Table 2), where the 
government funds programs through the Departments of Commerce 
and Housing and Urban Development. Entities funded with 
discretionary dollars in this function include the Federal 
Trade Commission, the majority of the Small Business 
Administration, and regulatory agencies such as the Securities 
and Exchange Commission.
    On a unified basis, for fiscal year 2018, the budget 
resolution provides -$16.1 billion in discretionary budget 
authority and -$15.6 billion in outlays (Table 2). The negative 
discretionary budget authority and outlay figures mainly 
reflect the subsidy rates applied to certain loan and loan 
guarantee programs scored under the guidelines of the ``Federal 
Credit Reform Act'', such as Federal Housing Administration and 
Government National Mortgage Association [Ginnie Mae] programs. 
This accounting method is further discussed in the section of 
this report titled ``Banking, Commerce, Postal Service, and 
Related Programs.''

           Illustrative Discretionary Spending Policy Options

    The main committees responsible for funding programs in 
this area are the Committee on Financial Services and the 
Committee on Energy and Commerce. As they make final policy 
determinations, the committees of jurisdiction should aim to 
reduce unwarranted subsidies to big businesses, reform 
inefficient government bureaucracies, and create a climate that 
supports rather than stifles commerce and free enterprise. 
Options worthy of consideration include those cited below. The 
policy discussions in this report reflect purely illustrative 
options the committees of jurisdiction may want to consider. 
Nothing in these descriptions is intended to predetermine, 
promote, or assume any specific policy change to be made. The 
committees of jurisdiction retain complete flexibility in 
deciding what policies they develop pursuant to the 
resolution's budgetary goals.

    Eliminate Corporate Welfare Programs in the Department of 
Commerce. Subsidies to businesses distort the economy, impose 
unfair burdens on taxpayers, and are especially problematic 
given the fiscal problems facing the Federal Government. 
Programs that should be considered for elimination include the 

      The Hollings Manufacturing Extension Program, 
which subsidizes a network of nonprofit extension centers that 
provide technical, financial, and marketing services for small 
and medium-size businesses. These services are largely 
available in the private market. The program already obtains 
two-thirds of its funding from non-Federal sources, and was 
originally intended to be self-supporting.

      The International Trade Administration [ITA]. 
This agency, within the Department of Commerce, provides trade-
promotion services for U.S. companies. The fees it charges for 
these services do not cover the cost of these activities. 
Businesses can obtain similar services from State and local 
governments and the private market. The ITA should be 
eliminated or should charge for the full cost of these ``Trade 
Promotion Authority'' services.

      The National Network for Manufacturing 
Innovation. This program, previously known as the Advanced 
Manufacturing Technology Consortia, provides Federal grants to 
support research for commercial technology and manufacturing. 
As stated in the Heritage Foundation's The Budget Book: 
``Businesses should not receive taxpayer subsidies; these long-
lived and unnecessary subsidies increase federal spending and 
distort the marketplace. Corporate welfare to politically 
connected corporations should end.''\200\
    \200\The Heritage Foundation, The Budget Book: 106 Ways to Reduce 
the Size & Scope of Government, 2015, p. 94

    Tighten the Belts of Government Agencies. Duplication, 
hidden subsidies, and large bureaucracies are symptomatic of 
many agencies within Function 370. For example, the Securities 
and Exchange Commission [SEC] now has more than 4,000 
employees. According to the Committee on Financial Services: 
``The SEC's current budget authority represents an increase of 
almost 57 percent since the passage of the Dodd-Frank Act in 
2010, and it is 90 percent higher than a decade ago. Since 
2000, the SEC's budget authority has increased by more than 345 
percent.''\201\ Despite these large increases, the SEC has 
consistently requested additional funding. The premise that 
more funding for the SEC means better, smarter regulation is 
highly questionable. The agency should be reformed so it can 
perform its duties more efficiently. Another example is the 
Federal Trade Commission's budget, which has increased 30 
percent since 2008.
    \201\Committee on Financial Services, U.S. House of 
Representatives, Views and Estimates, 3 March 2017.
    Congress should assess the ever-growing spending of Federal 
agencies, determining what levels are necessary to effectively 
and efficiently execute their missions, and adjusting funding 

    Streamline Federal Housing Programs. There are currently 
three major federal home buying programs: the Federal Housing 
Administration [FHA], the Rural Housing Service [RHS], and the 
Veterans Affairs Home Loan Program [VA]. The fiscal year 2018 
budget recommends Committees of jurisdiction streamline these 
programs to gain efficiencies while continuing to serve each 
program's core mission.

    Eliminate Overlap and Consolidate Necessary Department of 
Commerce Functions Into Other Departments. Since its 
establishment in 1903, the Commerce Department has expanded in 
size and scope to include many elements whose priorities would 
be better suited in other agencies. The Department of Commerce 
and its various agencies and programs are rife with waste, 
abuse, and duplication. This budget recommends the following 
dissolution, delegation of authority, and consolidation 

      Consolidate National Oceanic and Atmospheric 
Administration functions into the Department of the Interior.

      Establish the U.S. Patent and Trademark Office as 
an independent agency.

      Eliminate the International Trade Administration.

      Delegate trade enforcement activities to the 
International Trade Commission.

      Consolidate the Bureau of Industry and Security 
into the Department of State.

      Eliminate the Economic Development 

      Consolidate trade adjustment activities into the 
Department of Labor, which already has a duplicate program.

      Consolidate the Minority Business Development 
Agency into the Small Business Administration.

      Consolidate the National Institute of Standards 
and Technology and the National Technical Information Services 
into the National Science Foundation.

      Consolidate the National Telecommunication and 
Information Administration with the Federal Communications 
Commission as an independent agency.

      Consolidate the United States Census Bureau and 
the Bureau of Economic Analysis into the Department of Labor's 
Bureau of Labor Statistics.


                            Function Summary

    Innovation is propelling the Nation's transportation sector 
forward. The coming years will likely see technological leaps 
of American ingenuity. Technologies at various stages of 
development and deployment hold potential to increase mobility 
and safety, solve persistent problems, and expand commerce 
opportunities. Technology is available that collects real-time 
traffic, road condition, and parking information; cities and 
states that leverage this technology can employ the data and 
analytics to do tasks ranging from identifying potholes to 
assessing travel patterns. Ride-sharing technology and services 
provide new ways to move around cities and towns. Technologies 
on the horizon includ unmanned aircraft systems (drones), and 
semi- and fully autonomous vehicles. These and other 
advancements will be under consideration by Federal 
policymakers, as they develop future transportation policies 
and manage current surface, air, water, and other 
transportation programs.
    A transportation system that enables people and goods to 
move freely, efficiently, and affordably is a national 
priority. Such a system should be resilient and responsive to 
the needs of the traveling public and businesses. Its funding 
should be sustainable and finances sound. As the following 
discussion and explanation of illustrative fiscal year 2018 
budget options suggest, Federal policymakers have opportunities 
to try new approaches to ensure America's transportation system 
accommodates innovation and is financially healthy and focused 
on performance.
    Congress has a history of bipartisanship in setting 
transportation policy. The Trump Administration has proposed--
most recently in the President's fiscal year 2018 budget 
request\202\--increasing transportation infrastructure 
investment and making it more productive, as well as reducing 
red tape that delays projects and increases costs. Part of the 
administration's proposal calls for improvements to existing 
transportation systems, whether by improving airports and 
seaports or maintaining roads and bridges, to help America 
remain competitive and to increase productivity. In addition to 
ongoing public funding for transportation, the President's 
budget envisions a private sector role, both in partnership 
with and separate from the public sector.\203\
    \202\The President's FY 2018 Budget Request, Fact Sheet: 
Infrastructure Initiative: May 2017,
    \203\Ibid. p. 2.
    Indeed, all levels of government and the private sector 
fund and manage transportation activities, from construction to 
operations to safety oversight. Though public-private 
partnerships are not suitable for all types of projects, 
government and private businesses do collaborate and share the 
costs of constructing and maintaining transportation assets.
    Mandates, rules, and regulations accompany Federal 
transportation funding.\204\ They have received renewed 
attention from lawmakers, scholars, and the Trump 
Administration, because they can undermine the goal of 
efficient, productive investment. Some Federal mandates pertain 
to workers. Others place sourcing requirements on certain 
construction materials; they can increase project costs or lead 
to delays. Other laws, rules, and regulations, such as those 
governing permitting and environmental reviews, also delay 
transportation projects, at the expense of time and funding. 
The current fiscal environment should prompt lawmakers, as 
stewards of public dollars, to review such rules and 
regulations and assess viable alternatives. The budget 
recognizes that pursuing free-market reforms in these areas, 
through statutory, regulatory, and organizational improvements, 
could reduce costs, speed up project timelines, and get more 
value overall from Federal transportation spending.
    \204\For discussion of specific mandates and restrictions on 
transportation funding and proposed solutions, see Philip K. Howard, 
``Two Years Not Ten Years: Redesigning Infrastructure Approvals,'' 
Common Good, September 2015:
c613b4cfda258a5fcb_ e8m6b5t3x.pdf and Michael Sargent and Nicolas 
Loris, ``Driving Investment, Fueling Growth: How Strategic Reforms Can 
Generate $1.1 Trillion in Infrastructure Investment,'' The Heritage 
Foundation, 3 May 2017:
    In addition to alleviating the regulatory burden, the House 
budget envisions focusing the Federal Government's role on 
needs that are national in scope and Federal in responsibility. 
State and local governments are versed in their particular 
transportation challenges, such as planning what to build and 
maintain or how to pay for transportation improvements. Federal 
policies should aid, not hinder, States' efforts to solve those 
problems. Federal reforms that cut red tape, for example, would 
free up resources and allow all levels of government and 
private businesses to invest efficiently and experience fewer 
project delays.
    Major components of the Nation's transportation system 
include the vast network of interstate highway roads and 
bridges and major arterials, and the civil aviation system, 
including air traffic control and airport improvement 
activities. Federal transportation programs in these areas face 
challenges, and the illustrative budget options that follow 
contain further discussion of the problems along with 
consideration of other categories of transportation.
    The transportation category of the budget (Function 400 in 
the summary tables) reflects ground, air, water, and other 
transportation funding. The major agencies and programs within 
this function are the Department of Transportation (which 
includes the Federal Aviation Administration; the Federal 
Highway Administration; the Federal Transit Administration; 
highway, motor-carrier, rail, and pipeline-safety programs; and 
the Maritime Administration); the Department of Homeland 
Security (including the Federal Air Marshals, the 
Transportation Security Administration [TSA], and the U.S. 
Coast Guard); the aeronautical activities of the National 
Aeronautics and Space Administration; and the National Railroad 
Passenger Corporation, or Amtrak.
    For these programs and agencies, the budget resolution 
calls for $88.1 billion in budget authority and $91.8 billion 
in outlays in fiscal year 2018. Discretionary budget authority 
in 2018 is $28.5 billion, with outlays of $90.6 billion (see 
Table 2); direct spending is $59.6 billion in budget authority 
and $1.2 billion in outlays (Table 3). Over 10 years, budget 
authority totals $707.4 billion, with outlays of $762.1 
    The large discrepancy between discretionary budget 
authority and outlays here results from the split treatment of 
the Highway Trust Fund programs and certain aviation 
activities, for which funding is provided as a type of 
mandatory budget authority called contract authority, while 
outlays--controlled by annual limitations on obligations set in 
appropriations acts--are treated as discretionary spending. 
Because of this unique budgeting regime, the discussion below 
examines both categories of transportation spending.
    Basic transportation policies in this area fall under the 
jurisdiction of the Committee on Transportation and 
Infrastructure and the Appropriations Subcommittee on 
Transportation, Housing and Urban Development, and Related 
Agencies. The Committee on Homeland Security and the 
Appropriations Subcommittee on Homeland Security will determine 
policies for the Transportation Security Administration and 
Federal Air Marshals. These committees retain full authority 
and flexibility in determining policy choices over programs in 
their jurisdictions. The options that follow demonstrate the 
credibility of the budgetary assumptions of the resolution. In 
the spirit of ensuring the safe, reliable transportation system 
described above, the budget envisions maintaining essential 
funding for surface transportation, aviation, and safety--
offset by reductions in other transportation activities of 
lower priority to the Federal Government.

              Illustrative Direct Spending Policy Options

    Put the Highway Trust Fund on a Path Toward Solvency and 
End Taxpayer Bailouts. The Highway Trust Fund [HTF] has 
required large general fund contributions totaling $141 billion 
since 2008 to cover cash shortfalls. These transfers from the 
general fund enable the U.S. Department of Transportation to 
reimburse States for Federal highway and transit commitments in 
a timely manner. While a cash shortfall is not imminent for 
several years, the budget resolution continues a reform that 
would require offsets for any future general fund transfer to 
the HTF. CBO estimates that, absent changes, the Highway Trust 
Fund again will face insolvency during fiscal year 2021, the 
year after the current authorization law, the ``Fixing 
America's Surface Transportation Act'', expires.
    Congress created the Highway Trust Fund (under the Highway 
Revenue Act of 1956) as a mechanism to connect revenue 
generated from gasoline taxes to the purpose of building the 
Interstate Highway System. The Federal-Aid Highway Act of 1956 
established the program enabling its construction.\205\ 
Receipts from Federal excise taxes on fuels, levied on 
motorists, truckers, and bus operators, along with related 
truck and tire fees, fill the Highway Trust Fund; these tax 
rates stand at 18.4 cents per gallon for gasoline and 24.4 
cents per gallon for diesel. Congress and the President enacted 
the most recent fuel tax increase in 1993--originally as part 
of deficit-reduction legislation.
    \205\The Interstate Highway System, in fact, dates to 1944 
    For decades, the trust fund was self-financing; cash 
shortfalls date only to 2008. In addition to inflation's 
effects on Highway Trust Fund revenue's purchasing power, 
Federal fuel-economy standards and increased use of hybrid and 
electric vehicles are eroding the trust fund's balances. In 
recent years, Congress also has authorized annual spending out 
of the trust fund above the amount of tax receipts collected or 
projected for collection. From 1999 through 2008, outlays 
outpaced receipts in the trust fund by almost $1 billion a 
year, on average. The spending-revenue gap widened further 
under the Obama Administration, expanding to more than $11 
billion a year. The ``Fixing America's Surface Transportation 
Act'' reauthorized Federal highway and transit programs for 5 
years and provided for a $70-billion general revenue transfer 
to the trust fund. The transfer covers trust fund deficits, 
which range from $11 billion in fiscal year 2016 to a projected 
$16 billion in fiscal year 2020. The CBO projects the trust 
fund's accounts will face a combined $5-billion shortfall 
sometime in fiscal year 2021, and the trust fund's cumulative 
deficit will grow from $24 billion in fiscal year 2022 to $138 
billion by fiscal year 2027.\206\
    \206\Congressional Budget Office, ``Projections of Highway Trust 
Fund Accounts''--CBO's June 2017 Baseline:
    Congress has time and options to address the systemic 
factors driving the repeated cash shortfalls in the trust fund 
and implement sustainable solutions. Congress could continue 
using general tax dollars to pay for an increasing share of 
Federal transportation programs, although doing so would 
further unravel the user-pays/user-benefits model that proved 
successful over the Federal-Aid Highway Program's history. 
Congress also could reconsider the mission and scope of surface 
transportation program, including which activities belong in a 
Federal program and those that do not. It may conclude, for 
example, that the Federal Government bears some role in the 
considerable task of rebuilding the decades-old Interstate 
Highway System in the future, while providing aid to States and 
cities for activities of local benefit, such as bicycle and 
recreational trails, sidewalks, and streetcars, lies outside 
its purview or are of lower priority given scarce funding. 
Toward this end, Federal policymakers could reconsider spending 
mandates on non-highway projects through program set-asides or 
the eligibility of non-highway activities for funding. Another 
solution could involve a pilot program for States to fund their 
transportation priorities with State revenues, opt out of the 
Federal fuel taxes, and forgo Federal allocations. Indeed, 
numerous States have proposed and enacted legislation to 
generate more money for their transportation programs in recent 
    Pursuing other reforms to Federal surface transportation 
policy, in tandem with reforms to the Highway Trust Fund and 
its programs, would help advance the broad public policy goal 
of efficiently directing resources toward high-value, cost-
effective projects that address congestion problems and improve 
mobility and safety. For example, policymakers could assess the 
progress of recent legislative efforts to simplify 
transportation project review processes and reduce red tape. 
They could then use that assessment to inform future 
legislation.\207\ To ensure productive use of resources, 
lawmakers could consider reforms to other regulations and 
mandates that unintentionally increase project costs or siphon 
money to government bureaucracy. To ameliorate funding 
concerns, they could continue to refine financing mechanisms 
for public-private sector partnerships (as demonstrated in the 
Transportation Infrastructure Finance and Innovation Act 
program). Lawmakers also could consider policies that remove 
barriers States face in generating transportation revenue to 
fund and finance projects.
    \207\The FAST Act, enacted in December 2015, contained provisions 
to improve and consolidate the environmental and permitting process for 
surface transportation projects, for example.
    The budget encourages reform that puts the trust fund back 
on sound financial footing, and it dispenses with the habit of 
raiding general funds and increasing the deficit. It recommends 
sensible reforms to avert the projected bankruptcy of the 
Highway Trust Fund within the budget window, by aligning 
spending with incoming revenues, and it includes a provision to 
ensure offsets to any future general-fund transfers. President 
Trump included this policy in his fiscal year 2018 budget 
    \208\Office of Management and Budget, The Fiscal Year 2018 Budget 
of the U.S. Government, A New Foundation for American Greatness, p. 42,

    Restructure the Air Traffic Control System. Upgrading the 
United States' air traffic control [ATC] system, by reforming 
its governance and funding structures, is in the interests of 
air travelers, businesses that operate within the National 
Airspace System, and Federal taxpayers. Without reform, 
improvements such as reduced airport congestion, timely 
technological upgrades, improved service, and stable funding 
for investments will continue to be delayed--and at a steep 
cost. Restructuring the system, on the other hand, would have 
numerous benefits, including attracting a talented workforce, 
meeting demand in the skies, and cost-effectively maintaining 
the safest ATC system in the world. A model successfully 
adopted by some other countries is that of a federally 
chartered, not-for-profit corporation. The government 
establishes the corporation, which then operates the ATC system 
day to day and makes business decisions, to include investments 
in technology. The corporation is self-funded through service 
charges paid by users. A government entity--the Federal 
Aviation Administration [FAA] in the U.S.--retains its strong 
safety oversight and regulatory role.
    The budget does not assume budgetary figures associated 
with a new approach for providing ATC services. It does include 
a reserve fund to accommodate the budgetary effects of such a 
proposal, and the reserve fund requires the downward revision 
of the Budget Control Act's discretionary spending limits to 
reflect the reduction in appropriated spending on ATC-related 
activities that should occur as part of ATC reform.
    This is not a new concept. Considerable study and debate of 
this approach to providing ATC services has gone on over 
several decades. The fiscal year 1997 House budget resolution, 
for example, proposed to study separating ATC operations from 
the Federal Aviation Administration. The budget report 
discussed projected congestion at airports and the inability of 
the system to meet travel demands cost-effectively and 
efficiently. It cited the current system's outdated technology 
and that ``Washington has bungled its modernization for more 
than a decade.''\209\ Twenty years later, similar problems 
hamper the system. Recognizing the need for modern equipment 
and ATC facilities, President Trump also proposed to 
restructure the ATC system in his fiscal year 2018 budget 
request.\210\ The President's proposal envisions a new ATC 
provider that quickly and efficiently invests in technology 
upgrades and improves services, while the Federal Government 
dedicates its resources to maintaining unparalleled safety in 
the air navigation system. More recently, the Committee on 
Transportation and Infrastructure reported a Federal aviation 
program authorization bill to the House; this bill would 
transfer operations of the Nation's air traffic control system 
to a federally chartered, not-for-profit corporation, and it 
would maintain the Federal Aviation Administration's role in 
overseeing safety in the system.\211\
    \209\H. Con. Res. 178, Concurrent Resolution on the Budget for 
Fiscal Year 1997,
104hrpt575.pdf pg. 92-94.
    \210\The President's FY 2018 budget,
    \211\On 27 June 2017, the committee favorably reported H.R. 2997, 
the 21st Century Aviation, Innovation, Reform, and Reauthorization Act.

                          AN UPGRADE IS NEEDED

    The FAA operates a safe ATC system, but not because the 
Federal Government owns and operates it. It is safe due to the 
daily efforts of the FAA's approximately 14,000 air traffic 
controllers and to safety being at the fore of aircraft design 
and maintenance. Technology used by the FAA is obsolete. Its 
computer system relies on ground-based radar, not Global 
Positioning System [GPS]. As a point of contrast, the thousands 
of travelers who fly daily within the system carry GPS-enabled 
phones. For at least two decades Congress, with little success, 
has legislated reforms requiring the FAA to operate its Air 
Traffic Organization [ATO] like a business and expedite 
    The ATO remains a massive bureaucracy with high operating 
costs, losses in productivity, and a culture that resists 
change. The FAA also has received criticism over its 
implementation of the multibillion-dollar Next Generation Air 
Transportation System [NextGen] program, which is to upgrade 
the ATC system. In a letter to the FAA's Administrator, the 
Department of Transportation's Inspector General wrote: ``While 
FAA reports improvements in its management of acquisitions, 
major projects continue to experience problems that delay the 
introduction of new technologies, such as performance-based 
navigation; postpone benefits to users; and defer the 
retirement of costly legacy systems * * * Notwithstanding 
reforms, several underlying and systemic issues--including 
overambitious plans, shifting requirements, software 
development problems, ineffective contract and program 
management, and unreliable cost and schedule estimates--affect 
the FAA's ability to introduce new technologies and 
capabilities that are critical to transitioning to 
    \212\See Office of the Inspector General, Department of 
Transportation, FAA Reforms Have Not Achieved Expected Cost, 
Efficiency, and Modernization Outcomes, Audit Report AV-2016-05, 15 
January 2016:
FAA%20Organizational%20Structure_ Final%20Report%5E1-15-16.pdf.
    A high-tech ATC service provider, by contrast, would be 
able to respond quickly to market forces and implement new 
technology efficiently. Recognizing this need in their 
respective situations, more than 50 countries--from Canada, the 
United Kingdom, and Spain, to Germany, Australia, and New 
Zealand--have remodeled their ATC systems over the past few 
decades. While the countries have adopted different corporation 
models, they have enjoyed similar results: consistent or 
greater safety, modernized systems, improved service, and lower 
    All those who use the national airspace value access to it. 
They all have a stake in the future of the ATC system, 
including any proposal to change its governance structure and 
means of funding. Likewise, uninterrupted and matchless safety 
on the ground and in the skies is paramount to all users. As 
the Congress and administration consider future measures, they 
will take into account the interests of rural communities, 
airports, business jet owners, and private pilots, as well as 
labor groups, commercial airlines, the traveling public, and 
national security.
    Modernization of the United States' ATC system has the 
potential to improve the airspace navigation experience for all 
users. It would allow for better cost management, safe and 
efficient delivery of services, and a more direct connection 
between system users and funding.

                           BUDGETARY EFFECTS

    The budget contains a reserve fund to accommodate any 
budgetary effects resulting from ATC system reform. The budget 
would view a new provider of ATC services as independent, and 
therefore it would not view such an entity's spending and 
revenue as part of the Federal Government's budget. Under such 
reform, Federal spending on ATC and related activities should 
necessarily decrease as soon as the new provider assumes 
operational responsibility and begins assessing service 
charges. Therefore, the budget's reserve fund requires that the 
Budget Control Act's discretionary spending caps be lowered to 
reflect this decrease in appropriated funding.
    Congress may choose to transition the U.S. ATC system to a 
federally chartered, non-profit corporation model as part of 
reform efforts. As international experience has shown, the 
following factors are typical under this type of model: the new 
ATC services provider would be independent and self-supporting, 
charging its users fees for services it provides. The fees 
would fund daily operations and finance borrowing in private 
capital markets to pay for capital-intensive investments. 
Receipts from the fees would not be deposited into the U.S. 
Treasury but would be managed directly by the ATC provider. 
This entity would operate the ATC system directly and set its 
own budget. It would become the employer of current government 
employees connected to providing ATC services, and it would 
provide for the health and retirement benefits of new 
employees. A chief executive officer and governing board would 
be composed of aviation stakeholders with a fiduciary duty to 
the Corporation, and the board would make all business 
decisions. The ATC provider, not Congress, would initiate 
organizational changes and investments. The budget resolution 
would view such an entity as independent, not as an agent of 
the Federal Government.

    Encourage Efficiencies and Controlled Costs in Essential 
Air Service. The Essential Air Service [EAS] program began as a 
temporary program following airline deregulation in the late 
1970s, to provide transitional assistance and ensure airlines 
would provide at least some service in small communities. 
Through the program, the Department of Transportation enters 
into contracts with air carriers (airlines) and subsidizes a 
certain number of flights between small community airports and 
larger, hub airports. EAS program costs increased by an 
inflation-adjusted 123 percent between 2008 and 2015; these 
cost escalations have come even though the government has 
implemented reforms aimed at containing costs, such as 
restricting subsidies to airports beyond a certain driving 
distance from a hub airport and allowing airlines to use 
smaller planes. According to Congressional Research Service 
findings, current law does not require the Department to weigh 
cost in the bidding process for EAS service. Congress and the 
Department have the opportunity to devise solutions that 
control the costs of providing this service.

           Illustrative Discretionary Spending Policy Options

    Reduce Federal Subsidies for Amtrak. Consistent with 
President Trump's budget request, the budget also assumes 
reduced Federal subsidies for Amtrak's operations. Federal 
subsidies have insulated the National Railroad Passenger 
Corporation [Amtrak] from becoming self-sufficient, and they 
unfairly commit taxpayers nationwide to underwriting the 
commutes, recreation, and other trips for a fraction of the 
traveling public. Generally, routes in the Northeast Corridor 
operate at a profit but have high capital costs, while long-
distance routes in the National Network tend to operate at a 
loss but have low capital costs. The 1997 Amtrak authorization 
law required Amtrak to operate free of subsidies by 2002. Yet 
taxpayers continue subsidizing approximately $44 of the cost of 
the average Amtrak ticket sold.\213\
    \213\Based on fiscal year 2016 ridership of approximately 31.3 
million customers and a $1.4 billion total appropriation.
    The budget envisions policies that would allow Amtrak's 
management to make judicious business decisions in an operating 
environment with reduced Federal subsidies. For example, 
Amtrak's management, in coordination with stakeholders, could 
be empowered to eliminate food and beverage service losses; 
lower its per-employee labor costs and administrative expenses; 
and discontinue or restructure unprofitable lines. Short of 
phasing out subsidies, Congress could make future 
appropriations contingent on Amtrak competitively contracting 
out the operation of its lines, as other commuter rail lines in 
the U.S. have done successfully.\214\ Amtrak could participate 
in such competitive bids. The anticipated benefits of these 
changes would be lower operating costs for Amtrak and high-
quality service for passengers.
    \214\The VRE and MARC train are two such lines that have contracted 
out certain aspects of their operations.

    Prohibit Funding for High-Speed Rail. Only two high-speed 
rail lines in the world are profitable: one in France and 
another in Japan.\215\ They serve densely populated areas where 
gasoline is expensive. Similar success is far from certain in 
the U.S., which has low population densities relative to high-
speed rail markets in Europe and Asia. American travelers also 
have widespread access to personal vehicles and competitively 
priced air and bus transportation, plus commuter rail and 
intercity passenger rail service. Both factors mean high-speed 
rail cannot currently attract enough riders, which in turn 
makes it challenging to meet revenue targets. Several governors 
across the country rejected Federal high-speed rail funding in 
recent years, because they recognized the risk to their 
taxpayers, who would have had to subsidize the proposed lines 
in perpetuity. Backing such risky, local projects, likewise, is 
not within the purview of the Federal Government but rather, it 
is more suited to the discretion of localities and the private 
    \215\See the Reason Foundation, High-Speed Rail in Europe and Asia: 
Lessons for the United States, May 2013:

    Phase Out Future Capital Investment Program Grants. Often 
called New Starts, this program awards grants for new fixed-
guideway mass transit projects and the expansion of existing 
ones. Streetcars, ferries, bus rapid transit, and other types 
of rail transit are examples of eligible projects. Such 
transportation systems produce local, not national, benefits. 
The budget supports fulfilling current commitments and then 
phasing out new grants, giving States and cities time to plan 
their future transportation priorities and budgets accordingly. 
This Federal grant program can have the perverse consequence of 
distorting local decisions about which types of transit 
projects to build, in favor of more costly projects. For 
example, a city may opt for a new rail transit project in one 
area at the expense of expanding comparatively cost-effective, 
flexible bus service in an area where that service is already 
in demand. Moreover, if a taxpayer-backed New Starts project 
fails to attract enough riders and generate expected revenue 
levels, local citizens must make up the revenue to cover future 
operating and capital costs.

    Eliminate TIGER Grants. The Transportation Investment 
Generating Economic Recovery [TIGER] Program was a 2009 
stimulus bill measure established as a competitive grant 
program. Congress and the President created this program to 
drive funding to critical national transportation needs for the 
country, yet more than 60 percent of the grants support local 
transit or so-called ``enhancement'' projects. With grantee 
selection based on vague metrics, including ``livability,'' the 
Department of Transportation has failed to provide more 
information regarding documentation of its review process as 
requested by the Government Accountability Office.\216\ The 
Trump Administration's preliminary budget proposal recommends 
ending this unauthorized program, in favor of supporting 
Nationally Significant Freight and Highway Projects grants, 
which more reasonably will produce national, not local, 
    \216\See the Reason Foundation, ``Eliminate TIGER Program,'' 17 
February 2015:

    Encourage Improved Performance and Safety at Washington 
Metropolitan Area Transit Authority [WMATA]. WMATA, commonly 
called ``Metro,'' is a local transit authority that operates 
rail, bus, and paratransit services in the Nation's capital and 
nearby communities. In addition to fare box and advertising 
revenue, it receives Federal aid through annual appropriations 
acts. Specifically, it receives Federal Transit Administration 
formula grants and a line-item appropriation. The District of 
Columbia, Maryland, and Virginia also raise matching funds 
through dedicated sources to pay for Metro's services. 
Congress, in a line-item appropriation, directed $150 million 
to Metro in fiscal year 2016. Approximately 40 percent of 
Metro's rush hour passengers are Federal Government employees. 
The transit agency has been characterized by poor performance 
in several areas: low on-time performance, weekly service 
disruptions, maintenance backlogs, smoky rail tunnels, high 
operating costs, and a tragically fatal rail accident in early 
2015. In October 2015, U.S. Federal Transit Administration 
officials assumed direct safety supervision of Metro's rail 
system. Customer satisfaction has dropped.\217\ Decreased 
reliability along with reduced service and hours of operation 
to accommodate SafeTrack repairs have led to lower ridership.
    \217\Washington Metropolitan Area Transit Authority [WMATA], 
``Vital Signs,'' November 2015: p. 5,
    In recent months, however, the new Metro General Manager, 
Paul Wiedefeld, has taken steps to control costs, conduct 
emergency repairs, and restore safety to the system--all 
without increased Federal subsidies. In his fiscal year 2018 
``Reality Check'' budget, he proposed broad-ranging reforms, 
including eliminating 1,000 nonessential or duplicative 
positions; increased funding from Maryland, Virginia, and the 
District of Columbia; and fare increases for bus and rail 
passengers.\218\ In total, the budget would close a $290 
million gap between revenue and expenses. His proposed budget 
does not rely on increased Federal subsidies. This budget 
resolution supports legislative reforms that encourage Metro to 
contain costs and operate more like a business, rather than 
reward the system with greater taxpayer-funded subsidies. Metro 
customers would benefit from more reliable, safer service.
    \218\FY 2018 Proposed Budget,

    Continue Reforms at the Transportation Security 
Administration [TSA]. In the wake of the September 11, 2001 
terrorist attacks on the country, which exposed major security 
gaps in airport screening and security, Congress and the 
Executive Branch took decisive action to assume control over 
aviation security. The Transportation Security Administration 
[TSA] was created to protect the nation's transportation 
systems by providing screening and setting security standards 
for major transportation sectors.
    TSA continues to face many challenges. Given low employee 
morale and high leadership turnover to prolonged airport wait 
times and failed internal investigations, reform and 
improvement at the agency must remain a top priority. 
Fortunately, Congress has made major efforts to reform and 
improve TSA through legislative action and oversight. In the 
114th Congress, six pieces of legislation were signed into law 
that sought reforms of airport checkpoint wait times, last 
point of departure airport security, TSA PreCheck, and domestic 
airport security. Additional bills passed the House in the 
114th Congress seeking to improve vetting of TSA and airport 
employees and establish comprehensive reforms for both aviation 
and surface transportation security.
    While the problems at TSA are great, it is important that 
Congress and the Executive Branch continue to build upon 
previous reforms. The committees of jurisdiction over aviation 
security, as well as TSA itself, must continue to emphasize 
risk-based security procedures, innovative screening 
capabilities and equipment, improvements in the workforce, and 
removal of all insider threats and corruption. Close 
relationships with other security agencies, law enforcement, 
airports, and airlines will enable TSA to maintain these 
priorities and conduct ongoing analysis of innovative 
approaches to carrying out its mission. Continued efforts in 
these areas, along with rigorous oversight of TSA, will ensure 
that the proper improvements are made. This budget recommends 
that TSA funding focus on the aforementioned priorities, with 
the expectation that the authorizing and appropriating 
committees of jurisdiction will continue their responsibility 
of directing substantive reforms, to ensure that funding is 
meeting taxpayers' expectations.


                Function Summary: Discretionary Spending

    The Federal Government continues to support many local, 
regional, and community-based activities. While both State and 
local governments maintain the bulk of programs in this 
purview, a variety of federally structured actions are required 
to be addressed at a community level. Federal funding for 
economic and community development in both urban and rural 
areas appears in this category. It includes Community 
Development Block Grants; the non-power activities of the 
Tennessee Valley Authority; the regional commissions, including 
the Appalachian Regional Commission; the Economic Development 
Administration; and partial funding for the Bureau of Indian 
Affairs. Homeland Security spending in this function includes 
the State- and local-government grant programs of the 
Department of Homeland Security, as well as a majority of the 
funding for the Federal Emergency Management Agency.
    While supporting these programs related to emergency 
preparedness and critical needs, this resolution urges 
streamlining non-essential community and regional initiatives 
that are not core functions of the Federal Government.
    The majority of this category's funding is discretionary 
and provided by the Appropriations Subcommittees on Financial 
Services; Energy and Water; Agriculture; Interior, Environment, 
and Related Agencies; and Homeland Security. Relevant 
authorizing committees for this category include the Committee 
on Financial Services, the Committee on Transportation and 
Infrastructure, and the Committee on Homeland Security.
    The resolution calls for $5.1 billion in discretionary 
budget authority and $19.6 billion in outlays in fiscal year 
2018. The 10-year totals for discretionary budget authority and 
outlays are $56.4 billion and $98.0 billion, respectively. The 
figures appear in Function 450 of Table 2.

           Illustrative Discretionary Spending Policy Options

    As elsewhere, the committees of jurisdiction will make 
final policy determinations. None of the policy discussions in 
this report is intended to bind the committees of jurisdiction 
to any particular policy direction. The committees retain full 
authority and flexibility in determining the policies to be 
adopted. The proposals below indicate policy options that might 
be considered.

    Eliminate Non-Core Programs. At a time when reducing 
spending is imperative for the government's fiscal well-being, 
this resolution recommends a hard look at community and 
regional programs, especially scrutinizing those that deliver 
funds for non-core Federal Government functions, and 
consolidating and streamlining programs wherever possible. A 
particular example is the Community Development Fund [CDF]. 
Historically, about 80 percent to 90 percent of funding for the 
CDF is spent on the Community Development Block Grant program 
[CDBG], a program that dates to the 1974 Housing and Community 
Development Act of 1974. CDBG is an annual formula grant 
directed to State and local governments. In 2016, Congress 
appropriated $3.0 billion for CDBG. A vast range of activities 
are eligible for funds, such as home water and energy 
efficiency activities, historic preservation, demolishing 
blighted properties, street and sidewalk repairs, job training, 
grants to local businesses, and community planning. Local 
organizations, private business, and sometimes local 
communities at-large are the ultimate recipients of CDBG funds. 
Likewise, the benefits are enjoyed locally, not nationally. The 
program's effectiveness has been compromised over the decades 
by debates over formulas, which have allowed wealthier 
communities to receive funding at the expense of lower-income 
communities; currently there is no maximum community poverty 
rate to determine eligibility for funds, nor are communities 
with high average income limited or excluded. Further, wasteful 
and inefficient projects have received grants, and the program 
has been criticized for incurring unnecessarily high 
administrative costs, which drain funding for actual projects. 
Recognizing the waste and abuse in the CDBG program, President 
Trump's fiscal year 2018 budget recommends eliminating it.

    Focus Department of Homeland Security Urban Area Security 
Initiative Grants. Urban Area Security Initiative grants to 
more than 30 cities have not produced measurable results for 
the most critical municipalities. This option would limit the 
grants on a risk-based formula basis.

    Reform the Federal Emergency Management Agency. The budget 
supports implementation of reforms at the Federal Emergency 
Management Agency [FEMA] passed by Congress to improve service 
delivery and efficacy in disaster assistance, while at the same 
time proposing further steps to eliminate overlap and 
inefficiencies. The budget also acknowledges the need to 
consider reforms in disaster-relief assistance to ensure those 
State and local governments most in need are receiving the 
assistance required. The disaster declaration is intended as a 
process to help State and local governments receive Federal 
assistance when the severity and magnitude of the disaster 
exceeds State and local resources, and when Federal assistance 
is absolutely necessary. Nevertheless, the recent precedent set 
by Congress regarding Federal emergency and disaster assistance 
has focused on providing designated emergency CDBG funding 
instead of using the FEMA Disaster Relief Fund. As a result, 
FEMA has pivoted to a variety of grant programs that exceed the 
purview of Federal funding and should be provided by individual 
states and localities themselves. This budget calls for a 
thorough review of the scope and funding levels of the 
following FEMA grant programs to determine whether overlap and 
duplication exists.

      Preparedness (Non-Disaster) Grants. This category 
of grants comprises a variety of security-related programs 
attempting to ``enhance the capacity of state and local 
emergency responders.''\219\ This includes the Homeland 
Security Grant Program; the Intercity Bus Security Grant 
Program; the Intercity Passenger Rail Security Grant Program; 
the Nonprofit Security Grant Program; the Port Security Grant 
Program; the Tribal Homeland Security Grant Program; and the 
Transit Security Grant Program.
    \219\Federal Emergency Management Agency [FEMA], ``Preparedness 
(Non-Disaster) Grants'':

      Hazard Mitigation Assistance Grant Programs. This 
category of grants includes the Flood Mitigation Assistance 
Program, the Hazard Mitigation Grant Program, and the Pre-
Disaster Mitigation Grants. These non-emergency disaster 
assistance programs hope to ``reduce overall risk to the 
population and structures from hazard events, while also 
reducing reliance on Federal funding for future 
    \220\FEMA, ``Pre-Disaster Mitigation Grant Program: General Program 

      Assistance to Firefighters Grant Programs. This 
collection of grants includes the Assistance to Firefighters 
Grants [AFG], Fire Prevention and Safety [FP&S], and Staffing 
for Adequate Fire and Emergency Response [SAFER]. These grants 
subsidize local and volunteer fire departments, and provide 
Federal funds to increase the staffing levels of specific 
community fire departments.

                          AND SOCIAL SERVICES

                Function Summary: Discretionary Spending

    Creating and supporting an environment of opportunity for 
all Americans is a national goal and a focus of Federal 
policymakers. Access to high-quality education is key to 
achieving this goal. Education can end the cycle of poverty in 
families and offer a path to the middle class. It equips 
students to pursue their academic and professional goals, makes 
American workers more competitive, and increases the Nation's 
economic strength.
    The question, however, is how best to advance the cause of 
high-quality education. One approach has crept toward ever-
greater centralization, creating Federal programs, spending 
more money, and piling on regulation. This approach has 
stripped local entities of opportunities to decide how to 
measure their educational systems and programs, and it ``has 
limited the ability of teachers, parents, faculty, and 
education leaders to do what's best for students and local 
communities.''\221\ The approach favors programs that spend 
more but gives insufficient attention to outcomes for students. 
Higher spending has not led to higher achievement. ``Since 
World War II, inflation-adjusted spending per student in 
American public schools has increased by 663 percent,'' yet 
student achievement has not followed suit.\222\ For example, 
``public school national math scores have been flat (and 
national reading scores declined slightly) for 17-year-olds 
since 1992,'' as analysis of Federal data show.\223\ Graduation 
rates at public high schools have not improved considerably 
since 1970.\224\
    \221\Committee on Education and the Workforce, FY 2018 Views and 
    \222\Gerard Robinson and Benjamin Scafidi, ``More Money, Same 
Problems,'' U.S. News and World Report, 20 September 2016: https://

                             K-12 EDUCATION

    Principally, Federal funds for K-12 education (Function 500 
in Table 2 of this report) should aim to support State and 
local entities and empower them to produce good outcomes for 
students. It should not seize control from States and 
localities. Real gains in education result from the diversity 
and creativity of State and local educators. Centralizing rules 
and standards in Washington risks dampening their effectiveness 
and innovation. The Federal Government has an interest in 
education, but that interest is chiefly in promoting the 
initiatives of local educators, not dictating them. To this 
end, Congress continues to oversee the implementation of the 
``Every Student Succeeds Act'', a law governing major K-12 
education programs, aimed at reducing Federal overreach.
    Promoting choice is another way to expand access to 
quality, affordable education. When parents have choices, they 
are empowered to help their children attend excellent schools 
and receive a first-rate education. States and local districts 
across the country are experimenting with the many forms of 
school choice, which include vouchers, charter schools, magnet 
schools, Education Savings Accounts, education-related tax 
credits, homeschooling, online learning programs, and 
others.\225\ For example, 43 States and the District of 
Columbia have laws governing charter schools, which now serve 
approximately 3 million students across the country.\226\ As 
the Education and the Workforce Committee notes in its Views 
and Estimates: ``[T]he D.C. Opportunity Scholarship program * * 
* has allowed thousands of students to attend private schools 
of their choice''\227\ as an alternative to staying at a poorly 
performing school. Four States--Arizona, Florida, Tennessee, 
and Mississippi--have active Education Savings Accounts 
programs serving an estimated 11,300 students combined.\228\ 
The 115th Congress may consider appropriate Federal solutions 
that advance the mission of school choice, alongside efforts to 
improve children's experiences and educational outcomes in the 
Nation's public schools.
    \225\See ``Types of School Choice,'' database at,
    \226\Education and Workforce Committee, ``Helping Students Succeed 
Through the Power of School Choice,'' Rep. Rokita opening statement, 2 
February 2017:
    \227\Committee on Education and the Workforce, FY 2018 Views and 
    \228\``Fast Facts on School Choice,'', https://


    While in middle and high school and in college, some 
students also pursue their academic and professional goals 
through a set of educational institutions referred to as career 
and technical education. Career and technical education [CTE] 
refers to programs that prepare students with academic and 
technical knowledge and skills to succeed in a specific field, 
whether health care, hospitality, manufacturing, information 
technology, and more. These capabilities are indispensable for 
maintaining the foundation of the Nation's economy, and 
equipping students with such in-demand skills is a national 
priority. This is especially so given gaps between jobs 
available in certain industries and the number of workers 
qualified for those jobs (often called the skills gap).\229\ 
Likewise, both traditional high-school graduates and older, 
contemporary students can enjoy the job-readiness benefits of 
CTE without taking on the costs--and debt often required--for 
four-year degree programs.\230\ As with K-12 education 
programs, there are opportunities for Congress to ensure 
Federal laws governing CTE programs are not overly prescriptive 
but instead empower State and local leaders to design 
innovative ways to educate students for high-demand, high-skill 
    \229\See Testimony of Mike Rowe, House Committee on Education and 
the Workforce, 28 February 2017:
    \230\A Better Way, ``Poverty, Opportunity, and Upward Mobility,'' 
p. 28,

                              JOB TRAINING

    In addition to high-quality educational opportunities, 
Americans of all ages should have access to skills and job 
training that will equip them to compete in the rapidly 
changing global economy. Federal training programs--also a 
major component of discretionary funding in this function--are 
notorious for their failure and duplication. As described 
further below, 42 training programs--administered by nine 
Federal agencies--have created a labyrinth of bureaucracy that 
consistently fail to produce a substantial number of job 
placements. In addition to reforming training programs so they 
serve Americans more effectively, Congress must make every 
dollar count by eliminating wasteful, duplicative, and 
ineffective programs.
    For fiscal 2018 the budget resolution in this category 
provides $80.4 billion in discretionary budget authority and 
$91.3 billion in outlays, which primarily goes to the 
Departments of Education, Labor, and Health and Human Services.

           Illustrative Discretionary Spending Policy Options

    The main committees responsible for funding programs in 
this area are the Committee on Education and the Workforce and 
the Appropriations Subcommittee on Labor, Health and Human 
Services, Education, and Related Agencies. They will make final 
decisions about what policies to develop to achieve their 
budgetary targets. Policy options for consideration include the 

    Reform Job-Training Programs. The Bureau of Labor 
Statistics' February 2017 report found that 7.5 million 
Americans are unemployed. Yet the bureau also reports 5.6 
million job openings. This gap is due in part to the failure of 
the Nation's workforce-development programs to successfully 
match workers' skills with employers' needs.
    This budget builds on the reforms made possible by the 
``Workforce Innovation and Opportunity Act'' [WIOA], signed 
into law in 2014. This budget calls for further consolidation 
of duplicative Federal job training programs and improved 
coordination with the reformed workforce development system. A 
streamlined approach with increased oversight and 
accountability will not only provide administrative savings, 
but will improve access, choice, and flexibility, enabling 
workers and job seekers to respond quickly and effectively to 
whatever specific career challenges they face.
    The GAO last reviewed Federal job training programs in 
2011, three years before WIOA was enacted. This budget 
recommends that GAO conduct a study to examine the 
effectiveness of current Federal job training programs, and 
identify ways to better measure program success.

    Make the Pell Grant Program Sustainable. The Pell Grant 
program is the foundation of Federal student aid, a portable 
grant to help low-income students afford a college education. 
After years of decisions to raise the Pell Grant award levels, 
however, the program is on unstable financial ground, with real 
consequences for future students. Pell Grant discretionary 
costs ballooned from $12.8 billion to $22.2 billion between 
fiscal years 2006 and 2016 (most recent data available). During 
this period, the funding required to support the discretionary 
portion of the grant award fluctuated considerably. In fiscal 
years 2011 and 2012, for example, Congress provided $36.5 
billion each year to sustain the program. CBO estimates Pell 
Grant program costs will increase over the coming decade. 
Instead of confronting some of the factors driving the 
program's costs, previous Congresses increasingly relied on 
mandatory spending to make up for discretionary funding 
deficiencies. Instead of implementing necessary, structural 
reforms to set up the program for long-term success, lawmakers 
repeatedly resorted to short-term funding patches--a temporary 
answer that will not prevent a severe funding cliff for the 
program in the future. Any reforms to Pell Grants should aim to 
help students with lower incomes access higher education and 
complete in a timely manner. The budget envisions responsible 
adjustments so that Pell Grants will continue to remain 
available for future students. These include the following:

      Provide flexibility and ensure on-time 
completion. The fiscal year 2017 omnibus appropriations act 
provides for year-round Pell Grants, which allow eligible 
students to draw down their overall maximum grant eligibility 
and continue their studies in the summer. Such a statutory 
change could be a way to give students more flexibility in 
earning their degree. It will likely lead to higher program 
costs. It is therefore important that students accelerate 
through their studies and complete their degrees on time. The 
committee of jurisdiction could consider, in future 
legislation, ways to encourage on-time completion. Policies 
could include changing the Federal definition of ``full-time'' 
attendance for financial aid to one that would align with on-
time completion, or explicitly requiring students participating 
in year-round Pell to accelerate their progress to completion.

      Roll back certain recent expansions to the needs 
analysis to ensure aid is available to students with the most 
need. The Department of Education attributed 14 percent of 
program growth between 2008 and 2011 to recent legislative 
expansions to the needs-analysis formula. The biggest cost 
drivers come from changes made in the ``College Cost Reduction 
and Access Act'' [CCRAA] of 2007, such as the expansions of the 
level at which a student qualifies for an automatic zero 
Expected Family Contribution and the income-protection 
allowance. One option is to return to these pre-CCRAA levels.

      Eliminate administrative fees paid to 
participating institutions. The government pays participating 
schools $5 per grant to administer and distribute Pell awards. 
Schools already benefit from the Pell program, because the aid 
makes attendance at those schools more affordable.

      Consider setting a maximum-income cap. Currently 
there is no fixed upper-income limit for a student to qualify 
for Pell. Figures go into a formula, which is used to calculate 
the grant amount for which the student qualifies. The higher 
the income level of the student and the student's family (and 
therefore expected family contribution to the student's 
education), the smaller the grant he or she receives.

      Eliminate eligibility for less-than-half-time 
students. Some students eligible for Pell grants may be 
balancing a job and college courses, and even family 
responsibilities. Timely completion of required course credits 
is important, so that students do not borrow more in loans than 
necessary to cover tuition and living costs; so that they can 
graduate, secure a job, and be financially able to start 
repaying any student loans; and so that grant aid can be made 
available to more students. One option for encouraging timely 
completion would be reserving funding for students enrolled on 
no less than a half-time basis. This policy would retain 
flexibility for contemporary students balancing school, work, 
and family commitments.

      Adopt a sustainable maximum-award level. The 
Department of Education attributed 25 percent of recent program 
growth to the stimulus bill's $619 increase in the maximum 
award, which took effect in the 2009-2010 academic year. To 
make Pell Grant program funding more stable and sustainable, 
the budget recommends maintaining the maximum award for the 
2017-2018 award year, of $5,920, in each year of the budget 
window. Discretionary appropriations would fund this award.

      Consider reforms to Return of Title IV Funds 
regulations. Simple changes to this policy, such as increasing 
the amount of time a student must attend class to withdraw 
without debt owed for back assistance, will increase the 
likelihood of students completing their courses and reduce 
incentives for fraud.

    Encourage Innovation in Higher Education. Federal higher-
education policy should focus not solely on financial aid but 
on policies that maximize innovation and ensure a robust menu 
of institutional options for students and their families. Such 
policies should include reexamining the data made available to 
students, to make certain they have information to assist them 
in making decisions about where to go to college and how to pay 
for it. Additionally, the Federal Government should remove 
regulatory barriers in higher education that act to restrict 
flexibility and innovative teaching, particularly as it relates 
to contemporary models, such as online coursework.

    Eliminate Administrative Fees Paid to Schools in the 
Campus-Based Student-Aid Programs. Under current law, 
participating higher-education institutions can use a 
percentage of Federal program funds for administrative 
purposes. One option would be to prohibit this practice. 
Schools benefit significantly from participating in Federal 
student-aid programs.

    Ensure Federal Early Childhood Programs Work for Children 
and Families. Recently enacted legislation, the Every Student 
Succeeds Act, intends to scale back Federal overreach into 
local education decisions and empower States to streamline many 
early childhood programs. In short, it aims to better target 
resources and shrink bureaucracy, and it gives States and 
localities the opportunity to innovate and pursue programs with 
demonstrated success. The budget supports future reforms, by 
committees of jurisdiction, to programs and activities that are 
not improving outcomes for participating children and parents. 
For example, a study released in 2010 by the Department of 
Health and Human Services found the Head Start program that 
serves children across the country was not producing lasting 
improvements in participating children's math, language, and 
literacy skills. Nor was it improving parenting practices.\231\ 
Yet taxpayers fund this program at $9 billion annually. The 
Obama Administration took regulatory action aimed at correcting 
the program's course, but without engaging Congress in 
discussions about how best to do so. Parents and their children 
deserve better. The budget supports efforts by the committees 
of jurisdiction to ensure that programs such as Head Start 
support working parents, expand parental choice, are not mired 
in regulation, and result in lasting gains for low-income 
children and their parents. Congress and the new administration 
have the responsibility to ensure existing early childhood 
programs are producing desired outcomes before establishing and 
funding new initiatives.
    \231\See U.S. Department of Health and Human Services, Head Start 
Impact Study, 15 January 2010:

    Empower Parents and Ensure High Quality in Federal Primary 
and Secondary Education Programs. Certain provisions in the 
``Every Student Succeeds Act'' prevent the Federal Government 
from coercing States into adopting specific sets of academic 
standards, such as Common Core. Setting standards, devising 
curricula, and conducting related activities are not Federal 
duties; they are of State and local concern. The budget 
supports work to implement these provisions as well as future 
efforts that stop Federal edicts and instead empower States, 
local communities, and parents.
    The structure for K-12 programs at the Department of 
Education is fragmented and ineffective. Many programs are 
duplicative, not working as intended, or are highly restricted, 
serving only a small number of students. Given budget 
constraints, Congress must focus resources on programs that 
truly help students. The ``Every Student Succeeds Act'' 
provided for the elimination or consolidation of 49 of these 
programs and replaced them with a single Student Support and 
Academic Enrichment Grant.\232\ The budget encourages the 
timely transition from an array of K-12 programs to the new 
streamlined system, which will increase efficiency, limit the 
Federal role, and make way for innovative practices in States 
and localities. Downsizing the number and scope of programs, 
and making more Federal aid dollars portable will make that 
possible. Federal dollars should go to efforts that improve 
academic outcomes, not add to the bureaucracy.
    \232\Became Public Law 114-95.
    The budget recommends that, as efforts to consolidate and 
streamline are undertaken, the committees of jurisdiction 
continue giving priority to discretionary funding for students 
with disabilities provided under the ``Individuals with 
Disabilities Education Act'' [IDEA]. IDEA funding has 
consistently fallen short of the 40-percent Federal 
contribution threshold established in statute. Congress should 
refocus efforts to support this existing commitment before it 
entertains new education programs or initiatives.

    Encourage Private Funding for Cultural Agencies. The 
activities and content funded by cultural agencies, such as the 
Corporation for Public Broadcasting, National Endowment for the 
Arts, and National Endowment for the Humanities, go beyond the 
core mission of the Federal Government. The country has robust 
offerings in the arts and media, which cater to the spectrum of 
preferences and perspectives held by people across the country, 
from small towns to dense urban cores. Federal cultural 
agencies can generate additional financial support from 
private-sector patrons, which will also alleviate risks of 
political interference and perennial funding uncertainty that 
come with Federal subsidies.

    Make Way for Increased State, Local, and Private Financial 
Support for Museums and Libraries. State and local governments 
are in a position to manage and invest in museums and 
libraries. Charitable contributions from private-sector 
businesses, organizations, and individuals in civil society can 
augment this funding.

    Promote More Private Support for the Smithsonian 
Institution. The Smithsonian Institution consists of 19 museums 
and galleries, a zoological park, and research and supporting 
facilities. Approximately 29 million visitors enjoyed the 
Smithsonian complex in person in fiscal year 2016 (the last 
full fiscal year), and the Institution can connect with 
millions through its website, podcast, and social media.\233\ 
In fiscal year 2016, for example, the Smithsonian raised $326 
million in private funds.\234\ Through Federal grants and 
appropriated funds, general taxpayers contribute about 60 
percent of its annual budget. The remaining 40 percent comes 
from trust fund sources and non-federal funds, including 
private gifts, endowment disbursements, membership 
contributions, external grants, and business income.\235\ The 
budget supports continued efforts by the Smithsonian to 
generate non-federal revenue. Given the current Federal fiscal 
environment, increased private funding can better enable 
Smithsonian to expand its collections, improve existing 
facilities, and make business decisions.
    \233\Smithsonian Institution Fiscal Year 2018 Budget Justification 
to Congress, May 2017: p. 1,
    \234\Ibid., p. 251.
    \235\See Smithsonian Dashboard, Finances:

    Eliminate the Corporation for National and Community 
Service. Programs administered out of this agency provide 
funding to students and others who work in certain areas of 
public service. Participation in these programs is not need-
based. The United States has a long history of robust volunteer 
work and other efforts that provide services to communities and 
individuals. Americans' generosity in contributing their time 
and money to these efforts is extraordinary and should be 
encouraged. The Federal Government already has aid programs 
focused on low-income students, and the oxymoronic act of 
paying ``volunteers'' is not a core Federal responsibility, 
especially in times of high deficits and debt. Further, it is 
much more efficient to have such efforts operate at the State 
and local level by the community that receives the benefit of 
the service.


                Function Summary: Discretionary Spending

    For decades, the United States has been the biomedical 
innovation capital of the world. This comes from the Nation's 
commitment to the discovery, development, and delivery of new 
treatments and cures. America should maintain its world 
leadership in medical science by encouraging competitive forces 
to work through the marketplace in delivering cures and 
therapies to patients. Federal policies should foster 
innovation in health care and promote medical ingenuity, not 
stifle it. Bureaucracy and red tape in Washington have held 
back medical innovation and prevented new lifesaving treatments 
from reaching patients. Removing these burdens will allow the 
Nation to maintain its lead in the production of medical 
devices, the creation of new vaccines, and the pharmaceutical 
research that saves and enhances millions of lives. This 
resolution recognizes the valuable role of government support 
for research agencies, such as the National Institutes of 
Health [NIH], but also encourages the indispensable 
contributions to medical research coming from outside 
    In addition to the NIH and the Centers for Disease Control 
and Prevention [CDC], programs and agencies that receive 
discretionary funding in this category (Function 550 in Table 
2) include Project Bioshield, the Food Safety and Inspection 
Service, and the Food and Drug Administration [FDA]. The 
resolution's discretionary totals for fiscal year 2018 are 
$61.6 billion in budget authority and $61.3 billion in outlays. 
The 10-year discretionary totals are $638.1 billion in budget 
authority and $624.7 billion in outlays.

           Illustrative Discretionary Spending Policy Options

    The principal authorizing committees in this category are 
the Committee on Energy and Commerce and the Committee on 
Oversight and Government Reform. Funding is provided by the 
Appropriations Subcommittees on Labor, Health and Human 
Services, Education, and Related Agencies; Agriculture, Rural 
Development, Food and Drug Administration, and Related 
Agencies; and the Legislative Branch. These panels have sole 
authority and maximum flexibility in determining the policy 
choices to meet the fiscal parameters of this resolution. 
Nevertheless, they might wish to consider the principles and 
illustrative policy options described below.

    Support Global Health Responses. The Nation must remain 
prepared to address threats to public health in a timely 
fashion. The budget protects funding for the NIH and the CDC, 
the first line of defense for the American people. The 
resolution recognizes the importance of resources to combat 
infectious diseases and respond to global health crises, 
ensuring the Nation's capability to prepare and act upon 
emerging health threats, such as the recent Ebola and Zika 
outbreaks. At the time of this resolution's consideration, the 
NIH is advancing clinical trials in the human testing phase for 
a new vaccine to combat the Zika virus.

    Defend Against Bioterrorism. The Constitution requires the 
Federal Government to provide for the common defense--a 
function that has implications for health care in a global 
environment fraught with chemical, biological, radiological, 
and nuclear [CBRN] weapons. In following this commitment, the 
budget supports funding to guard against bioterrorism, such as 
the countermeasure procurement and development activities of 
the Secretary of Health and Human Services.
    The Federal Government operates a pathway for medical 
countermeasures [MCM] to bioterrorism events. When the 
Department of Homeland Security, in collaboration with the U.S. 
intelligence community, identifies a CBRN threat, it begins the 
MCM development and stockpiling process. The linchpin of the 
process is Project BioShield. Project BioShield uses the 
Special Reserve Fund to procure and stockpile MCMs that are 
approved only for emergency use, following their research and 
development by NIH and the Biomedical Advanced Research and 
Development Authority [BARDA]. Upon approval by the Food and 
Drug Administration [FDA], MCMs are shifted to the CDC-managed 
Strategic National Stockpile. This budget recognizes the 
collaborative effort in developing MCMs is vital to 
safeguarding Americans against a bioterrorism attack. As such, 
it supports adequate, consistent, and advance funding for these 

    Foster Medical Research, Innovation, and Development. 
Medical breakthroughs and discoveries are made every day, and 
the pace of medical innovation will continue to quicken due to 
advancements in groundbreaking fields such as genomic medicine, 
molecular medicine, and biomedical research. The NIH and the 
CDC foster fundamental creative discoveries, cures, and 
therapies. The Health and Human Service Laboratories housed in 
these agencies rank first in the 2017 list of the world's most 
innovative research institutions.\236\ The budget resolution 
supports a level of funding for these agencies that enables 
them to continue their critical work. The budget also 
encourages the continuation of work started under the ``21st 
Century Cures Act'', which provided funds through the NIH and 
the Cures Innovation Fund for biomedical research, particularly 
early-stage, ``high-risk, high-reward'' research.\237\
    \236\David Ewalt, ``The World's Most Innovative Research 
Institutions,'' Reuters, 1 March 2017:
    \237\H.R. 6, the ``21st Century Cures Act,'' 114th Congress: 1st 
Session, 19 May 2015.
    Regrettably, much of this innovation has faced significant 
hurdles due to the Federal overregulation pushed by the Obama 
Administration. For example, a recent report from the Mercatus 
Center at George Mason University highlights the proper role 
the FDA should have in the 21st Century.\238\ It should not be 
an organization that holds up products for nine years before 
approving them.\239\ It should not cost innovators close to $20 
million to deal with the FDA's myriad requirements.\240\ Most 
important, patients should not be left to suffer the true costs 
of delaying life-saving devices. This resolution calls for a 
complete examination of the FDA approval process to promote a 
more effective, efficient system that truly safeguards 
Americans' access to innovative cures and therapies. The Trump 
Administration has signaled its intention to expedite review of 
potentially life-saving medicines and devices, and this budget 
supports those efforts.
    \238\Jason Briggeman, Joseph V. Gulfo, and Ethan C. Roberts, The 
Proper Role of the FDA for the 21st Century, the Mercatus Center at 
George Mason University, February 2016:
    \239\Emergo, ``How long it has historically taken the FDA to clear 
510(k) submissions,'' retrieved 1 February 2016: http://
    \240\AdvaMed, FDA Impact on U.S. Medical Technology Innovation, 
November 2010:

    Strengthen Oversight and Program Integrity Measures. 
Federal grant programs fund a variety of health care services 
provided by State and local governments. Every dollar made 
available through these programs should be used transparently, 
and in the most effective manner possible, for its intended 
purpose. This budget resolution supports increased program 
integrity measures to prevent fraud and abuse in health care 
programs, particularly in the realms of improper payments and 
inappropriate expenditures.
    The resolution promotes scientific integrity, particularly 
when taxpayer dollars are funding research. International 
research entities should be subject to the same strict 
transparency and reproducibility requirements that U.S. 
institutions must follow to receive the same grant money. If 
these standards are violated--or worse, never put into place--
the findings of the research are questionable at best.
    Regrettably, the government does not maintain these same 
protections when transferring taxpayer money overseas through 
international grant projects. This lack of transparency allows 
for results-shopping to fit a particular ideology, the 
intentional misdirection of taxpayer dollars away from 
institutions that value the scientific method, and the 
deliberate misinformation of the public. At the time of this 
report's writing, the House Committee on Science, Space, and 
Technology is conducting an investigation into just such an 
egregious use of taxpayer dollars.\241\
    \241\Letter from Chairman Lamar Smith, Chairman, House Committee on 
Science, Space, and Technology, and Chairman Darin LaHood, Science, 
Space, and Technology Subcommittee on Oversight, to Thomas E. Price, 
Secretary, U.S. Department of Health and Human Services, 24 March 2017:
    This budget supports the ongoing investigative efforts of 
the House Committee on Science, Space, and Technology. 
Furthermore, it asserts that future grants to study health 
safety should be awarded only to those intuitions subject to 
the same scientific standards as U.S. researchers.

    Limit Federal Health Coverage Funding for Members of 
Congress and Their Staffs. Currently, Federal contributions to 
the Federal Employee Health Benefits Program grow by the 
average weighted rate of change in these programs. This budget 
supports restricting the growth in these plans to inflation. It 
also proposes restricting Federal employees' retirement 
benefits based on length of service, which would bring Federal 
benefits in line with the private sector model.

    Reduce Wasteful Spending. This budget repeals funding for 
certain offices that waste taxpayer resources on nonessential 
projects, particularly projects that are only tangential to 
improving Americans' health. The NIH operates the National 
Center for Complementary and Integrative Health, which receives 
funding for research on alternative health care. Some of its 
recent grant awardees include studies on the effectiveness of 
cranberry juice in treating urinary tract infections; the 
potential use of yoga to improve low metabolism; and the 
benefits of chamomile tea in treating anxiety. The CDC operates 
the Division of Community Health, which provides grants to 
programs that fund sidewalks and smoke-free housing options. 
The CDC and NIH do excellent work on early detection, 
prevention, and treatment for breast and cervical cancer, as 
well as on immunizations, flu vaccines, and many other worthy 
efforts. The agency should receive sufficient funding for these 
activities, but they should not be spending American taxpayer 
dollars on unsubstantiated research and community enhancement 
that would be best conducted by local governments.

    Target Resources, Improve Outcomes. The budget supports 
better targeting of Federal spending to achieve the country's 
health care goals. For example, the budget calls for 
eliminating duplicative programs at the Department of Health 
and Human Services [HHS]. The budget supports the consolidation 
of the Agency for Healthcare Research and Quality [AHRQ] into 
existing HHS agencies. The AHRQ's mission and areas of research 
exist within other HHS agencies and are therefore duplicative 
and unnecessary.
    The budget also supports prudent investments to improve 
mental health care and awareness. In 2015, according to NIH, 
nearly 10 million adults in the U.S. lived with severe mental 
illness,\242\ and it is important that the Federal Government 
give priority to treatment of the sickest and most vulnerable 
patients. The Government Accountability Office recently 
conducted a study that identified more than 100 distinct 
programs supporting individuals with serious mental illness, 
and found interagency coordination for programs severely 
lacking.\243\ Federal dollars should not be squandered on 
antiquated programs that fail to meet patients' needs. The 
budget calls for Federal programs to be reoriented to advance 
treatment for those facing serious mental illness. Any research 
conducted and grants awarded by the Federal Government should 
be firmly rooted in evidence-based practice. Programs and 
resources in this area should focus on psychiatric care for 
patients and families most in need of services.
    \242\National Institute of Mental Health, ``Director's Blog: Mental 
Health Awareness Month: By the Numbers,'' 15 May 2015: http://
    \243\Government Accountability Office, HHS Leadership Needed to 
Coordinate Federal Efforts Related to Serious Mental Illness, report to 
the Energy and Commerce Subcommittee on Oversight and Investigations, 
December 2014:
    This budget supports initiatives aimed at modernizing the 
health care system, such as advancing telemedicine. This 
practice utilizes technology allowing providers to interact 
with patients from a distance. It can offer access to care for 
patients who may otherwise not receive regular care, 
particularly those in rural areas. It also gives patients 
greater control over their own health care while reducing 
costs.\244\ At the same time, this budget recognizes the 
government must not leave behind patients who rely on more 
traditional medical practices. Patient-centered care requires 
the budget to look forward as it fosters private-sector 
innovation, without abandoning currently available care models 
that patients require.
    \244\Bill Frist, ``Telemedicine: A Solution to Address the Problems 
of Cost, Access, and Quality,'' Health Affairs, 23 July 2015: http://
    One such model is the Federal Black Lung Program, which 
provides compensation to coal miners disabled by pneumoconiosis 
that resulted from their work in coal mining. The Black Lung 
Benefits Act provides eligible miners with medical coverage to 
treat related lung disease through benefits and clinic funding. 
This budget allows for continued support of those who risked 
their health to power the Nation.

    Combat the Opioid Epidemic. Finally, the budget recognizes 
that the United States is in the midst of a deadly battle with 
opioid and heroin abuse. According to the CDC, an average of 91 
Americans die each day from an opioid overdose.\245\ In the 
State of Tennessee, there are more opioid prescriptions than 
people. In 2015, Tennessee health care professionals wrote 
nearly 8 million prescriptions for opioids, producing enough 
for 1.18 prescription per Tennessean.\246\ Nearly 5 percent of 
Tennesseans suffer from opioid abuse.\247\ This reflects a 
larger challenge faced by Americans nationwide.
    \245\Centers for Disease Control and Prevention, ``Opioid Basics: 
Understanding the Epidemic,'' 16 December 2016:
    \246\Holly Fletcher, ``There Are More Opioid Prescriptions than 
People in Tennessee,'' The Tennessean, 19 September 2016: http://
    \247\Jake Lowary, ``Tennessee Lawmakers Still Wrangling with Opioid 
Epidemic,'' The Tennessean, 26 March 2017:
    The Committee on Energy and Commerce has led an ongoing 
effort to ascertain which Federal programs have been effective 
in combatting opioid abuse, and which have not--and why the 
latter failed.\248\ The budget resolution supports a 
continuation of these efforts. It calls for a complete 
examination of the Federal response to the crisis. The 
government should implement prevention activities, and evaluate 
them to identify effective strategies for preventing substance 
abuse. The budget resolution includes a policy statement that 
describes in greater detail the contours of how the Federal 
Government should respond to the ongoing substance abuse 
    \248\Press Release, Committee on Energy and Commerce, U.S. House of 
Representatives, 29 March 2017:

                            INCOME SECURITY

                Function Summary: Discretionary Spending

    The aim of potential reforms described here is to make more 
judicious use of limited resources. In addition, these reforms 
seek to target funds on the most needy while encouraging self-
sufficiency for those who can achieve it. Programs that 
subsidize food and housing for low-income Americans remain 
largely unreformed, nearly two decades after the success of the 
``Personal Responsibility and Work Opportunity Act''--the major 
welfare reform bill enacted in 1996. This budget proposes to 
improve work incentives for these programs and increase State 
    Discretionary spending components of this category 
(Function 600 in Table 2) include the Special Supplemental 
Nutrition Program for Women, Infants, and Children; the Low 
Income Housing Energy Assistance Program; housing assistance 
programs; and the Child Care and Development Block Grant. For 
these programs the budget resolution provides $68.1 billion in 
budget authority in fiscal year 2018, and $67.6 billion in 
outlays. The budget assumes discretionary spending of $712.8 
billion in budget authority and $710.3 billion in outlays in 
this area over the 2018-2027 period.

           Illustrative Discretionary Spending Policy Options

    The main committees responsible for funding these programs 
are the Committee on Agriculture; the Committee on Financial 
Services; and the Appropriations Subcommittees on Labor, Health 
and Human Services, Education, and Related Agencies, and on 
Agriculture, Rural Development, Food and Drug Administration, 
and Related Agencies. They will make final policy 
determinations for discretionary funding and should aim to 
provide State flexibility and to expand work incentives. The 
options below are potential policy proposals that follow such 
    The committees of jurisdiction are not bound by any of the 
illustrative policy discussions in this report. The options are 
presented to demonstrate the credibility of the budgetary 
assumptions of the resolution, but the authorizing and 
appropriating committees retain full authority and maximum 
flexibility in determining the policies to be adopted.

    Make Responsible Reforms to Housing-Assistance Programs. 
This resolution supports taking actions that would make 
housing-assistance programs more sustainable and direct Federal 
dollars to serve those most in need. In past budgets, 
illustrative policy options have attempted to impose a Federal 
solution to housing policy to aid those most in need. The 
Committee on Financial Services says: ``Current federal housing 
policy is fractured, costly, and inefficient * * *. In 
particular, the Department of Housing and Urban Development has 
received more than $1.655 trillion in real (2014) dollars in 
appropriations over its 50 year existence and today spends $45 
billion annually on at least 85 active programs.''\249\ The 
Committee on Financial Services also reports current federal 
programs for providing housing assistance are fragmented and 
outdated. As a result, ``[t]his fragmented national system * * 
*. may further constrain individual choice and economic 
    \249\Committee on Financial Services, U.S. House of 
Representatives, Views and Estimates, 3 March 2017.
    There is nothing more local than housing assistance. For 
fiscal year 2018, the resolution calls for block granting all 
discretionary housing assistance programs at the Department of 
Housing and Urban Development. Local communities are better 
prepared to address the housing needs of their citizens. Some 
communities have a large homeless population, while others may 
struggle to assist working age adults in unstable housing 
situations. Communities must be able to set their own 
priorities to address these local needs. Building off of the 
successful reforms to the Temporary Assistance for Needy 
Families [TANF] program, the fiscal year 2018 policy option 
would provide a base level of funding to each state and allow 
States to determine the best programs to provide housing for 
their citizens.

    Reform Supplemental Nutrition Assistance Program Outreach 
Funding. This budget assumes that outreach funding for 
Supplemental Nutrition Assistance Program (formerly food 
stamps) is reduced, and funds are shifted toward programs that 
facilitate upward mobility, such as properly reformed job-
training programs.

    Enforce Eligibility Requirements For WIC Program. The 
Women, Infants, and Children [WIC] Program is intended to serve 
individuals with incomes below 185 percent of the Federal 
Poverty Level. Adjunctive eligibility allows individuals to 
demonstrate eligibility for the program if they are enrolled in 
Medicaid. Since Medicaid serves families with incomes above 185 
percent of the Federal Poverty Level, adjunctive eligibility 
not only simplifies program administration, but also expands 
eligibility. The budget would limit WIC eligibility to 185 
percent of the Federal Poverty Level.


    Discretionary spending under the Medicare Program consists 
primarily of administration and management costs. The budget 
resolution totals for fiscal year 2018 are $6.6 billion in 
discretionary budget authority, with $6.6 billion in outlays. 
The 10-year totals in the budget resolution are $82.6 billion 
in discretionary budget authority and $82.1 billion in outlays 
(Function 570 in Table 2). This also includes the budget for 
the Medicare Payment Advisory Commission, a non-partisan, 
independent agency established by the Balanced Budget Act of 
1997 to advise Congress on Medicare payment policies and 
analyze issues affecting beneficiaries, such as access to care, 
quality of care, health care outcomes, and so on.
    For administering Social Security, the budget assumes $5.4 
billion in discretionary budget authority and $5.4 billion in 
outlays for fiscal year 2018. The 10-year totals for 
discretionary budget authority and outlays are $61.5 billion 
and $61.3 billion, respectively (Function 650 in Table 2). All 
the budget authority and all but a sliver of residual outlays 
are off budget. The Social Security Administration oversees the 

                            Direct Spending


    Uncontrolled automatic spending, formally called ``direct'' 
or ``mandatory'' spending,\251\ has come to dominate the 
Federal budget, and its share of total outlays continues to 
increase. As noted previously, this form of spending is largely 
open-ended and flows from effectively permanent authorizations. 
Most of the programs funded this way pay benefits directly to 
groups or individuals without an intervening appropriation. 
They spend without limit, and their totals are determined by 
numerous factors outside the control of Congress: caseloads, 
the growth or contraction of gross domestic product, inflation, 
and many others.
    \251\The Balanced Budget and Emergency Deficit Control Act (Public 
Law 99-177) defines ``direct spending'' as budget authority provided in 
law other than appropriations acts; entitlement authority; and the 
Supplemental Nutrition Assistance Program (formerly food stamps).
    The majority of this spending goes toward the government's 
health programs--mainly Medicare, Medicaid, and the Affordable 
Care Act. Social Security represents another major component. 
Apart from these, however, there are numerous other benefit 
programs financed with direct spending. These include farm 
assistance, food stamps, a range of income support programs, 
tuition assistance for college students, and many others. This 
section discusses solely the direct spending in these areas to 
reinforce the urgency of getting this spending under control.

                            SOCIAL SECURITY

                   Function Summary: Direct Spending

    Following the outbreak of the Great Depression, rates of 
unemployment and poverty increased dramatically, and nearly 
half of elderly Americans lacked the means to be self-
supporting. Many lived in poverty and also had no access to 
viable retirement security options. Americans at the time were 
reluctant to expand welfare programs. They believed in the 
virtue of self-sufficiency, and the strength of character that 
emerges in striving for it. What President Roosevelt proposed 
in the midst of America's economic crisis, however, was not 
welfare; it was retirement security through social insurance.
    ``[S]ecurity was attained in the earlier days through the 
interdependence of members of families upon each other and of 
the families within a small community upon each other,'' the 
President told Congress. ``The complexities of great 
communities and of organized industry make less real these 
simple means of security. Therefore, we are compelled to employ 
the active interest of the Nation as a whole through government 
in order to encourage a greater security for each individual 
who composes it * * * a right which belongs to every individual 
and every family willing to work.''\252\
    \252\President Franklin D. Roosevelt, Message to Congress Reviewing 
the Broad Objectives and Accomplishments of the Administration, 8 June 
    The result was the creation of the Old-Age and Survivors 
Insurance [OASI] program, commonly known today as Social 
Security, which established a work-based contribution system to 
insure against old-age and provide lifetime benefits to retired 
workers. The 1939 Amendments added Social Security benefits for 
the spouse and minor children of retired workers. Twenty years 
later, Social Security was expanded to provide disability 
benefits to workers and their dependents.
    Before the passage of the Social Security Act in 1935, the 
Federal Government played a limited role in poverty relief. In 
the 1920s, there were between five million and six million 
seniors, or 5 percent of the population. For male seniors, work 
provided the primary source of support. If a senior was unable 
to work and care for himself, the ``safety net'' was his 
family.\253\ Following the Great Depression, Social Security 
and other Federal poverty programs provided a floor of support 
for senior citizens during old age.
    \253\Carolyn L. Weaver, ``Support of the Elderly Before the 
Depression: Individual and Collective Arrangements,'' Cato Journal, Vol 
1, No. 2, Fall 1986:

                   Success, Popularity, and Expansion

    Social Security is the largest program in the Federal 
Government's budget. Program benefits are reflected in the 
direct spending of budget Function 650 (Table 3 in the summary 
tables). Under this budget, these benefits total $995 billion 
in outlays in fiscal year 2018. Over 10 years, total outlays 
will be $13.2 trillion. With respect to the budget resolution, 
these benefits are treated as off budget and do not appear in 
the legislative text. The retirement program, Old-Age and 
Survivors Insurance, is projected to spend $847 billion in 
benefits in 2018, and $11.4 trillion for the period of 2018 
through 2027. The Disability Insurance [DI] program has 
projected outlays of $148 billion for 2018 and $1.8 trillion 
for 2018-2027.\254\
    \254\Congressional Budget Office, The Budget and Economic Outlook: 
2017 to 2027, January 2017, Table 1-2:
    OASI was created in 1935\255\ as a self-financed program--
funded through a payroll tax on employers and employees--that 
provides a monthly cash benefit to retired workers, based on 
the worker's lifetime average earnings in covered employment. 
The program furnishes benefits to workers who spend at least 10 
years (40 quarters) in jobs in which they pay Social Security 
taxes. OASI has a progressive benefit structure so lower-income 
beneficiaries generally receive a monthly benefit that replaces 
a higher percentage of their pre-retirement income than do 
higher-income beneficiaries.
    \255\Public Law 74-271, 74th Congress.
    From the outset, however, Social Security benefits were 
never intended to be the sole source of income for seniors in 
retirement, but rather a floor so a senior citizen would not 
become destitute. Personal savings, pensions, family support, 
and continuing to work into old age were to provide additional 
support to seniors above a person's Social Security benefit.
    From 1935 through 1975, Congress expanded the number of 
people covered by the program, increased benefits and the taxes 
that support it, created the DI Program (in 1956),\256\ and 
established a cost-of-living adjustment [COLA] (in 1975).\257\ 
Since then, Congress has focused on ensuring the long-term 
solvency of the program. In 1983, Congress passed substantial 
reforms to Social Security, including increasing the full 
retirement age from 65 to 67.
    \256\Public Law 84-880, 84th Congress.
    \257\Public Law 92-603, 92nd Congress.
    By almost every measure, U.S. senior citizens today are 
healthier and wealthier than at any point in U.S. history. 
Social Security, along with Medicare, has played a significant 
role in improving quality of life for America's seniors. 
Americans also are living longer, largely due to medical 
innovation and healthier lifestyles. In 1935, when Social 
Security was created, the average life expectancy from birth 
was 60 years. Today, it is 78.8 years.
    A 2011 study using both income and consumption data found 
seniors over 65 have much lower poverty rates than almost any 
other demographic group.\258\ According to one of its authors: 
``Even over the past 10 years, those 65 and older with the 
lowest income are now living in bigger houses that are much 
more likely to be air conditioned and have appliances like a 
dishwasher and clothes dryer. Few other groups have enjoyed as 
much improvement in living standards over the past three 
    \258\Bruce D. Meyer, University of Chicago, and James X. Sullivan, 
University of Notre Dame, The Material Well-Being of the Poor and 
Middle Class Since 1980, American Enterprise Institute, 22 September 
2011: jsulliv4/well_being_middle_class_poor4.3.pdf.
    \259\Bruce D. Meyer, ``Using Consumption to Study Older Americans' 
Poverty,'' The New York Times, 9 November 2011:
    Social Security enjoys widespread support. It continues to 
represent a bond, a compact, among generations of Americans. 
The program currently serves some 60 million beneficiaries, but 
with 10,000 baby boomers now retiring daily, by 2040 Social 
Security will cover 100 million beneficiaries. Today and in the 
future, Social Security beneficiaries deserve a program that is 
sound and reliable--one responsive to the 21st century economy. 
Social Security is threatened, however, by demographic, 
financial, and structural challenges. It is on an unsustainable 
financial trajectory and will not be able to pay promised 
benefits within the next two decades.

                      Fragile Financial Prospects

    Social Security payroll taxes are credited to two trust 
funds: one for OASI and one for DI. The Social Security Trust 
Funds also hold additional assets, including interest on 
Treasury securities from previous cash surpluses. From 1983 
through 2010, more tax revenues were collected by the Trust 
Funds than what was paid out in Social Security benefits, so 
Social Security ran annual cash-flow surpluses. Because the 
government subsequently borrowed these surplus funds for other 
activities, critics declared a ``raid'' on Social Security that 
threatened retirees' future benefits. It was not. All the 
borrowed funds were replaced with interest-bearing Treasury 
securities--the only kind of resources the Trust Funds hold--
that can be redeemed as needed.
    In 2010, Social Security began running a cash-flow deficit, 
meaning non-interest income (mainly payroll tax revenue) could 
no longer pay all the benefits to current retirees. If not for 
balances of Treasury securities in the Trust Funds, built up 
from previous surpluses, the program would already be unable to 
pay promised benefits. The ability to redeem these securities, 
however, depends entirely on the Treasury's ability to raise 
money through taxes or borrowing.
    To make matters worse, both Trust Funds face insolvency 
within the next 20 years--2028 for DI and 2035 for OASI--
depleting their capacity to pay full benefits. With each year 
Congress delays, the policy changes needed to correct the 
program's fiscal trajectory will become too large and wrenching 
to adopt. That will lead to sudden, steep reductions in 
    Those who doggedly oppose reform, however, only ensure 
these automatic benefit cuts will occur. ``The Social Security 
program is kept solvent on the government's books by 
`planning'--it's the law of the land--to cut benefits 25 
percent across the board in under two decades. It's a horrible 
way to run a pension program and no one should be proud of that 
and so we need a better Social Security program. It's not a 
matter of just cutting because [we] want to have the numbers 
line up. It's about having programs that are serving the 
beneficiaries well.''\260\
    \260\Douglas J. Holtz-Eakin, The Need for Fiscal Goals, testimony 
to the Committee on the Budget, U.S. House of Representatives, 15 June 
    For these reasons, the House adopted a rule for the 114th 
Congress prohibiting legislation that improves the financial 
condition of DI at the expense of the OASI Trust Fund. The rule 
provides an exemption, however, for legislation that improves 
the financial condition of both Social Security Trust Funds. 
The rule has been continued in the 115th Congress.\261\
    \261\Section 3(o) of H. Res. 5, Rules of the House of 
Representatives: One Hundred Fifteenth Congress.
    The lack of bipartisan congressional action on a long-term 
solution to the problem facing Social Security has resulted in 
many Members of Congress offering their own. One such proposal 
would be a bipartisan commission that would study the 
structural deficiencies within the current Social Security 
system and report back with specific legislative proposals for 
Congress and the President to consider.
    Social Security's fiscal condition warrants a long-term 
solution that keeps the promise made to the Nation's current 
and future retirees.
    This budget calls for a bipartisan path forward in 
addressing the long-term structural problems within Social 
Security. The path will require all parties to first 
acknowledge the fiscal realities of this critical program. 
Short-term policy proposals that merely delay addressing Social 
Security's long-term fiscal challenges are no longer 
acceptable. Neither borrowing between the OASI and DI Trust 
Funds, nor reallocating the apportionment of payroll tax 
revenues to each Fund, is a long-term solution to Social 
Security's fiscal challenges. ``If you want to help both 
programs you're not going to accomplish that by moving money 
around just between them.''\262\
    \262\Holtz-Eakin, op. cit.
    Former President Obama's Fiscal Commission made an 
important contribution to the debate about addressing Social 
Security's financial shortfall. The Commission acknowledged the 
reality of increasing longevity and proposed reforms to 
alleviate the demographic problems that are undermining Social 
Security's finances.
    This budget seeks to build on the Fiscal Commission by 
requiring the President to put forward specific solutions to 
fix Social Security's long-term fiscal problem. The budget also 
puts the onus on Congress to offer legislation ensuring the 
long-term solvency of this program. Any policy proposal offered 
regarding the Disability Insurance program should first and 
foremost strengthen the long-term integrity of the program for 
Americans with disabilities (see further discussion below).
    The Committee on Ways and Means will determine actual 
policies in Social Security. The committee's members have 
maximum flexibility in determining the appropriate legislative 
course for meeting the budget resolution's parameters. The 
discussion below offers some guiding principles to include in 
the debate.

                          Starting the Process

    This budget requires the President and Congress to begin 
the process of reforming Social Security by altering a current-
law trigger that, in the event the Social Security program is 
not sustainable, requires the President, in conjunction with 
the Social Security Board of Trustees, to submit a plan for 
restoring the balance to the Trust Funds. This provision would 
then require congressional leaders to put forward their 
positive solutions to ensure the long-term solvency of Social 
Security. While the Committee on Ways and Means would make the 
final policy decisions, this provision would require the 

      If in any year the Board of Trustees of the 
Federal Old-Age and Survivors Insurance Trust Fund and the 
Disability Insurance Trust Fund, in its annual Trustees' 
Report, determine that the 75-year actuarial balance of the 
Social Security Trust Funds in the 75th year is in deficit, the 
Board of Trustees should, no later than the 30th of September 
of the same calendar year, submit to the President 
recommendations for statutory reforms necessary to achieve a 
positive 75-year actuarial balance and a positive annual 
balance in the 75th year.

      No later than the 1st of December of the same 
calendar year in which the Board of Trustees submits its 
recommendations, the President shall promptly submit 
implementing legislation to both Houses of Congress, including 
recommendations necessary to achieve a positive 75-year 
actuarial balance and a positive annual balance in the 75th 

      Within 60 days of the President's submission, the 
committees of jurisdiction to which the legislation has been 
referred shall report the bill, which shall be considered by 
the full House and Senate under expedited procedures.

                          Disability Insurance

    The Disability Insurance program provides essential income 
support for persons with disabilities and their families. Due 
in large part to the predictable consequence of demographic 
factors and policy decisions, however, DI program revenues will 
be unable to cover the full costs of benefits in 2028, 
according to the Social Security Trustees, unless Congress 
    In 2015 Congress took the first step toward comprehensive 
Disability Insurance reform that would solve the Trust Fund's 
long-term financing troubles. The Bipartisan Budget Act of 2015 
included a number of provisions to reduce fraud, increase 
program integrity, and encourage DI beneficiaries to return to 
work. These provisions strengthened the DI program and extended 
its solvency date to 2022.\263\
    \263\Public Law 114-74.
    Despite this recent legislation, the structural problems 
facing the DI program remain the same. Under current law, its 
Trust Fund is expected to be exhausted in 2028. If lawmakers do 
not enact reforms to ensure the long-term solvency of the 
Disability Insurance program, an immediate 7-percent reduction 
in benefits will be required when the Trust Fund becomes 
    \264\Congressional Budget Office, Estimate of the Effects on the 
OASI and DI Trust Fund of enacting H.R. 1314, the Bipartisan Budget Act 
of 2015, introduced 27 September 2015.
    The huge growth in the number of individuals receiving DI, 
and the benefits paid to each, have contributed heavily to the 
worsening financial condition of the DI Trust Fund. In 2016, 
the Congressional Budget Office reported that the share of 
working-age adults receiving DI benefits rose from 1.3 percent 
in 1970 to 4.5 percent in 2014.\265\ Between 1990 and 2015, the 
total number of individuals receiving DI benefits increased 
from 4.3 million to 10.9 million.\266\ Average DI benefits per 
person have also increased significantly from $5,100 in 1970 to 
$12,200 in 2015 (as measured in 2015 dollars). Legislated 
changes to the formula used to compute benefits contributed to 
the increase in spending.\267\ Meanwhile, tax revenues paid 
into the DI Trust Fund have remained relatively flat as a share 
of taxable payroll.
    \265\Congressional Budget Office, Social Security Disability 
Insurance: Participation and Spending, June 2016, p. 1.
    \266\Ibid., p. 6.
    \267\Ibid., p. 9-10.
    The demographic factors contributing to the problem include 
the aging of the baby boomers into their most disability-prone 
years and the increased number of women in the workforce now 
eligible for benefits should they become severely disabled. In 
addition, policymakers have expanded the ways in which 
applicants may qualify for benefits. At the same time, those 
receiving DI are in many ways prevented from improving their 
situations. If they work too much, they see their benefits 
reduced or eliminated. While about 40 percent of disability 
beneficiaries indicate an interest in working, less than one-
half of one percent leave the rolls each year due to earnings 
from work.\268\
    \268\Debra Wright, Gina Livermore, Denise Hoffman, Eric Grau, and 
Maura Bardos, 2010 National Beneficiary Survey: Methodology and 
Descriptive Statistics, Mathematica, 2 April 2012.

               Principles for Disability Insurance Reform

    Congress and the President should develop bipartisan 
legislation to secure the future of the DI program. This 
legislation should be rooted in principles that do the 

      Promote opportunity for those trying to return to 

      Ensure benefits continue to be paid to 
individuals with disabilities and their family members who rely 
on them;

      Prevent an 7-percent across the board benefit 
cut; and

      Make the Disability Insurance program work 

    Consistent with the House rule, reforms should begin to 
improve the financial situation of Social Security.

                       Illustrative Policy Option

    Eliminate the Ability to Receive Both Unemployment 
Insurance and Disability Insurance. This option would eliminate 
concurrent receipt of unemployment and disability insurance, a 
clear example of duplication in the Federal budget. The 
proposal would give the Social Security Administration the 
authority to identify fraud and prevent individuals from 
obtaining benefits from both programs. It is consistent with a 
similar policy proposal President Trump and former President 
Obama made in their budget requests. This budget takes the 
first step in preventing across the board benefit reductions to 
the Social Security program. This policy option could save up 
to $4.4 billion.


                   Function Summary: Direct Spending

    The Medicare and Medicaid Programs reached their 50th 
anniversary in July 2015. By many measures, Medicare has seen 
remarkable successes, such as providing access to health care 
for millions of seniors, and contributing to increased life 
expectancies and reduced rates of poverty among seniors. At the 
same time, however, it has become an immensely expensive 
program that actually limits retirees' choices, imposes heavy 
burdens on medical providers, and--through its myriad billing 
rules--effectively makes Washington bureaucrats the decision-
makers for retirees' health care services.
    The aims of Medicare are not in question. Retirees need 
health care and it has to be paid for somehow--without 
burdening seniors themselves with crippling costs. That was the 
goal of the program's creation in 1965. The problem has been 
the attempt to deliver Medicare's vast promises through a 
centrally managed government financing arrangement. In the 21st 
century American health care market, there is a far better way 
to achieve Medicare's worthy goals. It should be built on the 
same principles that apply to health care reform generally. 
Retirees should be able to choose the coverage plan best suited 
to their particular needs, rather than accept a set of benefits 
dictated by Washington. The program should ensure doctors and 
patients make health care decisions for themselves. It also 
should encourage competition among insurers to expand choices 
of coverage and restrain costs.
    The benefits of this approach have already been 
demonstrated in certain existing components of Medicare. 
Medicare Advantage and Medicare Part D, an optional 
prescription drug benefit, provide seniors with the opportunity 
to choose, from an array of private plan options, the coverage 
that best suits their needs. These programs, described further 
below, offer lessons that can be applied more broadly through 
Medicare, creating a more responsive and resilient program. 
They are a model for the proposals envisioned in this budget 
    Looking to these examples, as well as the private sector, 
positive solutions can be discovered that maintain access to 
high-quality care through patient-centered reforms fostering 
competition, restoring market forces, expanding choices and 
empowering individuals, promoting innovation, and providing 
flexibility for patients and providers.
    Such reforms, worthwhile in themselves, have another 
significant benefit: They can help Congress balance the budget, 
and bolster Medicare's collapsing financial structure. On its 
present course, the so-called Medicare ``guarantee'' is in fact 
a promise of shrinking benefits. Yet those who doggedly oppose 
reform only ensure this unacceptable outcome.


    When the Medicare Program was created in 1965, it consisted 
of just two essential parts: Part A, coverage for hospital 
services, or hospital insurance [HI]; and Part B, or 
supplementary medical insurance [SMI]. The HI Trust Fund is 
funded primarily through a designated payroll tax of 2.9 
percent that is shared equally by employer and employee. The 
SMI Trust Fund is supported much differently; revenues consist 
of beneficiary premiums, which must account for 25 percent of 
all Part B costs on an annual basis, and transfers from the 
U.S. Treasury's general revenues.
    During the late 1990s, Congress created Medicare Part C, or 
Medicare Advantage [MA]. The MA program offers beneficiaries 
private plan options that cover services provided under Part A, 
Part B, and often Part D benefits. The Federal Government 
determines the level of spending per enrollee that will be 
provided to MA plans (with funds from the appropriate trust 
funds used to offset the Part A, Part B, and Part D costs), and 
beneficiaries pay a monthly premium as they do under Parts B 
and D. Not surprisingly, with the adjustment of payment rates 
to make MA plans comparable to traditional Medicare, use of 
this program dramatically expanded. In 2016, 31 percent of all 
Medicare beneficiaries chose a MA plan, as opposed to just 13 
percent in 2003.\269\
    \269\Gretchen Jacobson, Giselle Casillas, Anthony Damico, Tricia 
Neuman, and Marsha Gold, Medicare Advantage 2016 Spotlight: Enrollment 
Market Update, The Kaiser Family Foundation, 11 May 2016: http://
    Finally, Medicare Part D, Prescription Drug Coverage, was 
established in 2003. Part D is structured similarly to Part B 
and is a separate account within the SMI Trust Fund. 
Beneficiary premiums account for approximately 25.5 percent of 
costs, with the remaining 74.5 percent funded through general 
revenues.\270\ Unlike any other program in Medicare, however, 
Part D relies on market forces and competition among private 
plans to drive down costs. As a result, year after year Part D 
reports costs millions of dollars lower than projected, while 
still maintaining high quality and beneficiary satisfaction. 
These lessons ought to be applied throughout the Medicare 
    \270\Part D also receives payments from States for dually enrolled 
beneficiaries in the program.
    Medicare's evolution brought growing complexity, making 
benefits difficult for retirees to navigate. This conflicts 
with the experience the majority of beneficiaries enjoyed for a 
lifetime in the private health insurance market prior to 
entering the program. Notwithstanding the program's successes, 
Medicare's complicated benefit structure, along with a 
multitude of rules and regulations, make the program a 
bureaucratic quagmire for both beneficiaries and providers.
    Medicare's current benefit design is overly complex, with 
various cost-sharing structures for each part. Currently, 
beneficiaries must enroll in three separate programs to get the 
same comprehensive coverage. Seniors are required to enroll in 
Part A for hospitalization; coverage is provided separately for 
outpatient physician services and prescription medications, 
through the optional Parts B and D, respectively. Medicare also 
fails to offer financial protections for seniors, such as 
annual or lifetime limits. Many must sign up for an additional 
supplemental insurance policy called MediGap to obtain a fully 
comprehensive coverage package.
    Several fundamental program design problems add costs to 
the system and inhibit innovation. First, Medicare allows 
government bureaucrats to determine what benefits enrollees are 
entitled to, and the program's administrative pricing system 
distorts costs and services throughout the entire health care 
sector. Medicare keeps restricting the medical sector because 
its savings mechanisms are largely price controls, not cost 
controls. The Centers for Medicare and Medicaid Services [CMS] 
often fails to reimburse for new therapies and medical 
technology, limiting patient access to more advanced cures. 
This effectively stymies innovation throughout the health care 
delivery model.
    Additionally, CMS acts as the clinical arbiter of access to 
medical goods and services with full authority to deny coverage 
of items. Unfortunately for patients, CMS is often abysmally 
wrong when it comes to coverage determinations, and in some 
cases appears to be working toward a certain bottom line rather 
than ensuring patients have access to the safest and most up-
to-date medical technologies and therapies. For example, 
transcatheter aortic valve replacement [TAVR] is a minimally 
invasive surgical procedure used to repair heart valves--which 
previously required open heart surgery. Today, a small implant 
can be inserted through a catheter to the affected valve and 
requires only very small openings that leave all the chest 
bones in place. While no procedure is completely without risk, 
TAVR provided options to previously non-viable surgical 
candidates and offers a faster recovery period. Despite these 
advances, CMS created coverage and procedural requirements to 
limit the procedure's use.
    Finally, Medicare's billing and reporting regulatory regime 
force providers to spend more time filling out paperwork than 
actually seeing patients.\271\ A recent Health Affairs article 
reported that today physician practices spend more than 785 
hours per physician and $15 billion annually to report quality 
measures.\272\ While everyone benefits from quality health 
care, the current reporting requirements are highly burdensome 
and add unnecessary costs to the health care system.
    \271\Christine Sinsky, Lacey Colligan, Ling Li, Mirela Prgomet, Sam 
Reynolds, Lindsey Goeders, Johanna Westbrook, Michael Tutty, and George 
Blike, ``Allocation of Physician Time in Ambulatory Practice: A Time 
and Motion Study in 4 Specialties,'' Annals of Internal Medicine, 6 
December 2016:
    \272\Lawrence P. Casalino, David Gans, Rachel Weber, Meagan 
Cea,Amber Tuchovsky, Tara F. Bishop, Yesenia Miranda, Brittany A. 
Frankel, Kristina B. Ziehler, Meghan M. Wong and Todd B. Evenson, ``US 
Physician Practices Spend More Than $15.4 Billion Annually To Report 
Quality Measures,'' Health Affairs, March 2016: http://
    Many of these difficulties could be addressed by expanding 
retirees' choices of insurance plans and promoting competition 
among insurers. As noted, such approaches are already working 
in Medicare Parts C and D. They should apply to the program 
more broadly.


    In addition to its structural problems, Medicare suffers 
from a failing financial arrangement and ever-rising costs. 
Correcting these problems is indispensable for making the 
program sustainable for the long term. They also contribute 
immensely to the important task of balancing the Federal 
    Medicare and the other major health care programs are 
projected to consume an ever-increasing portion of the Federal 
budget over time.\273\ In the next decade, annual spending on 
these programs will double, from $1.1 trillion to $2.2 
trillion, according to estimates by the Congressional Budget 
Office [CBO].\274\ Medicare currently serves more than 57 
million beneficiaries, and is the second largest direct, or 
automatic, spending program after Social Security.\275\ In 
2016, Medicare Program costs totaled $692 billion, and CBO 
projects spending to more than double by 2027, reaching $1.4 
trillion that year. Congress cannot balance the budget without 
addressing these rapid cost increases.
    \273\Using CBO's descriptions, the major health care programs are 
Medicare, Medicaid, the State Children's Health Insurance Program, and 
the Affordable Care Act's exchanges and associated credits and 
    \274\Congressional Budget Office, The Budget and Economic Outlook: 
2017 to 2027, January 2017.
    Several factors contribute to the growth in program 
spending over the next decade. Foremost is the aging of the 
population. In 2011, the first baby boomer enrolled in 
Medicare. This generation will continue to age into the program 
over the next two decades at a rate of approximately 10,000 
beneficiaries per day. By the time the baby-boom generation has 
fully aged into Medicare in 2030, the program will cover more 
than 75 million beneficiaries. Such an increase in the 
Medicare-covered population naturally corresponds with an 
increase in program costs, but this effect is exacerbated by a 
number of additional factors. Since the beginning of the 
program, the average life expectancy has increased dramatically 
while the Medicare eligibility age has remained unchanged. In 
1965, the average life expectancy was 70 years, meaning 
Medicare provided 5 years of health care coverage on average. 
Today, life expectancy is almost 80 years, and the average 
Medicare beneficiary remains in the program roughly three times 
longer than those enrolled at its inception.
    Additionally, revenues for Part A--supporting the HI Trust 
Fund--cannot meet the costs of the program due to a shrinking 
working-age population. When Medicare was created, there were 
4.5 workers for every beneficiary enrolled in the program, 
which easily sustained the pay-as-you-go funding structure. 
Today, the ratio has declined with approximately three workers 
per beneficiary. By 2030, when the baby-boom generation has 
fully aged into Medicare, the ratio will be closer to two 
workers per beneficiary, meaning fewer revenues will be 
available to offset ever-increasing program costs. Finally, 
although most beneficiaries pay into the Medicare Program 
throughout their working years, the Medicare benefit the 
average person receives far exceeds his or her contribution to 
the program through payroll taxes. For example, the present 
value of lifetime Medicare taxes for a married couple earning 
the average wage and retiring at age 65 in 2015 equaled 
approximately $140,000 contributed through payroll taxes, but 
the anticipated lifetime Medicare benefit is estimated to be 
$422,000--roughly three times the lifetime contribution.\276\ 
By 2050, the anticipated lifetime Medicare benefit balloons to 
more than four times the lifetime contribution.
    \276\C. Eugene Stuerle and Caleb Quakenbush, Social Security and 
Medicare Lifetime Benefits and Taxes, Urban Institute, September 2015:
    These trends play a significant role in Medicare's long-
term outlook. The CBO recently updated enrollment projections 
for Medicare by age group. Currently, the majority of 
beneficiaries are under age 75, but by 2035 there will be more 
Medicare beneficiaries over age 75 than under.\277\ This is 
especially troubling when the difference in Medicare per capita 
spending between older and younger beneficiaries has widened. 
The average spending for a Medicare beneficiary of 85 years is 
now more than twice that of a 66-year-old, and spending is 
three times greater for a 95-year-old.\278\ Not surprisingly, 
Medicare costs are expected to rise not only as a greater 
number of beneficiaries enter the program, but also as per-
capita costs increase with the continued aging of the Medicare 
population. The CBO estimates Medicare per-capita cost growth 
to average 4.3 percent per year between 2017 and 2027, 3 
percent higher than the previous five years and net program 
spending to grow from 3 percent of gross domestic product [GDP] 
to 5.7 percent by 2046. Compared to the other major health care 
programs--Medicaid, the State Children's Health Insurance 
Program, and the Affordable Care Act [ACA]--that are expected 
to grow from 2.2 percent to 2.9 percent of GDP by 2040, this is 
a startling growth rate for a single program.\279\ Furthermore, 
the Medicare Trustees estimate the total amount of unfunded 
obligations for the Medicare Program over the 75-year period to 
equal $3.2 trillion for the HI Trust Fund and $24.8 trillion 
for the SMI Trust Fund.\280\
    \277\The Congressional Budget Office, The 2015 Long-Term Budget 
Outlook, June 2015:
    \278\Tricia Neuman, Juliette Cubanski, Jennifer Huang, and Anthony 
Damico, The Rising Cost of Living Longer: Analysis of Medicare Spending 
by Age for Beneficiaries in Traditional Medicare, The Kaiser Family 
Foundation, 14 January 2015:
    \279\The Congressional Budget Office, The 2015 Long-Term Budget 
Outlook, June 2015:
    \280\United States Department of the Treasury. Fiscal Year 2015 
Financial Report of the United States Government: https:// 
    In the short term, Medicare costs are projected to outpace 
income, creating a shortfall in the HI Trust Fund. In January 
2017, the CBO reported the HI Trust Fund would be exhausted by 
2025--four years earlier than the date estimated by the 
Medicare Trustees and one year earlier than CBO projected last 
year.\281\ Expenditures from the trust fund, which is financed 
mainly through the 2.9-percent payroll tax, have exceeded 
revenues annually since 2008. Although the Medicare trustees 
expect a slight surplus from 2016 through 2020, the ratio of 
revenues to costs declines quickly in the following years. The 
most recent projection, reported by the trustees in July 2017, 
estimated depletion of the HI Trust Fund in 2029. Upon 
depletion, Medicare may only pay for Part A services equal to 
the amount of revenues available in the HI Trust Fund, which 
are expected to cover only 88 percent of promised benefits. The 
Social Security Act is silent on what steps may be taken upon 
depletion of the HI Trust Fund, but without action, 
beneficiaries' access to health care services would certainly 
be severely reduced. They will be subject to automatic benefit 
    \281\Congressional Budget Office, The Budget and Economic Outlook: 
2017 to 2027, January 2017.
    Structural reforms to the Medicare Program are necessary to 
ensure the long-term viability of the program without 
compromising beneficiary access to quality care. While many of 
the most insidious effects of the ACA appear mainly in 
Medicaid, the Medicare Program was also fundamentally undercut 
and altered as a result. The ACA imposed across-the-board cuts 
on Medicare providers and services, and put those savings 
toward new government spending programs rather than to extend 
the solvency of the Medicare Program. Furthermore, the Medicare 
trustees have warned for several years that the low Medicare 
payment updates authorized by the ACA will lead to serious 
limitations of access over the long term, and create perverse 
incentives in the short term that further distort the health 
care sector. By 2040, approximately half of hospitals, 70 
percent of skilled nursing facilities, and over 80 percent of 
home health agencies will have negative margins, the Medicare 
trustees estimate--an unsustainable situation that will cause 
many providers to withdraw from the program, and will 
unquestionably limit access to quality care for Medicare 
beneficiaries.\282\ Furthermore, the Independent Payment 
Advisory Board [IPAB] established by the ACA must submit 
proposals for further spending reductions if the estimated rate 
of growth in Medicare exceeds GDP plus 1 percent. Without 
congressional action to achieve the same level of savings, the 
IPAB's proposals will automatically take effect. Given these 
pressures, medical providers have acted accordingly, with 
record rates of consolidation among hospitals and physician 
practices. Medicare currently pays approximately 67 percent of 
what private insurance would otherwise pay for hospital 
services. Over time, however, reimbursements for services are 
expected to fall well below providers' overhead costs, such as 
rent, energy, equipment, and the cost of employing medical 
staff. A recent study by the Government Accountability Office 
[GAO] reported that from 2007 through 2013, the number of 
vertically consolidated physician practices nearly doubled, 
from 96,000 to 182,000; this occurred more rapidly in recent 
years across all regions and hospital sizes.\283\
    \282\2017 Annual Report of the Boards of Trustees of the Federal 
Hospital Insurance and Federal Supplementary Medical Insurance Trust 
Funds, July 2017.
    \283\Government Accountability Office, Increasing Hospital 
Physician Consolidation Highlights Need for Payment Reform, December 
    As currently structured, Medicare cannot fulfill the 
promise of health care security for America's seniors. Medicare 
must be saved, strengthened, and secured to restore the trust 
that both current and future retirees will continue to have 
guaranteed access to health care providers, services, and 
treatments. Looking to examples both within the Medicare 
Program and the private sector, positive solutions can be 
discovered that reduce costs while maintaining access to high 
quality care through patient-centered reforms that foster 
competition, restore market forces, expand choices and empower 
individuals, promote innovation, and provide flexibility for 
patients and providers.
    This budget resolution reflects the Medicare Program in the 
direct spending portion of Function 570 (see Table 3). The 
function includes all four program components: Medicare Part A 
Hospital Insurance Program, Part B Supplementary Medical 
Insurance Program, Part C Medicare Advantage Program, and Part 
D prescription drug coverage. For fiscal year 2018, the net 
direct spending totals in the resolution are $587.3 billion in 
budget authority and $587.0 billion in outlays. Over 10 years, 
Medicare direct spending is projected at $8.1 trillion in 
budget authority and $8.1 trillion in outlays.
    The primary authorizing committees--Ways and Means and 
Energy and Commerce--have made a laudable commitment to 
structural Medicare reforms, along with efforts to improve 
transparency and eliminate waste, fraud, and abuse in the 
program.\284\ They have complete authority and discretion to 
write program reforms that meet the fiscal parameters of this 
budget resolution. Nevertheless, they may choose to follow the 
framework outlined below to ensure Medicare's long-term 
sustainability for America's current and future retirees.
    \284\Committee on Ways and Means Committee, Views and Estimates, 14 
February 2017; Committee on Energy and Commerce, Views and Estimates on 
the President's Fiscal Year 2018 Budget, 3 March 2017.

              Illustrative Direct Spending Policy Options

    This budget provides for policy proposals that protect 
seniors' and near-seniors' health care security with a focus on 
the doctor patient relationship as opposed to the 
indiscriminate, mindless cuts brought about as a result of the 
    Every year that difficult choices are deferred, the cost of 
inaction continues to rise and inflicts tremendous fear on 
current recipients who do not view Medicare as a real choice. 
To them, it is truly a matter of life and death. Without 
changes, the accelerated insolvency of the HI Trust Fund will 
only lead to an abdication of the Federal Government's 
responsibility to this population. The budget offers Americans 
true structural reforms that generate savings by allowing 
competition to derive greater efficiencies without the loss of 
access to high-quality care for beneficiaries.

    Enhance Quality and Choice in Medicare. Throughout 
Medicare's history, Washington has been slow to innovate and 
respond to transformations in health care delivery. Meanwhile, 
controlling costs in Medicare's open-ended fee-for-service 
system has proved impossible without limiting access or 
sacrificing quality. This is because policies in the main have 
artificially controlled prices or payments, not costs; in the 
absence of real structural reform, the factors that drive costs 
higher remain. Today, costs continue to grow, seniors continue 
to lose access to quality care, and the program remains on a 
path to bankruptcy. Inaction will not protect Medicare; it will 
only hasten the program's demise.
    Reform aimed at empowering patients--combined with a 
strengthened safety net for the poor and the sick--will not 
only ensure the fiscal sustainability of this program, the 
Federal budget, and the U.S. economy, but will also guarantee 
that Medicare can fulfill the promise of health security for 
America's seniors. Hence, this budget resolution fully supports 
a patient-centered program that enhances quality and choice in 
    Under this program, traditional Medicare--which would 
always be an option available to beneficiaries--and private 
plans providing the same level of health coverage would compete 
for seniors' business, just as Medicare Advantage does today. 
By adopting the competitive structure of Part D, the 
prescription drug benefit, the program would also deliver 
savings for seniors in the form of lower monthly premium costs.
    This improved program assumes a simplified benefit that 
provides comprehensive coverage for all beneficiaries, rather 
than the complex and fragmented structure in place today. 
Currently, beneficiaries must enroll in three separate programs 
to get the same comprehensive coverage. Seniors are required to 
enroll in Part A for hospitalization; coverage is provided 
separately for physician services and prescription medications, 
through the optional Parts B and D, respectively. None of these 
coverage options, however, offers financial protections for 
seniors, such as annual or lifetime limits, and many must sign 
up for an additional supplemental insurance policy called 
MediGap to obtain a fully comprehensive coverage package.
    Today, only Medicare Advantage (Part C) offers seniors the 
opportunity to choose from a selection of comprehensive 
coverage plans. Not surprisingly, Medicare Advantage enrollment 
has tripled in the past decade and currently serves almost 18 
million seniors.\285\ Medicare Advantage also shows higher 
satisfaction rates than traditional Medicare. Beneficiaries 
were especially satisfied with the overall cost of Medicare 
Advantage plans and with the simplified health process compared 
to traditional Medicare.\286\
    \285\Medicare Advantage, The Kaiser Family Foundation, 11 May 2016: 
    \286\Morning Consult, Seniors Love Their Medicare (Advantage), 30 
March 2015:
    The Medicare improvements envisioned in this budget 
resolution would adopt the popular simplified coverage 
structure of Medicare Advantage, and allow seniors greater plan 
choices while reducing costs. It would resemble the private 
insurance market, in which the majority of Americans select a 
single health care plan to cover all their medical needs.
    The enhanced program would also continue to offer a robust 
financial benefit to all beneficiaries. In many ways, the 
benefit provided would mirror the Federal Employees Health 
Benefits [FEHB] Program for Federal employees, retirees, and 
their families. FEHB boasts the widest selection of health 
plans in the country, from which its eight million members may 
choose. Plans offered under the FEHB Program may charge 
different premium amounts, competing for individuals' choices, 
and the government pays a certain percentage--or a defined 
contribution--to help offset the cost of coverage. Similarly, a 
Medicare recipient would choose from an array of guaranteed-
coverage options, including traditional Medicare, for a health 
plan that best suits his or her needs.
    The Federal Government contribution would go directly to 
the plan provider, following the current model under both the 
FEHB Program and Medicare Advantage. Furthermore, the 
government payment would be adjusted so the sick would receive 
more financial assistance if their conditions worsened, and 
lower-income seniors would receive additional support to help 
cover premiums and out-of-pocket costs. Wealthier seniors would 
assume responsibility for a greater share of their premiums.
    Additionally, this enhanced Medicare program would ensure 
affordability by fixing the currently broken system and letting 
market competition work as a real check on widespread waste and 
skyrocketing health care costs--as successfully demonstrated 
through the competitive structure adopted by Medicare Part D. 
More than 70 percent of beneficiaries are currently enrolled in 
the prescription drug benefit, which enjoys extremely high 
satisfaction rates among seniors.\287\ In 2016, nearly 90 
percent reported satisfaction with their coverage, and 80 
percent consider the coverage to be a good value.\288\ 
Similarly, this personalized arrangement puts patients in 
charge of how their health care dollars are spent, requiring 
providers to compete against one another on price and quality.
    \287\The Kaiser Family Foundation, The Medicare Part D Prescription 
Drug Benefit, 13 October 2015:
    \288\Morning Consult, National Tracking Poll, conducted 1-11 July 
2016: http://
    The improvements to Medicare derive from a long history of 
bipartisan reform plans based on the defined contribution 
model, or premium support, with a competitive bidding structure 
to lower costs. The 1999 Breaux-Thomas Commission, the 
Domenici-Rivlin 2010 Report, and the 2011 Wyden-Ryan plan all 
put forward this model of reform as it is designed to ensure 
security and affordability for seniors now and into the 
future.\289\ All three recognize two fundamental truths: the 
current path of Medicare is unsustainable, and it is 
unacceptable for Washington to allow the program to fail 
current or future beneficiaries. Each proposal further 
developed the policy with the intent of preserving Medicare 
over the long term without reducing health care access or 
    \289\National Bipartisan Commission on the Future of Medicare, 
Building a Better Medicare for Today and Tomorrow, 16 March 1999:; Bipartisan Policy 
Center, Restoring America's Future, November 2010: http://
BPC%20FINAL%20REPORT%20FOR%20PRINTER%2002%2028%2011.pdf.; and Senator 
Ronald L. Wyden and Representative Paul D. Ryan, Guaranteed Choices to 
Strengthen Medicare and Health Security for All: Bipartisan Options for 
the Future, 15 December 2011:
    The policy continues to garner bipartisan support today. 
Even former-President Obama's fiscal year 2017 budget proposal 
included a similar reform to introduce a competitive bidding 
structure into the Medicare Advantage program. His proposal 
failed, however, to offer the benefits of more choice and lower 
costs achieved through the competitive bidding structure to all 
    Following these examples, CBO performed an analysis of two 
variations of premium support that established a defined 
government contribution using different formulas. CBO 
determined that a Medicare Program following the premium 
support model that based the contribution level on an average 
of bids submitted by competing plans would result in savings 
for both beneficiaries and the program. Moreover, it would set 
up a carefully monitored exchange for Medicare plans. Health 
plans that chose to participate in the Medicare exchange would 
agree to offer insurance to all Medicare beneficiaries, to 
avoid cherry-picking, and to ensure that Medicare's sickest and 
highest-cost beneficiaries received coverage.\290\ A patient-
centered Medicare program would also adopt these protections to 
guarantee better health, better value, and better choice for 
America's seniors, and allow all those in traditional, fee-for-
service Medicare the same opportunity as new retirees to remain 
there or transition into the improved program beginning in 
    \290\Congressional Budget Office, A Premium Support System for 
Medicare: Analysis of Illustrative Options, 18 September 2013: http://
    This resolution envisions giving seniors the freedom to 
choose plans best suited for them, guaranteeing health security 
throughout their retirement years. Further, it resolves the 
concerns regarding Medicare's long-term sustainability, while 
also lowering costs for beneficiaries. With the adoption of 
patient-centered improvements, this program would preserve the 
positive aspects of traditional Medicare, while modernizing the 
program to reflect the changes to health care delivery in the 
21st century.

    Promoting Personal Digital Advance Care Plans. In keeping 
with expanding patient-centered care, this resolution supports 
the use of readily available advance care plans. Administering 
medical treatment often requires patient consent. When informed 
consent cannot be obtained due to life-threatening emergencies 
or impaired decision-making, precious time is lost in 
determining who has the legal authority to act on behalf of a 
critical patient. Consequently, the patient's wishes may not 
ultimately be fulfilled. Digital advance care plans allow 
individuals to thoughtfully consider their treatment options, 
on their schedules, and with their loved ones--rather than 
making urgent decisions under emergency room pressure, where 
time is of the essence. This resolution respects the patient's 
voice, whatever it says, and supports its primacy in the health 
care delivery process.

    Implement a Unified Deductible and Reform Supplemental 
Insurance. This resolution strengthens the Medicare Program 
through another bipartisan proposal. The outdated and 
fragmented fee-for-service arrangement would be streamlined 
into one benefit, unifying the separate parts of the program, 
that would provide coverage for both hospital and physician 
services. Additionally, the reform would provide common sense 
financial protections for America's seniors and reform 
supplemental insurance policies. This proposal, which was also 
supported by a number of bipartisan commissions including 
Breaux-Thomas, Domenici-Rivlin, and Simpson-Bowles, would allow 
the Medicare benefit to operate more like private health 
insurance coverage.\291\\,\\292\\,\\293\
    \291\National Bipartisan Commission on the Future of Medicare, op. 
cit., 16 March 1999; Bipartisan Policy Center, op. cit., November 2010.
    \292\Bipartisan Policy Center, op. cit. November 2010.
    \293\The National Commission on Fiscal Responsibility and Reform, 
The Moment of Truth, December 2010:
    With this reform, Medicare will have a single, annual 
deductible for medical costs and include a catastrophic cap on 
annual out-of-pocket expenses--an important aspect of the 
private health insurance market to safeguard the sickest and 
poorest beneficiaries that is currently absent from Medicare. 
These reforms build in further protections for beneficiaries 
and for the preservation of the Medicare Program for future 

    Means Test Premiums for High-Income Seniors. Under current 
law, high-income beneficiaries are responsible for a greater 
share of the premium costs for Medicare's Part B and Part D 
programs, or the optional coverage for physician services and 
prescription drug coverage respectively. Medicare Advantage 
enrollees receiving coverage for these benefits similarly 
assume a share of the costs. Parts B and D must account for all 
additional program costs net of beneficiary premiums from 
general revenues because these components of the Medicare 
Program do not have a dedicated income source like the 2.9-
percent payroll tax that funds most of the Part A benefits. 
Consistent with several bipartisan proposals, including former-
President Obama's fiscal year 2017 budget, this resolution 
assumes additional means testing of premiums in Medicare Parts 
B and D for high-income seniors, including full responsibility 
of premium costs for individuals with annual income exceeding 
$1 million.

    Equalize the Eligibility Age with Social Security. One of 
the Nation's greatest achievements of the 20th century was the 
dramatic increase in the average life expectancy. As Americans' 
health improves, extending their lives, many enjoy the benefits 
of employment later in life. To further ensure Medicare's long-
term sustainability, this resolution recommends a gradual 
increase of the Medicare eligibility age to correspond with 
that of Social Security.

    Streamline Support for Graduate Medical Education. All 
Americans benefit from a strong physician workforce. Since the 
creation of the Federal health care programs, Federal funds 
have supported physician training. The congressional report 
from the Social Security Amendments of 1965 comments on the 
need for Federal funds to support hospitals in the education 
and training of physicians, nurses and other medical personnel, 
``until the community undertakes to bear such education costs 
in some other way * * * ''\294\ Instead, the level of Federal 
support has grown over time, and the complexity of the payment 
formulas linked to a hospital's Medicare inpatient volume has 
made accountability and oversight next to impossible. The 
financing structure also props up an antiquated system that 
fails to recognize the rapidly changing care delivery model and 
the demographic shifts within the population--meaning the 
number of physicians is insufficient and cannot meet the 
Nation's needs either in terms of specialty or geography. 
Distributing funds directly to hospitals favors traditional 
acute care institutions and discourages physician training in 
various clinical or lower cost settings of care, including 
children's hospitals, safety net hospitals, ambulatory surgical 
centers, and so on.\295\ The call for reform to enhance 
accountability, transparency, and flexibility in graduate 
medical education has been advanced by the Institute of 
Medicine, the Medicare Patient Advisory Commission, the 
American Enterprise Institute and the Heritage Foundation.\296\ 
This resolution recommends that support for medical education 
should accurately reflect the costs of training future 
physicians and be streamlined into a single payment, providing 
greater freedom and flexibility to encourage teaching 
institutions and States to develop innovative approaches to 
medical education.
    \294\Committee on Finance, U.S. Senate, Social Security Amendments 
of 1965 (H.R. 6675), Report to the Committee on Finance, U.S. Senate 
(Rept. 404), 30 June 1965:
    \295\Institute of Medicine of the National Academies, Graduate 
Medical Education that Meets the Nation's Health Needs, 29 July 2014:
    \296\Ibid.; Medicare Payment Advisory Commission, Does it Cost More 
to Train Residents or to Replace Them?, September 2013: http://
sept13_residents_gme_contractor.pdf?sfvrsn=0; American Enterprise 
Institute, Improving Health and Health Care: An Agenda for Reform, 
December 2015:
Improving-Health-and-Health-Care-online.pdf; John O'Shea, Reforming 
Graduate Medical Education in the U.S., The Heritage Foundation, 29 
December 2014:

    Establish an Uncompensated Care Fund. Since 1986, Medicare 
has provided additional financial support to hospitals that 
serve a significant population of low-income patients in the 
form of a disproportionate share hospital [DSH] payment. This 
funding was intended to ensure access for low-income patients 
and those unable to afford the costs of care. Hospitals, in 
addition to receiving a Medicare DSH payment, may also receive 
a Medicaid DSH payment so long as they meet certain 
requirements. This has led to some States engaging in improper 
fund transfers in order to gain additional Federal support of 
State Medicaid budgets through the Federal Medical Assistance 
    Additionally, limiting DSH payments to only hospitals fails 
to recognize the abundance of uncompensated care that occurs 
outside of the hospital setting. Therefore, this resolution 
recommends converting the separate DSH payments into a single 
flexibility fund to support uncompensated care, to more 
appropriately and equitably distribute funds in a targeted 
manner that recognizes all providers serving low-income 

    Reform Medical Liability Insurance. This resolution also 
advances the common sense curbs on abusive and frivolous 
lawsuits contained in H.R. 1215, the ``Protecting Access to 
Care Act of 2017'', as passed by the House on 28 June 2017. 
Medical lawsuits and excessive verdicts increase health care 
costs, result in reduced access to care, and contribute to the 
practice of defensive medicine. When mistakes happen, patients 
have a right to fair representation and fair compensation. The 
current tort litigation system, however, too often serves the 
interests of lawyers while driving up costs due to expenses 
associated with the practice of defensive medicine. The costs 
of defensive medicine are often overlooked, but add a 
considerable burden to overall health care spending. According 
to a study published in 2010--apparently the most comprehensive 
available--more than 30 percent of health care costs, or 
approximately $650 billion annually, were attributable to 
defensive medicine.\297\ Even if the costs are only a fraction 
of this projection, such expenses are unnecessary and 
unsustainable for the Medicare Program and America's seniors. 
Therefore, this resolution supports several changes to laws 
governing medical liability.
    \297\Jackson Healthcare, Physician Study: Quantifying the Cost of 
Defensive Medicine, 2010:

                          AND RELATED PROGRAMS

                   Function Summary: Direct Spending

    The center of all health care policy assumed in this budget 
resolution is the patient. This requires placing the emphasis 
on real Americans' health needs--not on Washington's ideas 
about what those needs may be. Health care in America is a 
complex and dynamic set of interactions that employs more than 
$3 trillion of the Nation's resources and represents about one-
fifth of the economy; it is a sector in which the participants 
themselves--patients, care-providers, and insurers--are clearly 
best suited to establish effective and efficient means of 
delivering such a uniquely valued service.\298\
    \298\Centers for Medicare and Medicaid Services, National Health 
Expenditures 2015 Highlights:
    Yet for decades, Federal policymakers have relentlessly 
sought to systematize health care to meet their ideological and 
bureaucratic aims. When the Federal Government sets the 
standards of health care, or determines the required contents 
of health coverage--and it cannot do one without the other--
this necessarily limits the options available to consumers, 
suffocates innovation, and spikes costs. Such an approach must 
assume that a population of 323 million--living in a wide range 
of geographical and climatic settings, and possessing diverse 
cultural backgrounds and values--all require roughly the same 
set of health care services. The government's increasing 
imposition distorts the medical market, drives up prices, 
requires tedious regulations, and undermines Americans' liberty 
in this most important and intimate realm: their health. The 
House of Representatives recently passed the ``American Health 
Care Act'' [AHCA] in a critical first step toward restoring 
health decisions to patients.\299\
    \299\H.R. 1628, the ``American Health Care Act of 2017'', 115th 
Congress: 1st Session, 20 March 2017.
    Washington's progressively expanding involvement in the 
health care sector stems from the belief that government can 
centrally manage the entirety of the Nation's diverse, personal 
health needs. This notion has led to the creation of Medicare 
(discussed previously), Medicaid, and the Affordable Care 
Act.\300\ Of these, Medicaid constitutes the majority of direct 
spending in this category (Function 550 in Table 3). The totals 
for fiscal year 2018 are $517.8 billion in budget authority and 
$490.0 billion in outlays. Over 10 years, the budget projects 
direct spending of $5.1 trillion in budget authority and $5.0 
trillion in outlays for all components of this function 
    \300\The Affordable Care Act consists of the two related measures 
enacted in March 2010 that constituted the health care legislation: the 
Patient Protection and Affordable Care Act (Public Law 111-148), and 
the Health Care and Education Reconciliation Act of 2010 (Public Law 
    The Affordable Care Act has led to higher insurance 
premiums and deductibles; has limited consumers' choices of 
doctors and health plans; has deprived millions of the coverage 
they had; and has imposed taxes aimed at compelling people to 
purchase health coverage they do not want. Insurance markets 
are collapsing, and total national health care spending is 
projected to more than double during the next three decades.
    The ACA established a system of four tiers of insurance 
plans--described as bronze, silver, gold, and platinum--that 
forces insurers to construct their coverage plans according to 
the demands of Washington, not the marketplace. These tiers 
mandate the actuarial value of benefits insurers must cover in 
their plans rather than letting insurers design plans for a 
broader variety of patient needs--thus sharply restricting the 
available choices. The AHCA unravels this tier system by 
repealing the Obamacare actuarial value requirements. This 
budget supports the sort of bold reform that infuses the 
insurance market with the flexibility that will lead to greater 
patient choice and higher quality care.
    Obamacare's resulting limited options are so unsatisfying 
that enrollments under the law are about half of what was 
projected when it was enacted, and 19.2 million Americans have 
chosen to face its individual mandate tax penalty rather than 
buying coverage they did not want.\301\ To the extent Obamacare 
may have expanded health coverage, it has not enhanced access 
to affordable health care. Due to higher premiums and 
deductibles, many who have obtained ACA coverage cannot use it 
because their out-of-pocket medical expenses are too high. 
Recent reports showed that 50 percent of Obamacare customers 
were cutting back on care to help manage their health costs. 
This compares to 33 percent among the general insured 
population.\302\ In other words, enrollees cannot afford to use 
their Affordable Care Act coverage.
    \301\Internal Revenue Service Commissioner John A. Koskinen updated 
members of Congress regarding 2016 tax filings related to Affordable 
Care Act provisions, 9 January 2017:
    \302\GfK, ``To Reduce Health Costs, 50% of ACA Exchange Customers 
Are Cutting Back on Care--GfK Study,'' 27 October 2016: http://
    The AHCA serves as a fundamental transformation of health 
care policy toward a better strategy for true reform. To put 
this another way: ``It makes no sense for one Federal agency to 
dictate the contents of every American's health insurance 
plan.''\303\ The ``American Health Care Act'' unravels 
Obamacare's tier system by repealing its actuarial value 
requirements. Thus the AHCA removes a bureaucratically imposed 
design from the health care market.
    \303\The Speaker's Health Care Reform Task Force, A Better Way: Our 
Vision for a Confident America--Health Care, 22 June 2016, p. 12.
    A key component of this strategy involves the restoration 
of federalism in health care--giving States more flexibility to 
handle health care arrangements for their distinctive 
populations. ``States have been in the business of regulating 
health insurance for decades. They should be empowered to make 
the right tradeoffs between consumer protections and individual 
choice, not regulators in Washington.''\304\ Under the AHCA, 
States will have the opportunity to assist high-risk 
individuals or fund innovation programs to care for their 
unique patient populations.
    \304\A Better Way op. cit., p. 12.
    The ``American Health Care Act'' provides a portable, 
advanceable tax credit that evolves with an individual's health 
care needs. The legislation's reforms will make more options 
available for individuals and families, who will be free to 
choose the health plan that best meets their needs. Protections 
and access to care for individuals with pre-existing conditions 
will continue. Further, by increasing the amount of money that 
can be placed in Health Savings Accounts, coupled with other 
reforms, the policies will allow individuals and families to 
save and spend their health care dollars the way they want.
    The analysis by the Congressional Budget Office and the 
Joint Committee on Taxation [JCT] projects stability in the 
non-group health insurance market. These agencies estimate 
grants from the AHCA's Patient and State Stability Fund would 
exert substantial downward pressure on premiums in the nongroup 
market and would help encourage insurers' participation in the 
market.''\305\ Although the new tax credits would be structured 
differently from current subsidies, the analysis notes, the 
other changes would ``lower average premiums enough to attract 
a sufficient number of relatively healthy people to stabilize 
the market.''\306\ Further, CBO and JCT agree the Federal 
Invisible Risk Sharing Program ``would result in lower premiums 
for health insurance coverage in the nongroup market and would 
encourage insurers to continue to sell insurance in that 
market.''\307\ In addition to these efforts to restore 
patients' rights and inject stability into the now-precarious 
health insurance market, the ``American Health Care Act'' will 
reduce the Federal deficit by $118.7 billion, if enacted.\308\
    \305\Congressional Budget Office, ``Cost Estimate for the `American 
Health Care Act', as passed by the House of Representatives on May 4, 
2017,'' 24 May 2017:
2017-2018/costestimate/hr1628aspassed.pdf, p. 14.
    \306\Ibid., p. 5.
    \307\Ibid., p. 14.
    This budget supports the sort of bold reform that infuses 
the insurance market with the flexibility that will lead to 
greater patient choice and higher quality care. The 
resolution's approach to health care builds on the ``American 
Health Care Act'', and revolves around the following goals:

      Lowering costs;

      Providing more choices;

      Restoring patient control; and

      Ensuring universal access to quality care.

    The illustrative options for health care outlined in this 
report follow this guidance, while allowing for a stable 
transition that does not disrupt people's current coverage, or 
the insurance market.
    Because the AHCA removes the individual mandate penalty and 
enables people to choose coverage that best suits their 
individual needs--or, as the case may be, to choose not to have 
coverage at all--a greater number of Americans will elect to 
have coverage outside Obamacare's restrictive definitions. Many 
Americans will choose catastrophic plans, mini-medical plans, 
expanded Health Savings Accounts, or as-yet-undefined plans 
purchased with the new AHCA tax credits. CBO does not count 
these in its model for ``comprehensive'' health plans, and 
therefore treats individuals who might purchase them as 
uninsured. This is a key reason for the decline in coverage, 
relative to current law, CBO projects for the ``American Health 
Care Act''. The analysts simply do not account for alternative 
forms of legitimate insurance that may arise in a less 
restricted market
    CBO's capacity for estimating coverage, however, is an 
emerging field. The agency is limited in its ability to predict 
behavior and therefore the number of people truly covered by a 
range of insurance options. CBO's coverage estimates are narrow 
in scope, and cannot account for the variety of plan options 
detailed in this section. CBO itself considers this a 
``challenge,'' and explains the problem in two separate blog 
posts that the analysts cite in their multiple iterations of 
the score for the ``American Health Care Act''.\309\ Even so, 
CBO predicts that ``more people who would otherwise be 
uninsured would enroll in nongroup coverage in states making 
changes to regulations, because of the resulting lower 
    \309\See: Congressional Budget Office, ``Challenges in Estimating 
the Number of People With Nongroup Health Insurance Coverage Under 
Proposals for Refundable Tax Credits'', Blog Post, 20 December 2016:, and, Congressional Budget 
Office, ``How Does CBO Define and Estimate Health Insurance Coverage 
for People Under Age 65?'', Blog Post, 20 December 2016: https://
    \310\CBO Cost Estimate for AHCA, 24 May 2017, p. 31.
    Another major policy area reflected here--the largest 
component of Function 550--is Medicaid. Medicaid is a crucial 
component of the American safety net. It provides a fundamental 
level of security for low-income Americans who struggle with 
long-term illnesses and disabilities. These individuals are 
unable to perform substantial gainful activities; they require 
society's help. Medicaid is often the only option for people in 
these difficult circumstances.
    Medicaid is also a vital program for low-income children, 
parents, pregnant women, and seniors. The social safety net 
should catch these individuals when they fall. On the other 
hand, for those who are able-bodied, it should serve as a 
springboard to help them get back up. For many, though, 
Medicaid's promises are empty, its goals are unmet, and its 
dollars are wasted. Sick individuals cannot get appointments, 
and new beneficiaries cannot find doctors, making Medicaid 
synonymous with poor access and little care. Medicaid patients 
often have a hard time accessing care at all. A survey in The 
Washington Post found that fewer than one out of every two 
physicians now accept Medicaid as a form of coverage.\311\
    \311\Jenny Gold, Wonkblog, ``In cities, the average doctor wait-
time is 18.5 days,'' The Washington Post, 29 January 2014: https://
    In fact, according to a study conducted by a team of 
renowned economists from the Massachusetts Institute of 
Technology, Harvard, and Dartmouth, Medicaid's value to its 
recipients is significantly lower than the government's 
spending on the program.\312\ In addition, doctors who provide 
services to Medicaid patients are severely under-
reimbursed,\313\ a problem made worse by adding more 
individuals to the system.\314\ GAO found that provider 
payments for Medicaid are about 30 percent to 65 percent lower 
than what private insurers pay providers.\315\ This contributes 
to the difficulty Medicaid patients have in finding a doctor. 
Without reform, Medicaid will fail to deliver on its promise of 
providing a sturdy health care safety net for the Nation's most 
    \312\Amy Finkelstein, Nathaniel Hendren, and Erzo F.P. Luttmer, The 
Value of Medicaid: Interpreting Results from the Oregon Health 
Insurance Experiment, June 2015, pp. 2, 40, 41: http:// Furthermore, the study found that 
Medicaid does not have a ``statistically significant impact on 
mortality or physical health measures'' for recipients.
    \313\The Henry J. Kaiser Family Foundation, ``Medicaid-to-Medicare 
Fee Index,'' Accessed 8 January 2016:
    \314\Congressional Budget Office, The Budget and Economic Outlook: 
2017 to 2027, Underling Baseline Projections for Medicaid. In 2016, the 
average number of people enrolled in Medicaid, on a monthly basis, was 
76 million, making Medicaid the largest health care provider in the 
    \315\Government Accountability Office, GAO-14-533, ``Medicaid 
Payment: Comparisons of Selected Services under Fee-for-Service, 
Managed Care, and Private Insurance,'' July 2014.
    Furthermore, Medicaid spending is not sustainable. Spending 
in the program's first 50 years far exceeded expectations, and 
the trend is projected to continue in the future. According to 
the CBO, since 1980, Medicaid spending has increased by more 
than 2,600 percent, and by 300 percent of gross domestic 
product. In just the past 15 years, Medicaid spending has 
increased by 200 percent, or 66 percent as a share of GDP. Last 
year alone, Medicaid spending grew by $19 billion; this single 
year's increase was more than the entire Federal share of 
Medicaid spending for the program in 1980, at which time the 
cost was $14 billion. The CBO projects Federal spending on this 
program to be $389 billion in fiscal year 2017. This amount is 
expected to grow by 67 percent over the next 10 years, reaching 
$650 billion by fiscal year 2027.\316\
    \316\Congressional Budget Office, op. cit., p. 13, and p. 96.
    This number, however, masks the full cost of Medicaid, 
because it represents only the Federal share of spending. 
States also pay a significant portion of Medicaid costs, and 
their spending on the program is expected to follow these 
upward trends as well. According to the most recent data 
available from the Centers for Medicare and Medicaid Services, 
total State Medicaid spending is expected to rise from about 
$212.5 billion in fiscal year 2016 to $369.8 billion in fiscal 
year 2025.\317\ This means that at the end of the 10-year 
window, taxpayers will spend about $1 trillion annually on 
Medicaid through Federal and State expenditures. According to 
the CMS Actuary's most recent annual report, by fiscal year 
2025, Medicaid is projected to have 81.6 million 
    \317\Office of the Actuary, Centers for Medicare and Medicaid 
Services, 2016 Actuarial Report on the Financial Outlook for Medicaid. 
This reflects the most recent data available. The 2017 Actuarial report 
will be released this summer.
    \318\Ibid., p.21.
    Medicaid's current funding structure (the Federal Medical 
Assistance Percentage [FMAP]) creates perversely encourages 
States to expand the program while providing little incentive 
to save. For every dollar a State government spends on 
Medicaid, the Federal Government traditionally has paid an 
average of 57 cents. Expanding Medicaid coverage during boom 
years is tempting for States because they pay less than half 
the cost. Conversely, there is little incentive to restrain 
Medicaid's growth because State governments only save an 
average of 43 cents for every dollar worth of coverage they 
rescind. The program's expansion under Obamacare exacerbates 
this challenge, with the Federal Government covering 95 percent 
of every dollar spent on a State's additional Medicaid 
population in 2017.\319\ CBO estimates former President Obama's 
health care law will increase Federal spending for Medicaid and 
State Children's Health Insurance Program [SCHIP] by more than 
$1 trillion over the 2018-2027 period. This sharp increase is 
due to the millions of new beneficiaries the Affordable Care 
Act drives into these programs.
    \319\This percentage began at 100 percent and will decrease over 
time, falling to 90 percent of the costs for a State's additional 
Medicaid population in 2020 and thereafter.
    In contrast, the ``American Health Care Act'' seeks to 
minimize the strain on the Medicaid Program to preserve 
resources for those most in need. Currently, Medicaid subjects 
enrollees to second-rate care--if they can get care at all. The 
expansion under the ACA only served to exacerbate this problem, 
as well as to discourage work and self-sufficiency.
    The AHCA's Medicaid reforms provide greater State 
flexibility while modernizing the program for the 21st Century. 
Significant reforms will ensure resources are available for the 
vulnerable populations Medicaid is intended to serve: children, 
pregnant women, the aged, and the disabled. A reformed payment 
structure will give States the latitude and control to meet 
their varied needs. Indeed, even after AHCA's allegedly deep 
``cuts'' in Medicaid, the program's spending would continue to 
grow, rising from $389 billion in 2017 to $466 billion in 2026 
(the final year of CBO's most recent cost estimate). Federal 
Medicaid spending will still total $4.09 trillion over the 10-
year period, even after reform. What AHCA will do is slow the 
growth of Medicaid spending, making the program sustainable for 
the long term so it can protect the most vulnerable in American 
    While the AHCA presents a promising change of course for 
America's health care sector, this budget envisions additional 
steps toward a fully patient-centered system. Congress must 
pass further legislation, and the administration must implement 
significant regulatory reform, to achieve this goal.

              Illustrative Direct Spending Policy Options

    For all the reasons given above, the budget resolution 
calls for major reforms of the Medicaid Program and further 
steps in the repeal and replacement of the Affordable Care Act. 
To clear the way for patient-centered health care in America, 
the budget supports the AHCA and efforts to continue down the 
path it started.
    Americans should have more choices in coverage options are 
available so they can pick a plan that best fits their unique 
health care needs. A critical initial action is eliminating 
Obamacare's burdensome one-size-fits-all mandates and 
regulations that are driving up the price of insurance and 
limiting options. Encouraging a robust, competitive insurance 
market would reduce costs, restore flexibility, and provide 
Americans more options to choose the coverage they want for 
themselves and their families.
    Those who have a severe injury or illness should also have 
access to quality and responsive care. To guarantee affordable 
coverage, patient-centered health care would provide 
protections for patients with pre-existing conditions, reward 
those who maintain health coverage, and give States--who are 
better equipped to respond to the needs of their communities--
more control over regulating insurance. Finally, patient-
centered health care must break down costly and burdensome 
barriers to innovation so that life-saving technologies and 
treatments are reaching patients in need. By moving health care 
into the 21st Century, America can build on the remarkable 
advancements that have already been made, which make delivery 
of care more effective, efficient, and affordable.
    These principles--affordability, accessibility, quality, 
choices, innovation, and responsiveness--provide the roadmap to 
health care that actually works for patients and providers. 
They promote a responsive network that puts health care 
decisions in the hands of individuals, families, and their 
doctors, not Washington. The budget resolution includes a 
policy statement that describes in greater detail the contours 
of such a patient-centered approach.
    The House committees responsible for the program changes in 
these areas are Energy and Commerce, Ways and Means, Education 
and the Workforce, Judiciary, Natural Resources, House 
Administration, and three Appropriations Subcommittees: 
Agriculture, Rural Development, Food and Drug Administration 
and Related Agencies; Labor, Health and Human Services, 
Education, and Related Agencies; and Legislative Branch. These 
panels have full authority over the programs in their 
jurisdictions; they will determine the exact parameters of 
structural Medicaid reform, as well as those for other policies 
flowing from the fiscal assumptions in this budget resolution. 
Nevertheless, meaningful Medicaid reform and other measures to 
slow the growth of Federal spending, while also providing 
recipients with a benefit that helps improve health outcomes, 
are critical. One set of potential approaches is outlined 


    Repeal the Remainder of the ACA and Repair Its Damage. This 
budget encourages additional action--through both 
administrative and legislative channels--to repair the market 
damage and patient suffering caused by the ACA. The Obamacare 
legislation contains more than 1,400 instances in which it 
grants the Department of Health and Human Services broad 
discretion in determining Federal health care policy. Apart 
from subjecting individuals' medical care to the dictates of 
government bureaucrats, this constitutes a dangerous expansion 
of the administrative state. The budget supports a rollback of 
the vast regulatory authority granted to the Executive Branch. 
Such a rollback would likely promote economic growth as well as 
patient choice.
    The ACA expanded Washington bureaucracy through a number of 
new programs. Many of these programs either duplicated existing 
efforts or expend taxpayer dollars with no accountability. 
Still others created new programs exemplifying the ideology of 
``Washington knows best.'' The Prevention and Public Health 
Fund, though intended to support prevention and public health 
activities, provided the administration with access to $15 
billion that could be accessed without restraint, and was 
raided to supplement the costly ACA exchanges.
    The AHCA eliminates the Prevention and Public Health Fund, 
but there are additional similarly problematic programs. For 
example, Obamacare established the Patient-Centered Outcomes 
Research Institute to study the effectiveness of various 
medical treatments. It imposes a $2 fee for every covered life 
the epitome of bureaucracy in health care determining the cost-
benefit of treatments for patients. The Centers for Medicare 
and Medicaid Innovation [CMMI] presents another example: CMMI 
was designed to test new payment models in Medicare and 
Medicaid, but the Obama Administration interpreted its 
authority beyond the ability to ``test'' payment models and 
announced it will ``mandate'' untested payment models that may 
adversely affect quality of care for Medicare and Medicaid 
patients. In the new administration, HHS Secretary Price has 
signaled his intent to restore the CMMI program to its original 
    The most egregious program created under the Affordable 
Care Act, however, is the Independent Payment Advisory Board, a 
panel of 15 unelected, unaccountable bureaucrats charged with 
making coverage decisions on Medicare to decrease program 
spending levels without the authority of Congress.
    Obamacare's failures are not mere glitches in an otherwise 
smooth-running operation. They are the predictable and 
inevitable result of a program that remains profoundly and 
fundamentally flawed. For all these reasons, this budget calls 
for full repeal of the Affordable Care Act, building on the 
efforts of the ``American Health Care Act''.
    As mentioned earlier, however, repealing Obamacare is only 
the first step. The more important effort is to rethink health 
care fundamentally--to shed the arrogant illusion that 
Washington bureaucrats and technicians can somehow control and 
manage the many moving parts that interact to create what is 
known as health care in America. Instead of trying to box this 
immensely valuable service into an homogenous, government-run 
system, policymakers should enlist the creativity of all the 
participants--and also open the door to innovators from outside 
the field, who may be able to deliver unexpected insights--and 
reform health care from the ground up. This should start from 
the most fundamental relationship in medicine: the one between 
the patient and the doctor.

                           MEDICAID AND SCHIP

    Repeal the Medicaid Expansion under the Affordable Care 
Act. The ACA's Medicaid expansion also binds the hands of local 
governments in developing solutions that meet the unique needs 
of their citizens. Obamacare exacerbates the already crippling 
one-size-fits-all enrollment mandates that have resulted in 
below-market reimbursements, poor health care outcomes, and 
restrictive service availability.
    The ACA created major expansions in the Medicaid Program 
beginning in 2014. As noted previously, the Federal Government 
now pays a significantly larger share of the Medicaid expenses 
for individuals who are newly eligible for Medicaid due to the 
ACA, dramatically increasing Federal spending. Newly eligible 
beneficiaries also add pressure to already-strained State 
budgets, drawing limited resources away from the most 
vulnerable populations. According to CBO, approximately 12 
million new individuals are enrolled in Medicaid under the ACA 
in 2017; this number is expected to grow to 17 million 
individuals by 2027 if the law is not reformed.\320\
    \320\Congressional Budget Office, Federal Subsidies Under the 
Affordable Care Act for Health Insurance Related to the Expansion of 
Medicaid and Nongroup Health Insurance: Tables from CBO's January 2017 
Baseline, January 2017:
    While the AHCA begins reforming the Medicaid expansion, it 
allows States the option of continuing the expanded program for 
individuals up to 138 percent of the Federal Poverty Level 
[FPL]. The budget calls for repealing the ACA's Medicaid 
expansions. While it supports the AHCA's policy not to remove 
from the rolls anyone currently on the program, it does not 
support adding any new enrollees above the poverty line.

    Refocus Medicaid Resources on the Truly Needy. The Federal 
Government and States share the cost of Medicaid, with the 
share of each derived from the FMAP formula.\321\ This formula 
provides for a higher reimbursement rate to States with a lower 
per capita income, and a lower reimbursement rate for States 
with a higher per capita income.\322\ To achieve this, a 
State's per capita income is compared to the National per 
capita income. As such, the Federal share of spending varies 
from State to State.\323\
    \321\Section 1905(b) of the Social Security Act.
    \322\The statutory formula is as follows:
    FMAPState = 1--((Per Capita IncomeState)\2\/
(Per Capita IncomeU.S.)\2\ * 0.45)
    \323\The FMAP discussed in this section refers to the traditional, 
or base, FMAP. For many populations, the FMAP rate is higher (for 
example, due to the ACA expansion or enhanced FMAP additions for select 
groups such as SCHIP enrollees or prisoners).
    Medicaid continues to grow at an unsustainable rate and 
contributes to the ballooning budget deficit. As such, Congress 
must make adjustments to ensure that taxpayer dollars are spent 
with prudence--that is, that dollars are spent in a way that 
they do the most good for the most people. Additionally, for 
States to gain greater flexibility in designing their Medicaid 
programs, they should be required to raise their stake in the 
programs' successes.
    Under Obamacare's Medicaid scheme, the Federal Government 
reimburses States at a higher FMAP rate for enrollees above the 
poverty line than for those below it. This means that an able-
bodied, working-age adult without dependents receives more 
taxpayer dollars for Medicaid than a sick, disabled child well 
below the poverty line.
    For example, an adult with no physical or mental obstacles 
who has an income above the poverty line will bring the State a 
95-percent FMAP in 2017, but a needy child below the poverty 
line could earn only a 50-percent FMAP.\324\ The scheme was 
created as a perverse incentive under the ACA to entice States 
into adding more people to their Medicaid rolls, rather than 
finding ways to lift them out of poverty or near-poverty. With 
limited Federal resources and a growing strain on taxpayers, 
such a system is unsustainable--in addition to being unfair to 
those Medicaid was intended to serve. This disproportionate 
reimbursement incentive flagrantly abandons the most vulnerable 
in favor of advancing an ideology of government dependency.
    \324\This traditional match rate is dependent on the State, as it 
is calculated based on each State's per-capita income. The statutory 
range is currently between 50% and 85%.
    This budget encourages reinserting parity into the Medicaid 
FMAP structure. The budget encourages returning for higher-
earning Medicaid enrollees to the traditional FMAP. By 
restoring enrollees above the poverty line to the same match 
rate as those below the poverty line, the Federal Government 
removes the incentive for States to push resources away from 
the most impoverished. This would also preserve access to 
Medicaid for those most in need of society's help.

    Put Medicaid on a Budget. The budget resolution supports 
the AHCA's model for transforming Medicaid from an open-ended 
benefit back to a quality safety net for the Nation's most 
vulnerable. States would have the option of choosing one of two 
possible designs: the per capita cap allotment or the optional 
block grant.
    The AHCA strengthens and secures Medicaid by instituting a 
per capita cap, which converts the Federal share of Medicaid 
spending into finite funding amounts. The allotment is paired 
with reforms that allow States to design programs for their 
Medicaid enrollees, such as the ability to define the essential 
health benefits Medicaid must cover. Governors and State 
legislatures are closer to patients in their States and know 
better than Washington bureaucrats where there are unmet needs, 
as well as opportunities to cut down on waste, fraud, and 
    Even with the limited flexibility of Medicaid's current 
waiver program, States have developed innovative reforms that 
produce cost savings and quality improvements. For example, the 
Healthy Indiana Plan (implemented prior to the ACA) provided 
that State's residents who did not qualify for Medicaid with 
access to health benefits such as physician services, 
prescription drugs, inpatient and outpatient hospital care, and 
disease management--all without additional funding. Other 
States could alter eligibility requirements, for example, or 
move able-bodied adults off the Medicaid rolls. The savings 
generated could then be redirected toward additional 
protections for the most vulnerable populations, or to other 
State health care priorities.
    All States should have the flexibility to adapt their 
Medicaid programs--to design their benefit packages in a way 
that best meets the needs of their State populations; to 
promote personal responsibility and healthy behaviors; and to 
encourage a more holistic approach to care that considers not 
only Medicaid beneficiaries' health conditions, but also their 
economic, social, and family concerns.
    The per capita cap program design ensures protections for 
the most vulnerable by providing States with designated funding 
for those persons who are truly in need of care and support. 
Based on the four main eligibility categories as currently 
defined by the Federal Government in the Medicaid Program--the 
elderly, the blind and disabled, nondisabled adults, and 
children--a per-person payment amount would account for the 
average cost of care, per enrollee, in each of these four 
principal categories, and would be indexed to a predetermined 
growth rate. The Federal Government would then provide Medicaid 
funds to the States based on the total number of enrollees in 
category. This accounts for the variation in spending among the 
four different categories, helping target funds to the most 
vulnerable. Further, Federal law would provide the basic 
template for the program to provide accountability for the 
funds and help root out waste, fraud, and abuse.\325\
    \325\Committee on Oversight and Government Reform, Uncovering 
Waste, Fraud, and Abuse in the Medicaid Program, staff report 25 April 

    Promote State Flexibility. The optional block grant would 
encourage State innovation. Through this arrangement, both the 
Federal Government and the States would have budgetary 
certainty, which would create strong incentives for the States 
to manage the Federal funding wisely, while reducing 
costs.\326\ Any spending that exceeded the amount provided to 
the State would have to be financed by the State. Conversely, 
the funding provided to States would not be reduced if they 
found innovative ways to reduce Medicaid costs. Under a 
traditional State Flexibility Fund, States could, for example, 
use money saved to support other welfare programs, including 
Temporary Assistance for Needy Families, Supplemental Security 
Income, and the Supplemental Nutrition Assistance Program (food 
stamps) if the need was greater in those areas. This option 
provided by the AHCA restores State prerogatives and increases 
the ability of States to tailor programs for their vulnerable 
    \326\Letter from Keith Hall, Congressional Budget Office Director, 
to the Honorable Diane Black, Chairman of the U.S. House Committee on 
the Budget, 17 March 2017:
    If enacted, these ``American Health Care Act'' Medicaid 
reforms would improve the health care safety net for low-income 
Americans by giving States the ability to offer their Medicaid 
populations more options and better access to care. This kind 
of reform would ease the fiscal burdens on States. It also 
would provide States budget certainty, contribute to the long-
term stabilization of the Federal Government's fiscal path, and 
preserve the Medicaid safety net.
    The budget also supports legislative efforts to promote 
State flexibility in Medicaid beyond structural reform. For 
example, States could be enabled to set reasonable cost-sharing 
standards for able-bodied adults. The Federal Government could 
improve program management and empower States simultaneously 
through a variety of other tools, including: allowing States to 
use contractors in eligibility processing, giving States 
flexibility regarding non-emergency transportation use, and 
promoting better oversight and transparency of the State-
managed portions of Medicaid.

    Apply a Work Requirement to Medicaid. The budget seeks to 
promote self-sufficiency through a work requirement for able-
bodied adults enrolled in Medicaid. Such a proposal would aim 
to reinforce and strengthen the policy of the ``American Health 
Care Act''.
    Under the policy, where applicable, able-bodied, working-
age adults would remain enrolled in Medicaid only if they were 
actively seeking employment, participating in an education or 
training program, or doing community service. The policy would 
support Americans who are trying to get back on their feet 
while preserving resources for those who need help most.
    Work provides a source of income and self-sufficiency. It 
also has been demonstrated as a valuable source of self-worth 
and dignity for individuals. In fact, employment and self-
esteem are so closely tied together that a Gallup-Healthways 
Well-Being Index found ``Unemployed adults and those not 
working as much as they would like are about twice as likely as 
Americans who are employed full time to be depressed.''\327\ 
Applying a work requirement to Medicaid would assist more 
people in transitioning out of poverty while also enhancing 
their self-respect, their self-reliance, and their courage and 
determination--much like what occurred with the highly 
successful Temporary Assistance for Needy Families Program as 
established in 1996.
    \327\Alyssa Brown and Kyley McGeeney, In U.S., Employment Most 
Linked to Being Depression-Free, Gallup, 23 August 2013: http://
    Under this option, the policy would apply to Medicaid 
beneficiaries who are able-bodied, non-elderly adults without 
dependents. For children in foster care or living with 
relatives, the policy would treat non-parent custodians as 
parents in determining dependent status. The policy also would 
exclude pregnant women from the requirement--and provide a 
postpartum exemption period of at least 62 days (nine weeks) to 
cover mothers who suffer a miscarriage, whose infant dies 
during or shortly after birth, or who place their child with an 
adoptive or foster family.
    Under such a policy, enrollees could be expected to work 30 
hours per week, with 20 of the 30 hours attributable to ``core 
work activities.'' Core activities would be defined as: private 
or public sector employment; work experience; on-the-job 
training; job-search or job-readiness assistance program 
participation; community service; or vocational training and 
education. Noncore activities that might be counted as the 
remaining 10 hours would be defined as: job-skills training, 
job-related education, or satisfactory attendance at high 
school or in an equivalent course.
    This policy would promote State flexibility by allowing 
States to define the criteria for qualifying community service, 
job-search and training programs, and unpaid work experience. 
It also would encourage States to perform case checks as they 
saw fit. States would have the authority to make determinations 
on hardship exemptions.
    At the same time, because Medicaid is partly a federally 
funded program, the Federal Government has a responsibility to 
ensure taxpayer dollars are appropriately spent. Hence, under 
such a policy, States would certify that beneficiaries meet the 
minimum work requirement standards for an individual to enroll 
in the Medicaid Program. Enrollees not meeting work 
requirements for more than 63 days would be ineligible for 
benefits, barring an exemption. The budget recommends a two-
year roll-out period for States to acclimate to the new 
standards. To prevent fraud and abuse, States would conduct 
checks every six months, and the GAO or the HHS Inspector 
General would conduct annual audits of State programs to ensure 
proper reporting.
    These requirements would help target resources toward the 
most vulnerable populations, while at the same time making 
Medicaid available for those on the precipice of poverty who 
are transitioning into economic stability.

    Eliminate Waste, Fraud, and Abuse. The budget also advances 
several reforms to help root out waste, fraud, and abuse in the 
Medicaid Program. For example, Medicaid eligibility is 
determined by an individual's calculated Modified Adjusted 
Gross Income [MAGI].\328\ Under current law, the MAGI does not 
include all forms of income. This budget proposes to expand the 
MAGI to count extra income, presenting a more accurate picture 
of eligibility. This will help target the limited Medicaid 
resources to those who are actually in need of them.
    \328\Centers for Medicare and Medicaid Services, MAGI: Medicaid and 
CHIP's New Eligibility Standards, 30 September 2013: https://
    In addition, the budget recognizes several options that can 
be implemented in the short term to strengthen and preserve the 
Medicaid Program. The first is to reform the 1115 waiver 
process. One potential improvement would be requiring that 
waivers be budget-neutral in actual costs and to ensure that 
any new spending does not duplicate other Federal programs. 
Another would be allowing States to adopt previously approved 
waivers without having to go through the approval process 
again. Additionally, the budget encourages efforts recently 
initiated by CMS to streamline the waiver application process 
and assist States in creating programs that will be successful.
    Furthermore, the budget supports implementation of 
recommendations from the Government Accountability Office to 
improve how the program functions and reduce fraud.

    Reduce Risk Based on GAO Recommendations. The Government 
Accountability Office has designated Medicaid as high-risk 
since 2003, largely due to ``concerns about the adequacy of 
fiscal oversight.''\329\ According to GAO, State management of 
programs complicates oversight of payments and patient access 
to care, as the Federal Government must rely on State-provided 
data. Further, Medicaid experiences dramatic swings in 
enrollment and funding requirements based on economic upturns 
and downturns. These periods of higher enrollment lead to 
higher costs and less State revenue stability, which in turn 
contribute to greater risk for improper payments and poor 
access to services. Adding to this, CMS receives insufficient 
data on Medicaid programs from States. GAO describes the lack 
of accurate, timely data as an ``overarching challenge'' for 
oversight of the Medicaid program.\330\ Often, available data 
is three years behind.
    \329\Government Accountability Office, High-Risk Series: Progress 
on Many High-Risk Areas, While Substantial Efforts Needed on Others, 15 
February 2017, p. 560:
    \330\GAO, op. cit., p. 563.
    In its report on high risk programs, GAO provides five 
areas of Medicaid in need of improved oversight: financing and 
provider payment transparency and oversight, managed care 
payments and utilization oversight, growing expenditures for 
and oversight of large Medicaid demonstrations, monitoring and 
measurement of access to quality care, and growing expenditures 
for long-term care services.
    This budget supports GAO's recommendations for reducing 
risk in the Medicaid sphere. Among them, GAO and this budget 
encourage a systematic review of Federal determinations of 
Medicaid eligibility. GAO and this budget also support 
improving the process for reviewing and approving Medicaid 
demonstrations, and making transparent the basis for spending 
limits approved by HHS for the demonstrations. Finally, based 
on testimony by Comptroller General Gene L. Dodaro, this budget 
proposes requiring greater reporting by States on Medicaid 
payments for uncompensated care, along with greater 
coordination between CMS and State auditors.\331\
    \331\Committee on the Budget, U.S. House of Representatives, 
hearing on ``Failures of Fiscal Management: A View from the Comptroller 
General,'' 3 May 2017.

    Institute Parity for SCHIP. The State Children's Health 
Insurance Program provides coverage for otherwise-uninsured 
low-income children and pregnant women who do not qualify for 
Medicaid. These enrollees are above the poverty rate required 
for Medicaid coverage. For fiscal year 2017, 6.3 million 
children are projected to be enrolled in SCHIP on a monthly 
average.\332\ CBO anticipates Federal outlays for the same year 
to total $14.5 billion.\333\
    \332\Congressional Budget Office, Detail of Spending and Enrollment 
for the Children's Health Insurance Program--CBO's January 2017 
Baseline, January 2017:
    \333\CBO, op. cit.
    SCHIP is essential for children in the gap between Medicaid 
and private health insurance (those children whose parents 
cannot provide health care coverage but who are not 
impoverished). This budget supports the continuation of the 
program and urges Congress to extend its funding when it 
expires shortly. At the same time, the budget proposes using 
the forthcoming extension as an opportunity to prevent unfair 
practices that divert resources away from the most susceptible 
    As with the ACA's unfair practice of favoring higher-income 
Medicaid enrollees over the poorest Americans, the Obama 
Administration unjustly favored higher-income SCHIP recipients 
over their poorer Medicaid counterparts. At present, States 
receive an enhanced FMAP for SCHIP enrollees, with an average 
increase of 15 percent over the State's Medicaid reimbursement 
rate per enrollee. Additionally, the ACA added an additional 23 
percent FMAP increase for SCHIP. This places the combined 
enhanced Federal Medical Assistance Percentage rate for SCHIP 
such that the Federal Government covers 88 percent to 100 
percent of the cost for each SCHIP beneficiary.\334\ As such, 
the Federal Government provides a higher nominal amount for 
States to cover children above the poverty line than to cover 
those below it.
    \334\Baumrucker and Mitchell, op. cit., p. 17.
    Under Obamacare, subsidies are available for individuals up 
to 400 percent of FPL.\335\ As such, most of these children 
could be covered through the health care insurance market, 
rather than under SCHIP. If the AHCA is enacted, parents will 
have access to a portable, advanceable tax credit to purchase 
health care coverage for their children, as well, regardless of 
income. Thus, children and pregnant women would have access to 
plans that better fit their needs and provide broader access to 
care through expanded provider networks and tailored services. 
With these considerations, the requirement for enhanced funding 
for SCHIP no longer stands.
    \335\, Glossary: Federal Poverty Level, last accessed 
16 May 2017:
    Taking these concerns together, children and pregnant women 
well above the poverty line, with no limit on income, and 
alternative access to care receive the greatest taxpayer 
assistance. Congress must take measures to correct this 
disparity, while preserving health care access for children and 
pregnant women who cannot access it without help. This budget 
proposes that Congress eliminate the enhanced 23-percent FMAP 
for SCHIP recipients in parity with the previously discussed 
option of returning Medicaid expansion enrollees to the 
traditional FMAP.

                           PRO-LIFE POLICIES

    Defend Life and Promote Access to Health Care. This 
resolution supports the long-standing policy to ban Federal 
taxpayer dollars from funding elective abortions and calls for 
a 10-year cessation of Federal funding for Planned Parenthood. 
This year, President Trump signed into law H. J. Res. 43 under 
the authority of the Congressional Review Act.\336\ This 
legislation overturns a December 2016 Obama Administration rule 
that forced States to provide Title X family planning grants to 
abortion providers. The Federal Government should not force 
States to provide funding to clinics such as Planned Parenthood 
that perform elective abortions. Similarly, the government 
should not force taxpayers to fund those clinics. The budget 
continues this protection by proposing to eliminate all Federal 
funding from Planned Parenthood and similar organizations.
    \336\Public Law 115-23, Providing for congressional disapproval 
under chapter 8 of title 5, United States Code, of the final rule 
submitted by Secretary of Health and Human Services relating to 
compliance with title X requirements by project recipients in selecting 
subrecipients, 115th Congress: 1st Session, 13 April 2017.
    The resolution promotes reinvesting the Planned Parenthood 
funding in community health centers [CHCs] to promote greater 
access to care for women, men, children, and the unborn. CHCs 
are nonprofit, community-based clinics that provide 
comprehensive care. There are 9,000 community health centers, 
which--unlike Planned Parenthood clinics--are required to be 
situated in underserved areas with high levels of poverty and 
infant mortality.\337\
    \337\Elayne J. Heisler and Victoria L. Elliot, Factors Relating to 
the Use of Planned Parenthood Affiliated Health Centers (PPAHCs) and 
Federally Qualified Health Centers (FHQCs), Congressional Research 
Service, 18 May 2017.
    This budget supports enhanced access to women's health 
care, while protecting taxpayers from funding abortion. For 
example, although Planned Parenthood advocates regularly claim 
that women receive mammograms at its facilities, none of the 
organization's 650 facilities actually offers mammograms. In 
contrast, CHCs are major providers of mammograms and other 
preventive services, particularly to women of color, Medicaid 
recipients, and the uninsured.
    In 2015, CHCs provided health services to more than 20 
million Americans, nearly 60 percent of whom were female. In 
contrast, Planned Parenthood served fewer than 3 million 
Americans the same year.\338\ This budget makes efforts to 
ensure that taxpayer dollars do not go to the Nation's largest 
provider of abortions, but rather support the health centers 
that truly provide care to millions of women.
    \338\Heisler and Elliot, op. cit.


    Reform the Federal Employee Health Benefit Program. 
Currently, Federal contributions to the Federal Employees 
Health Benefits Program grow by the average weighted rate of 
change in these programs. This budget supports restricting the 
growth in these plans to inflation for retirees.\339\ The 
budget also proposes basing Federal employee retirees' health 
benefits on length of service. This option would reduce premium 
subsidies for retirees who had relatively short Federal 
careers. Together, these two reforms would bring health 
benefits for Federal retirees more in line with those offered 
in the private sector.
    \339\The budget also restricts growth of the Federal Employees 
Health Benefits Program for current Members of Congress and their 
staffs. The cost savings from this proposal are reflected in the 
discretionary spending section of Function 550.

                       INCOME SUPPORT, NUTRITION,
                          AND RELATED PROGRAMS

                            Function Summary

    With the passage of his Great Society programs, President 
Johnson launched America's War on Poverty and greatly expanded 
the Nation's safety net. ``Our aim,'' he promised, ``is not 
only to relieve the symptom of poverty, but to cure it and, 
above all, to prevent it.'' The President's intentions were 
widely accepted, and still are. A prosperous country, filled 
with a generous people, should be willing and able to help 
those of its citizens who are less well off. Indeed, voluntary 
charity is one striking demonstration of the American spirit. 
In 2015, charitable giving in America totaled $373.25 billion; 
that was more than the Federal Government spent on its major 
income security programs that year ($302 billion).\340\
    \340\The National Philanthropic Trust [NPT], ``Charitable Giving 
charitable-giving-statistics (figures are the latest available; 
Congressional Budget Office, The Budget and Economic Outlook: 2016 to 
2026, January 2016, Table 3-2, p. 68. The comparison is not dollar for 
dollar. According to the NPT, the majority of philanthropic spending 
went to religion (32 percent), education (15 percent), human services 
(12 percent)grantmaking foundations (11 percent), and health (8 
percent). The intent is simply to provide a measure of the magnitude of 
voluntary charity in America.
    Yet after a half century and trillions of Federal dollars 
spent, Washington's vast anti-poverty efforts have produced 
disappointing results. Two years after the war began, the 
poverty rate stood at 14.7 percent; in 2015, it was only 
modestly lower, at 13.5 percent.\341\ Reflecting on the 
divergence between higher spending and disappointing results, 
in 1988 President Reagan noted: ``The Federal Government 
declared war on poverty, and poverty won.''
    \341\Bernadette D. Proctor, Jessica L. Semega, and Melissa A. 
Kollar, Income and Poverty in the United States: 2015, United States 
Census Bureau, September 2016:
    Today, the Federal Government continues to operate a 
patchwork of more than 90 welfare programs that lack any 
coordination in their efforts to help lift people out of 
poverty, for which spending by all levels of government exceeds 
$1 trillion. Multiple programs, overlapping services, and 
differing benefit structures often create significant 
disincentives to work, keeping many trapped in a cycle of 
poverty for years. While reforms during the 1990s reduced 
caseloads in Temporary Assistance for Needy Families [TANF] by 
more than two-thirds, and helped many cash welfare recipients 
find work and escape poverty, those reforms were limited in 
scope and affected only a small part of the safety net.
    However well-intended, the current web of public assistance 
is more likely to entangle individuals in poverty rather than 
empowering them and their families to build lives of self-
sufficiency. ``[O]ur current system is broken,'' contends Larry 
C. Woods, Chief Executive Officer for the Winston-Salem Housing 
Authority, who has spent a career trying to assist America's 
most vulnerable. ``Our approach is flawed. Our safety net is no 
longer a net, but a steel trap fostering dependency and 
cultivating generational poverty. It must change; and we must 
change it--and sooner rather than later.''\342\
    \342\Testimony of Larry C. Woods, Chief Executive Office of the 
Winston-Salem Housing Authority, to the Committee on the Budget, U.S. 
House of Representatives, 28 October 2015.
    If America is going to cure poverty and prevent it, the 
effectiveness of anti-poverty programs must be measured by the 
number of individuals lifted out of poverty rather than the 
number of dollars being spent. What's more, if the government 
continues running unsustainable deficits and experiences a debt 
crisis, the poor and vulnerable will undoubtedly be the hardest 
hit, as the Federal Government's only recourse will be severe, 
across-the-board cuts.
    Anti-poverty programs should promote self-sufficiency, not 
extended dependency. To that end, this budget proposes to 
continue the successful welfare reforms of the 1990s by 
improving work requirements for means-tested programs to help 
more people escape poverty and move up the economic ladder. It 
focuses resources in programs that deliver real results, 
restraining spending to reasonable levels, reducing improper 
payments, and allowing States more ability to improve programs 
through policy innovation. It is focused on the following 

      Expect able-bodied adults receiving welfare to 
work or prepare for work in exchange for receiving benefits. 
Work--especially full-time work--is the surest way out of 
poverty. Many welfare programs provide benefits to alleviate 
immediate need, yet few expect able-bodied adults to work or 
assist them in finding and keeping jobs so they can move up the 
economic ladder. This budget proposes that able-bodied 
individuals receiving welfare benefits from a variety of 
programs be required to work or prepare for work in exchange 
for benefits, and that States be held accountable for engaging 
recipients in activities to help them find jobs and stay 

      Get incentives right when people move from 
welfare to work. The Nation's safety net should be designed to 
help those in need so they can get back on their feet and care 
for themselves and their families. Yet States and other service 
providers may lose money when someone leaves welfare for work, 
meaning they are better off failing than succeeding. Given the 
way the welfare system works now, it may not make sense for 
someone on welfare to work more because they can end up worse 
off financially. Under this budget resolution, committees 
across Congress would work together to get these incentives 
right, to make sure everyone is better off when someone leaves 
welfare for work.

      Focus welfare programs on outcomes, not inputs. 
The Federal Government often evaluates programs based on 
inputs, such as benefits paid, classes held, or people served. 
Yet very few, if any, programs are measured based on their 
results to assess whether they are really helping people out of 
poverty and dependency. To make sure taxpayer dollars are spent 
wisely, this budget would require committees overseeing welfare 
programs to work together to develop similar outcome measures 
for their programs and use funding structures that are focused 
on outcomes. Common outcome measures will allow Congress and 
the American people to better judge whether these programs are 
working and whether they should continue, need to be reformed, 
or should end. Focusing spending on outcomes allows greater 
flexibility in the operations of programs while ensuring 
families receive real help to climb the economic ladder.

      Preserve welfare benefits for those most in need. 
The American public is faced with a steady stream of reports 
revealing how welfare benefits are being paid to those who 
should never receive them. This frustrates taxpayers paying for 
these programs and reduces resources for those who truly need 
access to these benefits. Advances in technology have made it 
possible to more easily protect against fraud and abuse, and 
States are beginning to use these tools more frequently. The 
budget would implement these technological and administrative 
processes across means-tested programs to better protect 
taxpayer dollars allocated for these programs. By reducing 
abuse, these welfare programs will be better focused on those 
who truly need help to move their families forward.

    Finally, no set of government safety net programs can 
replace, or improve upon, nature's safety net: the family. For 
generation upon generation, the family has been the main source 
of comfort, security, and economic stability for the 
individual. It is where moral values and a sense of 
responsibility grow. The family reinforces the individual's 
place in the larger community. Government programs should 
recognize and support those who lose any connection to a 
family. At the same time, however, government should take care 
not to contribute to the dissolution of families. Government 
programs should aim to strengthen the family, the most 
important and enduring institution in society.
    Social scientists across the political spectrum agree that 
children are better off with married parents.\343\ Yet today, 
more than 40 percent of children are born to unwed 
mothers,\344\ and the structure of anti-poverty programs places 
harsh anti-marriage penalties on those who currently depend on 
these programs when it is clear that ``the married, two-parent 
family is one of the best weapons we have in the fight against 
poverty.''\345\ In 2014, the poverty rate for single mother-led 
families was almost five times the poverty rate for married-
couple families, 30.6 percent and 6.2 percent, 
respectively.\346\ This budget proposes to reduce, and wherever 
possible eliminate, the marriage penalties that have been 
unwittingly built into the current welfare system.
    \343\``They Do: The scholarly about-face on marriage,'' The Boston 
Globe, 26 April 2015:
    \344\Centers for Disease Control and Prevention, Births: Final Data 
for 2013, National Vital Statistic Report Volume 64, Number 1, 15 
January 2015:
    \345\Robert L. Doar, Morgridge Fellow in Poverty Studies at the 
American Enterprise Institute, testimony to the Committee on the 
Budget, U.S. House of Representatives, 28 October 2015.
    \346\Carmen DeNavas-Walt and Bernadette D. Proctor, United States 
Census Bureau, Income and Poverty in the United States: 2014, United 
States Census Bureau, September 2015:
    Most of the Federal Government's income-support programs 
are reflected in the direct spending components of Function 
600, Income Security (see Table 3). These include Federal 
employee retirement and disability benefits (including military 
retirees); general retirement and disability insurance 
(excluding Social Security)--mainly through the Pension Benefit 
Guaranty Corporation--and benefits to railroad retirees; 
unemployment compensation; food and nutrition assistance, 
including food stamps and school lunch subsidies; and other 
income-security programs.
    This last category includes: TANF, the government's 
principal cash welfare program; Supplemental Security Income 
[SSI]; and spending for the refundable portion of the Earned 
Income Tax Credit [EITC]. Agencies administering these and 
other programs in Function 600 include the Departments of 
Agriculture, Health and Human Services, Housing and Urban 
Development, the Social Security Administration (for SSI), and 
the Office of Personnel Management (for Federal retirement 
    For these programs, the resolution provides $423.7 billion 
in direct spending budget authority for fiscal year 2018, and 
$409.9 billion in outlays. The 10-year figures are $4.2 
trillion in budget authority and $4.1 trillion in outlays. The 
figures appear in Function 600 of Table 3.

                     The History and Development of
                     Federal Anti-Poverty Programs

    Before the New Deal, poverty relief was seen primarily as a 
responsibility of States, localities, and civil society. The 
Great Depression hit State budgets hard, while also increasing 
the demand for aid. The country experienced joblessness, 
homelessness, and deflation to previously unknown degrees. This 
combination resulted in direct intervention by Washington that 
forever redefined the relationship between the American people 
and their Federal Government.
    In his 1935 State of the Union Address, President Roosevelt 
laid the foundation of the modern welfare state, declaring the 
Federal Government had a moral obligation to ensure a basic 
level of security for individuals. He warned, however, that 
Federal assistance ought to be focused and provide a pathway to 
self-sufficiency and independence. ``The lessons of history,'' 
he noted, ``confirmed by the evidence immediately before me, 
show conclusively that continued dependence upon relief induces 
a spiritual disintegration fundamentally destructive to the 
national fiber. To dole out relief in this way is to administer 
a narcotic, a subtle destroyer of the human spirit. It is 
inimical to the dictates of a sound policy. It is in violation 
of the traditions of America. Work must be found for able-
bodied but destitute workers. The Federal Government must and 
shall quit this business of relief * * *. We must preserve not 
only the bodies of the unemployed from destitution but also 
their self-respect, their self-reliance, and courage and 
    \347\The American Presidency Project, President Franklin D. 
Roosevelt, Annual Message to Congress, 4 January 1935: http://
    That year saw the enactment of Social Security, which 
created, among other things, Aid to Dependent Children, (later 
renamed Aid to Families with Dependent Children [AFDC]). In 
1946, President Truman signed into law the National School 
Lunch Program. He also proposed a plan for national health care
    In 1953, Washington's role in public assistance expanded 
and became bipartisan with the establishment of the Department 
of Health, Education, and Welfare under President Eisenhower. 
President Johnson launched his Great Society programs starting 
in 1964. Among other things, the Food Stamp Act made permanent 
a pilot program and, a year later, Congress and the President 
enacted Medicaid as part of the 1965 Social Security Amendment. 
The Supplemental Security Income Program began operations in 
1974, and in 1975 Congress created the Earned Income Tax 
Credit. By many important measures, however, the results of 
these efforts and others has been disappointing. In particular, 
the rising Federal spending commitment has not been matched 
with a falling poverty rate, increased self-reliance, or an 
improvement in other notable social indicators such as the 
health of the family.
    In his 1988 State of the Union Address, President Reagan 
lamented: ``With the best of intentions, government created a 
poverty trap that wreaks havoc on the very support system the 
poor need most to lift themselves out of poverty: the family. 
Dependency has become the one enduring heirloom, passed from 
one generation to the next, of too many fragmented 
families.''\348\ This remains true today for many of the 
safety-net programs.
    \348\The American Presidency Project, President Ronald Reagan, 
Address Before a Joint Session of Congress on the State of the Union, 
25 January 1988:

                             Welfare Reform

    During the 1980s and 1990s, leaders began to recognize the 
shortcomings of many safety net programs, especially AFDC, and 
began to build reforms that focused on improving the lives of 
recipients. During the 1992 presidential race, Bill Clinton 
promised to ``end welfare as we know it.'' Two years later, 
congressional Republicans' Contract with America included 
welfare reform as one of its 10 policy initiatives.\349\
    \349\Representative Newt Gingrich, ``The Capitol Steps Contract and 
Cynicism in Washington, DC,'' the Congressional Record, 22 September 
1994, vol. 140 (Washington: Government Printing Office, 1994), pp. 
    These proposals were much needed. The number of families on 
AFDC peaked at 5.1 million in March 1994.\350\ The subsequent 
1996 welfare reform law replaced AFDC with TANF. Its key 
revisions to welfare policy included a capped allotment to 
States, work requirements, time limits on benefits, and State 
flexibility in the use of funds. Along with moving many from 
welfare to work, these reforms led to the single largest 
sustained reduction in child poverty since the onset of the 
Great Society.
    \350\Gene Falk, Congressional Research Service, Temporary 
Assistance for Needy Families [TANF]: Size and Characteristics of the 
Cash Assistance Caseload, 5 August 2014.

             Failures of the Current Government Safety Net

    Notwithstanding the success of welfare reform, the current 
government safety net fails to achieve the most important sort 
of compassion: lifting those less well off into self-
sufficiency. Federal assistance programs too often discourage 
work, and the intended beneficiaries become trapped in a system 
with little opportunity to build a prosperous life of their 


    As recipients of public benefits find work or begin to earn 
more, their benefits phase out and their tax burdens rise. The 
combination of higher taxes and lost benefits can exceed the 
value of a dollar earned. Gary D. Alexander, former Secretary 
of Public Welfare for Pennsylvania, notes how various cliffs in 
anti-poverty programs can cause total household income to 
decline as wages increase.\351\ A department examination of 
poverty programs concluded that the cliff effect can cause 
individuals earning $29,000 and $69,000 to have almost 
identical household incomes once taxes and benefit phase-outs 
are taken into account.
    \351\Gary D. Alexander, the American Enterprise Institute, 
Welfare's Failure and the Solution, July 2012:
    ``Penalties to increased work effort, such as `benefit 
cliffs' and high implicit marginal tax rates, are not just 
hypothetical,'' says Robert L. Doar, former commissioner of New 
York City's Human Resources Administration and current fellow 
at the American Enterprise Institute [AEI]. ``* * * In my 
experience, child care subsidies are especially disjointed and 
prone to large benefit cliffs that need to be mitigated. 
Policymakers must find ways to better coordinate programs so 
that these drop-offs in benefits are more rational and don't 
interfere with low-income Americans accepting a raise or 
working more hours.''\352\
    \352\Op. cit., Doar.
    For many beneficiaries, the cliff effect compounds with the 
lack of work expectations in many programs, further reducing 
incentives to seek employment. The Obama Administration even 
claimed authority to waive the work requirements in TANF.
    Where Federal policy has failed, non-government policy 
innovators are attempting to fill the void. For example, Woods 
is pursuing strategies to increase self-reliance in Winston-
Salem housing programs: ``In the City of Winston Salem, there 
are a growing number of agencies (public and private) that are 
discussing coordination of services, resource leveraging, 
collaborative partnerships, and data sharing all related to 
performance-based outcomes * * *. Our approach is designed to 
provide a positive and hopefully permanent exit strategy so 
families remain self-reliant.
    ``We call this approach `Growing Families out of Poverty.' 
Unfortunately, under the current regulatory and statutory 
structure, we cannot fully implement our program. We have faced 
roadblock after roadblock restricting our ability to require or 
incentivize participation.''\353\
    \353\Op. cit., Woods.
    Under Doar's management, New York City's anti-poverty 
programs made work expectations a major focus. ``In New York, 
we were most successful at fighting poverty when we maintained 
the proper balance of strong work requirements and government 
assistance that supported--but did not replace--work.''\354\
    \354\Op. cit., Doar.
    Civic organizations are also solving problems where Federal 
programs have disappointed. William C. McGahan, Founder of 
Georgia Works!, has developed a program in the heart of 
downtown Atlanta to help chronically homeless men overcome 
obstacles--criminal records, substance abuse, overdue child 
support, lack of proper identification, and so on--and assist 
them toward a path to becoming self-sufficient individuals 
reintegrated with their families, into the work place, and into 
society. ``Unlike other programs that focus on singular issues 
faced by homeless individuals, the Georgia Works! methodology 
is comprehensive. The idea is to not only help eliminate the 
barriers to `escaping' homelessness, but also to change the 
person so that homelessness does not re-occur.'' Each month, 
six to eight more men graduate to self-sufficiency.
    Work not only provides a source of income and self-
sufficiency, but also has been a demonstrated source of self-
worth, pride, and dignity for individuals. In fact, employment 
and self-esteem are tied so tightly together that a Gallup-
Healthways Well-Being Index found: ``Unemployed adults and 
those not working as much as they would like are about twice as 
likely as Americans who are employed full time to be 
depressed.''\355\ Protecting programs with existing work 
requirements from efforts to weaken them, and expanding them to 
other programs, will allow more people to escape poverty and to 
preserve their self-respect and self-reliance.
    \355\Alyssa Brown and Kyley McGeeney, Gallup, In U.S., Employment 
Most Linked to Being Depression-Free, 23 August 2013: http://

                           MARRIAGE PENALTIES

    The structure of income support programs creates marriage 
penalties that cause individuals to have to choose between 
getting married or keeping benefits. ``For several decades now, 
policymakers have created public tax and transfer programs with 
little if any attention to the sometimes-severe marriage 
penalties that they inadvertently impose. The expanded public 
subsidies thus put in place by lawmakers came at the expense of 
higher effective marginal tax rates, as program benefits often 
had to be phased out beginning at fairly low incomes to keep 
overall program costs in check. The combined effective marginal 
tax rates from these phase-outs and from regular taxes are very 
high--sometimes causing households to lose a dollar or more for 
every dollar earned and severely penalizing marriage. In 
aggregate, couples today face hundreds of billions of dollars 
in increased taxes or reduced benefits if they marry. 
Cohabitating or not getting married has become the tax shelter 
of the poor.''\356\
    \356\C. Eugene Steuerle, The Widespread Prevalence of Marriage 
Penalties, testimony before the District of Columbia Subcommittee on 
Appropriations, U.S. Senate, 3 May 2006: http://
    In 2014, the poverty rate for single mother-led families 
was almost five times the poverty rate for married-couple 
families, 30.6 percent and 6.2 percent, respectively.\357\ Yet 
today, more than 40 percent of children are born to unwed 
mothers,\358\ and the structure of anti-poverty programs places 
harsh marriage penalties on those who currently depend on these 
programs even though it is clear that ``the married, two-parent 
family is one of the best weapons we have in the fight against 
    \357\Op. cit., DeNavas-Walt and Proctor.
    \358\Centers for Disease Control and Prevention, Births: Final Data 
for 2013, National Vital Statistic Report Volume 64, Number 1, 15 
January 2015:
    \359\Doar, op. cit.
    Furthermore, a recent AEI study found that marriage 
includes the far-reaching benefits of: greater economic growth, 
economic mobility, less crime, and less child poverty. The very 
first recommendation to ``strengthen the economic and cultural 
foundations of marriage and family life'' is an end to the 
marriage penalties in means-tested programs.\360\ Reducing 
these penalties should be a major focus of improving poverty 
    \360\W. Bradford Wilcox, Joseph Price, Robert I. Lerman, American 
Enterprise Institute and Institute for Family Studies, Strong Families, 
Prosperous States: Do Healthy Families Affect the Wealth of States?, 

                          RIGID CENTRALIZATION

    Washington's one-size fits all administration of means-
tested programs limits State innovation and experimentation 
that might improve the programs to truly meet the needs of 
their residents. States lack the flexibility to improve the 
efficiency of their programs, though many governors have asked 
for a new approach. Federal mandates prevent States from 
finding new ways to make the programs more effective for 
beneficiaries while also deriving efficiencies and reducing 
    Woods notes that ``there is insufficient flexibility to 
allow agencies to tailor localized, common-sense approaches to 
problem solving. For example, laws prohibit residents' required 
participation in self-sufficiency programs.''\361\ If the State 
had the flexibility to require participation on a trial basis, 
such a program could test the improvements of the safety net in 
Winston-Salem. Greater flexibility for States would enable 
State and local governments to find innovative solutions for 
work disincentives, marriage penalties, and other flaws in 
current federal policy.
    \361\Woods, op. cit.

                      POOR TARGETING OF RESOURCES

    The government's multiple programs across various 
departments, overlapping services, and differing benefit 
structures create significant penalties on work and marriage, 
keeping many trapped in a cycle of poverty for years. 
Duplication and fragmentation of programs make them difficult 
and time-consuming to navigate. Additionally, the incentives 
and disincentives are mismatched, often preventing resources 
from going to those most in need.
    In housing programs, for example, resources are not 
targeted where they can do the most good. ``In subsidized 
housing programs today, there is a stagnation of movement 
through the system,'' says Woods. ``Non-elderly, able-bodied 
families are living in subsidized housing for unnecessarily 
lengthy periods, resulting in generational poverty and 
cumbersome waiting lists. These waiting lists prevent our 
agency from responding to individuals who face unexpected, 
temporary, situational poverty.''\362\
    \362\Woods, op. cit.

                            WASTE AND FRAUD

    Safety net programs are not immune to waste and fraudulent 
activity by bad actors. The aforementioned challenges 
contribute to this, but the Federal Government and States have 
also loosened eligibility and oversight. As a result, a portion 
of what resources are available is siphoned from those 
individuals who truly need them. This is not fair to 
individuals truly in need or to hardworking taxpayers 
supporting the programs.
    Research by the Foundation for Government Accountability 
estimates that between 5 percent and 25 percent of spending on 
welfare programs has been wasted or spent on fraudulent 
activities.\363\ In the Supplemental Nutrition Assistance 
Program, benefits reportedly have been exchanged for cash and 
other non-food goods and services, including illegal 
    \363\Josh Archambault, Stop the Scam: Voters Know Welfare Fraud is 
a BIG Problem, The Foundation for Government Accountability: http://
    \364\Government Accountability Office, Supplemental Nutrition 
Assistance Program: Enhanced Detection Tools and Reporting Could 
Improve Efforts to Combat Recipient Fraud, August 2014. http://
    States and the Federal Government are both responsible for 
the current rates of waste and fraud. More than half of States 
have made use of waivers to roll back work requirements for 
able-bodied adults without dependents on SNAP. More than half 
of States have increased income limits and weakened, or 
altogether eliminated, asset tests, absurdly enabling 
millionaires to qualify for SNAP benefits.\365\
    \365\The Foundation for Government Accountability, The Food Stamp 
    The integrity of the safety net rests with the Federal 
Government and the States. It is a disservice to America's most 
vulnerable individuals to allow waste and fraud to continue 
unchecked. While wasteful spending and fraudulent activity are 
not limited to safety net programs in the overall Federal 
budget, the harm and damage are felt more acutely by those 
Americans who would otherwise rely on these programs when they 
fall on hard times.

              Illustrative Direct Spending Policy Options

    The main committees responsible for funding programs under 
Function 600 are Ways and Means, Agriculture, Oversight and 
Government Reform, and Education and the Workforce. They will 
make final policy determinations on how to increase State 
flexibility, reduce improper payments, and reform programs to 
eliminate marriage penalties and work disincentives. Some 
potential policy options following these guidelines might 
include the following.


    Strengthen Welfare Work Requirements. Welfare reforms in 
the 1990s led to substantial declines in poverty, increases in 
work, and decreases in government dependency. The TANF program 
was a central feature of these reforms. This budget calls for 
reforms to strengthen TANF work requirements so States will 
engage more recipients in activities leading to self-
sufficiency. This should include ending States' ability to 
reduce work targets by spending more than required, as well as 
enforcing penalties against States that fail to meet work 
targets. This budget also calls for TANF reforms to provide 
states with more options to help people prepare to leave 
welfare for work, and to hold states accountable for their 
success in getting people off welfare and into jobs.


    Reform Supplemental Security Income. Welfare programs 
typically pay benefits on a sliding scale. Supplemental 
Security Income [SSI] is different, paying an average of $640 
for each and every child in a household who receives benefits. 
This reform would create a sliding scale for children on SSI. 
Advocates for individuals with disabilities have expressed 
support in the past for such a step. In 1995, Jonathan M. 
Stein--the lead advocate attorney in the landmark 1990 Supreme 
Court Case expanding SSI eligibility for children and witness 
at a 27 October 2011 Ways and Means Subcommittee hearing on 
SSI--said the following about this proposal: ``[W]e have a long 
list of reforms that we do not have time to get into, but we 
would say for very large families there should be some sort of 
family cap or graduated sliding scale of benefits.''\366\ 
Additionally, Congress should review mental health categories 
in the children's SSI program, which have been the fastest 
growing categories of eligibility. This budget proposes a GAO 
recommendation that Continuing Disability Reviews be conducted 
every three years for children on the program who are deemed 
likely to improve upon initially receiving benefits. 
Additionally, benefits should be linked to school attendance 
except where the Social Security Administration finds medical 
    \366\Committee on Ways and Means, Contract with America: Welfare 
Reform, Part 2, hearing 2 February 1995 (Serial No. 104-44), 
Washington: Government Printing Office, 1995.

                           NUTRITION PROGRAMS

    Reform the Supplemental Nutrition Assistance Program. 
During the 114th Congress, the Agriculture Committee held 16 
hearings examining the past, present, and future of SNAP and 
reported 15 key findings in December 2016. In addressing these 
findings, the Agriculture Committee has done an excellent job 
of exploring options for improving eligibility standards that 
ensure SNAP is meeting its intent of providing services to the 
most vulnerable. The committee of jurisdiction has considered 
reforming Broad-Based Categorical Eligibility to end the 
practice of making individuals eligible for SNAP simply by 
receiving a TANF brochure or being referred to a social service 
telephone number. The committee could also continue improving 
program integrity, including limiting SNAP account balances to 
reasonable levels and eliminating abuse of the Low Income 
Housing Energy Assistance Program. As was demonstrated by the 
welfare reforms of the 1990s, work requirements are central to 
ensuring that public assistance helps individuals transition to 
independence. Pairing reformed work requirements with 
consistent enforcement would lead to more sustainable, self-
sufficient outcomes for SNAP recipients. Finally, the budget 
resolution encourages the committee to focus on reforms that 
will restore overall SNAP funding to sustainable levels while 
still providing States the flexibility to tailor the program to 
best meet the needs of their SNAP-eligible populations.

    Better Target Child Nutrition Resources. The 2010 child 
nutrition reauthorization law allows schools with 40 percent 
qualifying students to provide meals free of charge to all 
students regardless of income. The Community Eligibility 
Provision simplifies program administration, but a higher 
threshold would better target program resources to lower-income 

                         REFUNDABLE TAX CREDITS

    Child Tax Credit Program Integrity. The budget would 
require individuals seeking the refundable child tax credit to 
submit a Social Security number to claim the credit. Under 
current law, a Social Security number is now required in order 
to claim children under the EITC.

    Reform the Earned Income Tax Credit and Eliminate Marriage 
Penalties. The EITC is susceptible to fraud and abuse. 
According to the Internal Revenue Service, 24 percent of EITC 
payments were issued improperly in fiscal year 2016 (about 
$16.8 billion). To reduce these errors in the EITC program, 
this budget proposes requiring verification of income before 
these benefits are paid and using the resulting savings to 
eliminate marriage penalties.

                         CHILD SUPPORT PROGRAMS

    Allow State Flexibility for the Foster Care Program. 
Significant progress has been made among States, advocates, and 
Federal policymakers in developing proposals that would expand 
State flexibility in designing programs and pilot projects 
meant to better prevent child abuse and neglect. Such proposals 
would result in fewer children being removed from their homes, 
allowing more funds to be directed toward prevention efforts, 
as well as reducing the cost of the Nation's foster care 

    Implement Pay for Outcomes. H.R. 576, the ``Social Impact 
Partnerships to Pay for Results Act'', creates a model for 
Federal financing of social programs where payment is 
contingent on whether an independent analysis shows that the 
program achieved the desired goal. Expanding this concept to 
programs intended to reduce poverty would improve program 
outcomes while providing savings to taxpayers as funds would 
only be spent on programs that work.

    Modernize Child Support Enforcement. Enacted in 1975, the 
Child Support Enforcement [CSE] program was created to secure 
child support payments from non-custodial parents for families 
who relied on both the Federal and State governments for 
welfare benefits. The CSE program was designed to reimburse the 
government for those welfare benefits, as well as assist 
families in attaining self-sufficiency. Today, however, two-
thirds of CSE collections are for helping families who have 
never received cash welfare payments from the TANF program--
those it was intended to help. To ensure the CSE program is 
targeted for those who are most in need, this budget proposes 
to return the annual user fee for non-TANF families to its 
original value and index it for inflation. In addition, the 
budget would better align the financial incentives for states 
by modifying the Federal matching rate and the criteria for 
states receiving incentive payments to ensure they are truly 
rewarding innovation and effectiveness. Finally, this budget 
would require all income support programs to coordinate efforts 
with the child support enforcement program.

                             CIVIL SERVICE

    Reform Civil Service Pensions. This budget adopts a policy 
proposed by former President Obama's National Commission on 
Fiscal Responsibility. The policy calls for Federal employees, 
including members of Congress and staff, to make greater 
contributions toward their own defined benefit retirement 
plans. It would also end the ``special retirement supplement,'' 
which pays Federal employees the equivalent of their Social 
Security benefit at an earlier age. This would achieve 
significant savings while recognizing the need for new Federal 
employees to transition to a defined contribution retirement 
system. The vast majority of private sector employees 
participate in defined contribution retirement plans. These 
plans put the ownership, flexibility, and portfolio risk on the 
employee as opposed to the employer. Similarly, Federal 
employees would have more control over their own retirement 
security under this option. President Trump's fiscal year 2018 
budget calls for a phased-in increase to contributions federal 
employees pay into the Federal Employee Retirement System so 
that both employees and the government are contributing an 
equal amount.


                   Function Summary: Direct Spending

    Agriculture experienced a period of high market prices and 
incomes during the initial years of this decade, but national 
farm income has fallen sharply from 2013's record-high level. 
The U.S. Department of Agriculture [USDA] forecasts that farm 
income will be roughly flat in 2017 compared to last year.
    The ``Agricultural Act of 2014''--otherwise known as the 
Farm Bill--made a number of reforms to agricultural policies, 
most notably by eliminating Direct Payments which had cost 
taxpayers almost $91 billion over the past 18 years and were 
paid regardless of market conditions. While it is important to 
continue reforming agricultural programs, weather and market 
challenges continue to highlight the importance of maintaining 
a safety net for farmers. This is especially true when 
considering that other countries--primarily advanced, 
developing countries such as China--have dramatically increased 
trade-distorting support to their producers at the expense of 
America's farmers and ranchers. Further, it is worth noting 
that current law establishing the annual mandatory sequester 
pursuant to the Budget Control Act of 2011 affects agricultural 
programs significantly and indicates the need for Congress to 
review the sequester process to ensure all Federal programs are 
treated equitably.
    Direct (or ``mandatory'') spending programs in this 
category (Function 350 in Table 3) include direct assistance 
and loans to food and fiber producers, export assistance, 
agricultural research, and other programs. The Committee on 
Agriculture has made commendable efforts to reduce overall 
direct spending here. The budget resolution calls for direct 
spending of $17.9 billion in budget authority and $16.7 billion 
in outlays in fiscal year 2018. The 10-year direct spending 
totals for budget authority and outlays are $127.0 billion and 
$121.4 billion, respectively.

               Illustrative Direct Spending Policy Option

    The Committee on Agriculture has complete authority to 
determine direct spending policies under its jurisdiction and 
nothing in this report is intended to predetermine or influence 
the committee's specific choices. The Committee on the Budget 
will work with the Agriculture Committee to ensure it has 
adequate flexibility to craft a farm bill that responds to the 
significant challenges facing America's farmers and ranchers. 
Among the options the Agriculture Committee may wish to 
consider is the following:

    Reform Agricultural Programs. The Agriculture Committee is 
encouraged to continue reforming agricultural programs. Any 
additional savings would be coupled with significant benefits 
that will be realized from other provisions in this budget, 
including regulatory relief, fundamental tax reform, and 
stronger economic growth as the burden of Federal deficits is 
lifted from the economy.

                          AND RELATED PROGRAMS

                   Function Summary: Direct Spending

    As with its annually appropriated programs, the Federal 
Government has used direct spending in commerce and housing in 
a way that moves from healthy and productive support for 
industry to over-subsidizing corporations and unfairly exposing 
taxpayers to risk. One example is Fannie Mae and Freddie Mac, 
which were placed into Federal conservatorship in 2008 and 
remain a part of the Federal Government. As a result, taxpayers 
remain exposed to Fannie's and Freddie's more than $5 trillion 
of outstanding commitments.
    On a unified basis, the resolution provides $6.0 billion in 
direct spending budget authority and -$6.9 billion in outlays 
in this area in fiscal year 2018 (shown in Function 370 of 
Table 3, Commerce and Housing Credit). Reforms will be 
determined by the Committee on Financial Services, the 
Committee on Energy and Commerce, and the Committee on 
Oversight and Government Reform. Criteria the committees may 
wish to apply include promoting free enterprise and economic 
growth in a responsible way, scaling back corporate welfare, 
and protecting taxpayers from the risk of future bailouts.

              Illustrative Direct Spending Policy Options

    Specific policies affecting direct spending in this 
function will be determined by the Committee on Financial 
Services, the Committee on Energy and Commerce, and the 
Committee on Oversight and Government Reform. The resolution 
encourages continued reform in the areas discussed below, but 
the committees of jurisdiction retain complete flexibility in 
determining the policies to be adopted.

                       ON-BUDGET DIRECT SPENDING

    Assume Provisions of the House-Passed Financial CHOICE Act. 
On 8 June 2017, the House of Representatives passed H.R. 10, 
the ``Financial CHOICE Act'', by a vote of 233-186. The 
legislation is the first comprehensive reform bill to replace 
the disastrous Dodd-Frank Act. CHOICE stands for ``Creating 
Hope and Opportunity for Investors, Consumers, and 
Entrepreneurs,'' because the most basic element of resilient, 
reliable economic growth is allowing financial institutions and 
markets to invest in America without government regulators 
second-guessing every decision and driving up the cost of 
    Congress passed Dodd-Frank in a zealous regulatory attempt 
to ``fix'' the causes of the 2008 financial crisis. Although 
dubbed ``Wall Street Reform,'' the Dodd-Frank Act actually 
intensifies the problem of too-big-to-fail by giving large, 
interconnected financial institutions advantages that small 
firms will not enjoy. Dodd-Frank expands and centralizes power 
in Washington, exacerbating--not fixing--the root causes of the 
2008 financial crisis. It contains layer upon layer of new 
bureaucracy sewn together by complex regulations, yet it fails 
to address key problems, such as Fannie Mae and Freddie Mac, 
that contributed to the worst financial unraveling in recent 
    The Financial CHOICE Act is built on seven key 
    \367\The Financial CHOICE Act, Creating Hope and Opportunities for 
Investors, Consumers, and Entrepreneurs--Executive Summary.

    1.  Taxpayer bailouts of financial institutions must end 
and no company can remain too big to fail;

    2.  Both Wall Street and Washington must be held 

    3.  Simplicity must replace complexity, because complexity 
can be gamed by the well-connected and abused by the Washington 

    4.  Economic growth must be revitalized through 
competitive, transparent, and innovative capital markets;

    5.  Every American, regardless of circumstances, must have 
the opportunity to achieve financial independence;

    6.  Consumers must be vigorously protected from fraud and 
deception as well as the loss of economic liberty; and

    7.  Systemic risk must be managed in a market with profit 
and loss.

    The Financial CHOICE Act is the legislative manifestation 
of many of the policies the Committee on the Budget has 
recommended for many years, and continues in this resolution. 
H.R. 10 would change the name of the Consumer Financial 
Protection Bureau [CFPB] to the Consumer Law Enforcement Agency 
[CLEA], and--in a highly significant step--subject the agency 
to congressional oversight through the appropriations process. 
Under the Dodd-Frank legislation, the CFPB is allowed to fund 
its operations from a portion of the yearly off-budget 
remittances made to the Treasury by the Federal Reserve. The 
CFPB is housed in the Federal Reserve but is completely 
autonomous. Its financing scheme made it totally unaccountable 
as well. CLEA would be subject to annual appropriations and 
required to adhere to government-wide standards of cost-benefit 
analysis. CLEA would no longer serve as a supervisory agency, 
but would remain responsible for enforcing specifically 
enumerated consumer protection laws.
    The Financial CHOICE Act also repeals the Federal Deposit 
Insurance Corporation [FDIC] bailout fund, called Orderly 
Liquidation Fund. The Dodd-Frank Act created this fund to 
resolve ``systemically important financial institutions,'' but 
the Committee on the Budget has long held this is simply a 
taxpayer bailout fund for large, interconnected financial 
institutions. The fiscal year 2018 budget resolution continues 
to recommend repealing this regime that only paves the way for 
future bailouts. Taking the lead on regulatory reform, 
President Trump's fiscal year 2018 budget also recommends an 
end to the Dodd-Frank Act bailout system.

    Subject All Federal Financial Regulators to Congressional 
Oversight. H.R. 10 would also subject certain other financial 
regulators to congressional appropriations. Current law allows 
most Federal financial regulators to levy fees on the 
businesses they regulate to pay for operations, shielding them 
from congressional oversight through annual appropriations. 
These agencies include: Federal Deposit Insurance Corporation, 
National Credit Union Administration, Federal Reserve Board of 
Governors [the Fed], and the Federal Housing Finance Agency. 
Not all financial regulators set their own budgets. The 
Securities and Exchange Commission is subject to Congressional 
oversight through appropriations. The Financial CHOICE Act 
would mirror the current Securities and Exchange Commission 
appropriations structure for all Federal financial regulators. 
The budget resolution supports this policy.

    Terminate Separate Benefit and Payscales for Financial 
Regulators. Under current law, employees at the Fed and the 
CFPB have a separate retirement benefit arrangement. The fiscal 
year 2018 budget calls for a uniform system across the Federal 
Government and recommends these two agencies begin 
participating in the Federal Employees Retirement System and 
the Thrift Savings Plan.
    Likewise, many Federal financial regulators are not subject 
to the Office of Personnel Management [OPM] General Schedule 
[GS] payscale. As a result, financial regulators pay employees 
far more than other federal employees employed at different 
departments and agencies. The fiscal year 2018 budget 
recommends Committees look at these sweetheart pay arrangements 
and move federal financial regulators to the more transparent 
GS payscale.

    Reform the Universal Service Fund. The Universal Service 
Fund [USF] provides subsidized telecommunications services 
through four main programs: High-Cost Support, Schools and 
Libraries (E-rate), the Lifeline Program, and Rural Health 
Care. The USF is funded through mandatory contributions by 
carriers, who pass these costs to consumers as fees on 
subscribers' telephone bills. The Federal Communications 
Commission [FCC] maintains the USF's roughly $9 billion in net 
assets\368\ not in the U.S. Treasury but in a private bank 
account, where they are not subject to the management and 
safeguards as other Federal programs. This budget resolution 
aims to reform burdensome programs and has identified Lifeline 
as a key example.
    \368\Government Accountability Office, Additional Action Needed to 
Address Significant Risks in FCC's Lifeline Program, May 2017. The $9 
billion figure is as of September 2016.
    Lifeline--sometimes called ``Obamaphones\369\--provides 
subsidies to about 12.3 million low-income Americans for 
telephone, wireless, and broadband service, at a cost of about 
$1.5 billion per year.\370\ To be eligible, a household must 
have an income at or below the Federal Poverty Line or must 
participate in one of several safety net programs, such as 
Medicaid or the Supplemental Nutrition Assistance Program (food 
stamps). Yet due to a loosely monitored oversight arrangement, 
Lifeline is highly susceptible to fraud, waste, and abuse. 
According to a recently released report by the Government 
Accountability Office report, Lifeline has ``limited abilities 
to detect and prevent ineligible subscribers from 
enrolling.''\371\ This is because its structure relies on more 
than 2,000 Eligible Telecommunication Carriers with the dual 
duties of receiving subsidies from the Federal Government and 
verifying subscriber eligibility for each subsidy. Thus, with 
little oversight and audit ability available, these carriers 
have a financial incentive to sign up as many subscribers as 
possible--regardless of program eligibility. Moreover, about 96 
percent of low-income households already have phone 
    \369\When launched in the mid-1980s, Lifeline covered only 
telephones. More recently, it has expanded to include broadband and 
wireless, and during former President Obama's tenure, many carriers 
also began offering free or low-cost cell phones, which came to be 
called ``Obamaphones.''
    \370\Ibid. The program was created in the mid-1980s to promote 
telephone service for low-income households. Wireless service came to 
be included in the mid-2000s, and broadband in 2016.
    \371\Government Accountability Office, Additional Action Needed to 
Address Significant Risks in FCC's Lifeline Program, May 2017.
    In attempts to match subscriber to benefit data, GAO could 
not confirm whether roughly 1.2 million individuals--some 36 
percent of the 3.5 million subscribers the agency reviewed--
were actually eligible. Continued auditing by GAO of the 
National Lifeline Accountability Database, which consists of 
subscriber information from 46 States, has also found that 
subsidies totaling about $612,000 annually were duplicate 
payments. Even worse, GAO found that 6,378 individuals who were 
currently receiving benefits were deceased according to the 
Social Security Administration's Death Master File. In an 
undercover test using fictitious names and documentation, GAO 
gained approval for Lifeline service from 12 of 19 providers 
    While the FCC has taken steps to rectify some of Lifeline's 
internal controls, the agency's most significant reform plans--
creation of a third-party national eligibility verifier, and an 
independent third party tasked with evaluating the Lifeline 
program's design, function, and administration--will not 
materialize until 2019 and 2020 respectively. Reforming this 
program would significantly reduce the burden on taxpayers.

    Privatize the Business of Government-Controlled Mortgage 
Giants Fannie Mae and Freddie Mac. In 2008, the Federal 
Government placed Fannie Mae and Freddie Mac\373\ into 
conservatorship to prevent them from going bankrupt. The 
Treasury has already provided $187 billion in bailouts to the 
Government-Sponsored Enterprises [GSEs], and taxpayers remain 
exposed to more than $5 trillion in Fannie Mae's and Freddie 
Mac's outstanding commitments as long as the entities remain in 
conservatorship. The Congressional Budget Office has recorded 
Fannie Mae and Freddie Mac as explicit financial components of 
the Federal budget, accounting for their liabilities as 
liabilities of the government. In contrast, the administration 
does not fully account for taxpayer exposure to Fannie Mae and 
Freddie Mac, leaving them off budget. Despite recent dividend 
payments by the two mortgage agencies, both enterprises 
continue to assume outsized risks that place taxpayers in 
jeopardy in the event of future downturns in the housing 
market. Regrettably, reductions in dividend payments from 
Fannie Mae and Freddie Mac will increase the deficit as the 
Treasury has now come to rely heavily on these transfers.
    \373\Formally the Federal National Mortgage Association [FNMA] and 
the Federal Home Loan Mortgage Corporation [FHLMC].
    This budget suggests ending the corporate subsidies and 
taxpayer bailouts in housing finance. It envisions the eventual 
elimination of Fannie Mae and Freddie Mac, winding down their 
government guarantee, and ending taxpayer subsidies. In the 
interim, this resolution seeks to remove distortions, thereby 
allowing an influx of private capital back into the housing 
credit marketplace and advancing various measures that would 
bring transparency and accountability to these two GSEs, which 
could include measures described in H.R. 2767, the ``Protecting 
American Taxpayers and Homeowners Act of 2013'' (113th 
Congress). Recognizing the need for housing finance reform, the 
Trump budget includes policies to improve the housing finance 
system while ensuring access to housing credit.

    Incorporate Fair-Value Accounting Principles in the Credit 
Reform Act. Taxpayers are also vulnerable to bailing out 
another housing giant, the Federal Housing Administration 
[FHA]. The capital ratio of the FHA's Mutual Mortgage Insurance 
fund remained below the congressionally mandated 2-percent 
level for seven years. In fiscal year 2015, FHA finally reached 
its mandated 2-percent capital ratio. The fiscal year 2016 FHA 
Actuarial Report released on 15 November 2016 again shows FHA 
has achieved its statutory requirement of 2-percent. 
Nevertheless, FHA still provides guarantees on more than $1 
trillion in outstanding loans.\374\ Given the precarious 
financial position of FHA in recent years, it is incumbent upon 
Congress to ensure the forward progress continues. Furthermore, 
the government should adopt measures to control the assumption 
of risk by the FHA as other government-backed entities (such as 
Fannie and Freddie) are wound down. Right now, the government 
accounts for the risks carried by the FHA differently from the 
way it accounts for those of Fannie Mae and Freddie Mac. These 
differences simply encourage just such a shift in risk.
    \374\Actuarial Review of the Federal Housing Administration Mutual 
Mortgage Insurance Fund Forward Loans for Fiscal Year 2016, 15 November 
    The cost of FHA-insured loans are scored by calculating the 
net present value of the cash flows associated with loans and 
discounting those flows using a risk-free marketable Treasury 
security rate. In contrast, the CBO uses fair-value accounting 
for Fannie Mae- and Freddie Mac-guaranteed loans. Fair-value 
accounting recognizes that adverse economic events such as 
market downturns can cause loan defaults to rise; hence it 
reflects the full financial risk incurred by taxpayers for 
backing these loans. In other words, the current budgetary 
treatment of FHA loans understates the full costs associated 
with them, thereby encouraging policymakers to shift risk from 
Fannie and Freddie to the FHA.
    This resolution requires the CBO to provide supplemental 
estimates using fair-value scoring for federally-backed 
mortgages and mortgage-backed securities, regardless of which 
Federal agency is acting as the insurer or guarantor.
    As the government reforms its role in the U.S. housing 
market, which this resolution supports, Fannie Mae, Freddie 
Mac, and FHA loans should be treated with parity and full 
transparency. The current structure of the Federal housing 
finance system socializes potential losses in the housing 
market among all Americans. The housing-finance system of the 
future, however, should allow private-market secondary lenders 
to fairly, freely, and transparently compete, with the 
knowledge that they will ultimately appropriate risk for the 
loans they guarantee. Their viability will be determined by the 
soundness of their practices and the value of their services.

                       OFF-BUDGET DIRECT SPENDING

    Reform the U.S. Postal Service. The U.S. Postal Service 
[USPS] is expected to be self-sustaining and was statutorily 
placed off budget in the Omnibus Budget Reconciliation Act of 
1989, where it remains today. The mission of the USPS is to ``* 
* * provide postal services to bind the Nation together through 
* * * correspondence of the people'' and ``provide prompt, 
reliable, and efficient services to patrons in all 
areas.''\375\ It boasts an iconic brand name, universal 
service, and certain competitive advantages with regard to 
market-dominant products. In recent decades, however, the USPS 
has faced financial instability stemming largely from reduced 
demand for its services and ever-growing unfunded pension and 
health care liabilities. Electronic mail is ubiquitous, while 
demand for paper mail has waned. From 2000 to 2016, for 
example, first-class mail volume dropped by 59 percent.\376\ 
Further, USPS has suffered from inefficiencies in its business 
model. The organization faces financial problems that threaten 
its long-term viability and will ultimately lead to a taxpayer 
    \375\Public Law 91-375.
    \376\United States Postal Service, ``First-Class Mail Volume Since 
    The USPS is unable to meet its financial obligations 
through its own business-like operation and desperately needs 
structural reforms. Since fiscal year 2007, the USPS has run 
annual operating losses; in fiscal year 2016 it defaulted on 
another $5.8 billion payment to prefund the retirement health 
care of its employees.\377\ In the Government Accountability 
Office's annual High-Risk Series report to Congress for 2017, 
it found that USPS ``continues to face unfunded liabilities 
that have grown from 99 percent of USPS revenues in fiscal year 
2007 to 169 percent of revenues in fiscal year 2016. These 
unfunded liabilities--totaling about $121 billion at the end of 
fiscal year 2016--consist mostly of retiree health and pension 
benefit obligations for which USPS has not set aside sufficient 
funds to cover.''\378\ According to GAO, ``Congress and USPS 
need to agree on a comprehensive package of actions to improve 
USPS's financial viability.''\379\
    \377\Government Accountability Office, U.S. Postal Service: 
Financial Challenges Continue, testimony before the Senate Committee on 
Homeland Security and Governmental Affairs, 21 January 2016: http://
    \378\Government Accountability Office, High-Risk Series: An Update, 
February 2013:
    With declining mail volumes and increasing personnel costs, 
USPS has continued to give priority to parcel delivery as a 
value stream that may be able to make up for the loss in 
revenue from First Class Mail. According to the Postal 
Service's own research, while mail delivery volume to 
households has declined by 7 percent since 2012, package 
delivery has increased by 91 percent over the same window. 
While the Postal Service's parcel delivery market share has 
continued to grow, several questions remain regarding USPS's 
ability to accurately capture total costs associated with its 
parcel services. For the Postal Service to continue to 
associate a majority of its operational costs as 
``institutional'' is an affront to Congress and an 
administration that holds transparency and accountability 
    The budget recommends broad-based restructuring of the 
Postal Service. It should provide USPS with the flexibility 
that any business needs to create a viable and sustainable 
business model. That model should allow the Postal Service to 
compete in a 21st-Century economy, and to respond to changing 
market conditions, including declining mail volume. Examples of 
the flexibility that should be considered have been included in 
several reform proposals approved by the House Committee on 
Oversight and Government Reform, including calls to modify both 
the frequency and type of mail delivery. Allowing the Postal 
Service the authority to expand the products and services it 
provides would aid in creating additional revenue. This budget 
also recognizes the need to reform compensation of postal 
employees who currently pay a smaller share of the costs of 
their health and life insurance premiums than do all other 
Federal employees, and to address the prefunding schedule for 
postal retiree health benefits established in the ``Postal 
Accountability and Enhancement Act of 2006''.

                          AND RELATED PROGRAMS

                   Function Summary: Direct Spending

    Earning a college degree can bring marked, long-lasting 
benefits to individuals and society. Prospective and enrolled 
college students alike cite better employment prospects and 
financial security among their reasons for going to 
college.\380\ In addition to gaining sought-after knowledge and 
skills, graduates tend to enjoy higher earnings over a 
lifetime, steady employment, and access to jobs that require 
advanced training.\381\ They are also less likely to live in 
poverty or participate in public assistance programs.\382\ In 
turn, such financial security can help individuals pursue 
professional and personal goals, such as launching a business, 
climbing the career ladder, starting a family, and saving for 
retirement or their children's education. Society benefits in 
numerous ways from an educated citizenry, not least of which is 
having a competitive workforce to contribute to economic 
    \380\New America, College Decisions Survey: Deciding to Go to 
collegedecisions/, 28 May 2015, and Kaitlin Mulhere, ``141,000 Freshman 
Say Their Major Reason for Attending College Is * * *,'',
    \381\College Board, Education Pays, 2016, https://
    America's higher education system gives students choices 
and an abundance of opportunity. Students can choose among two-
year or four-year programs at public, private, career and 
technical schools, and proprietary schools. They also can 
enroll in programs of study ranging from liberal arts, to math 
and the sciences, to business, or to career and technical 
training. Additionally, schools offer study abroad programs, 
externships with industry-specific employers, and other on-the-
job training opportunities that teach valuable skills.
    Innovation is increasing choice and access in the higher 
education system, entrepreneurs and existing institutions are 
building programs on new business models, increasing the supply 
of postsecondary education. Some providers have designed online 
courses and degrees, as a complement or alternative to 
traditional in-class instruction.\383\ Others offer competency-
based programs, in which students move through coursework at 
their own pace and earn credit based on what they learn, not 
the number of hours they spend in a classroom.\384\ In some 
instances, such innovation has lowered costs in higher 
education. For example, Georgia Institute of Technology offers 
an online master's in computer science program for $7,000.\385\ 
A traditional high school graduate can earn a bachelor's degree 
through the competency-based Texas Affordable Baccalaureate 
Program for a cost of $13,000 to $15,000.\386\ These are just 
two examples of the innovation happening around the country.
    \383\Michael B. Horn, Testimony before Senate HELP Committee,
    \384\Lindsey M. Burke and Stuart M. Butler, Ph.D., Accreditation: 
Removing the Barrier to Higher Education Reform, Heritage Foundation 
Backgrounder No. 2728, 21 September 2012:
    \385\Kevin Carey, ``An Online Education Breakthrough? A Master's 
Degree for a Mere $7,000,'' The New York Times, 28 September 2016:
    \386\The Texas Higher Education Coordinating Board, South Texas 
College, Texas A&M University-Commerce, and the College for All Texans 
Foundation jointly developed the Texas Affordable Baccalaureate 
Program. See Thomas Lindsay, Ph.D., Testimony before the House Budget 
Committee, 21 September 2016, p. 6:,
    These new business models and the choices they bring 
benefit students and, in particular, contemporary students, who 
now constitute the majority of those attending college.\387\ 
These students are beyond the 18-to-21-year-old high school 
graduate age, and they may have full-time jobs and families. A 
technology-rich, flexible education experience can help them 
earn a degree in concert with their work schedules, family 
commitments, and geographic locations--removing those barriers. 
An affordable experience lowers a common barrier: high cost. 
Traditional high school graduates and contemporary college 
students both benefit from comparably lower-priced degree 
programs, because they do not have to borrow substantially and 
assume the associated risks.
    \387\Committee on Education and the Workforce, Views and Estimates 
for Fiscal Year 2018, p.3.
    Yet college affordability has been, and remains, a 
challenge for many students and their families. The Federal 
Government has provided substantial student aid, particularly 
through loans, since the 1960s, with the purpose of increasing 
college access and affordability--especially for low-income, 
disadvantaged students. Today it administers grant and loan 
programs, and authorizes the accrediting entities charged with 
monitoring institutions' quality. Yet Federal involvement in 
higher education has come with several disconcerting trends. 
Among them are:

      Rising college costs. College tuition is 
increasing well beyond inflation. For example, after accounting 
for inflation, published tuition and fees at public four-year 
schools are 3.1 times higher in the 2016-17 academic year than 
in 1986-87; 2.29 times higher at private four-year schools; and 
2.43 times higher at public two-year schools.\388\ There is 
debate over what is causing steady and robust tuition 
increases. Regulatory compliance costs may contribute, as may 
State budget constraints--though not at all types of 
institutions.\389\ Another explanation holds that students' 
easy and expanded access to Federal aid has enabled schools to 
increase tuition rates. The New York Federal Reserve examined 
the relationship between expanded lending and tuition and found 
that on average, for every dollar increase in subsidized loans, 
tuition increased by up to 60 cents.\390\ The researchers found 
a smaller but still positive pass-through effect on 
unsubsidized loans.
    \388\College Board, Trends in Higher Education, Published Tuition 
and Fees Relative to 1986-87, by Sector, https://
    \389\Preston Cooper, ``State Budget Cuts Don't Explain Tuition 
Increases,'', 14 September 2016:
    \390\The pass-through effect of subsidized loans was larger for 
private schools than public ones. See Federal Reserve Bank of New York, 
``Credit Supply and the Rise in College Tuition: Evidence from the 
Expansion in Federal Student Aid Programs,'' Staff Report, Revised 

      Student debt. There is widespread concern that 
students are borrowing money they do not need and may have 
trouble repaying. Research shows defaults come most frequently 
from those who borrow less than $5,000.\391\ The Federal 
Government holds most student loan debt; as of the second 
quarter 2017, its portfolio was $1.3 trillion, up from roughly 
$516 billion in fiscal year 2007.\392\ One explanation for the 
increase is a greater number of students seeking a 
postsecondary credential. In addition, some Federal programs 
allow graduate students to borrow essentially unlimited 
amounts, and some lend essentially unlimited amounts to parents 
without expecting they will be able to repay. Students are 
permitted to borrow up to statutory annual and aggregate loan 
limits, and institutions of higher education are unable to 
limit them to borrowing less than these limits. Institutions 
and their financial aid administrators, for example, might 
otherwise believe it is in the students' best interest to limit 
the amounts they can borrow based on the level of credential or 
program of study they are pursuing, to prevent them from over-
borrowing. As Federal lending consumes an ever-larger share of 
the student loan market, it crowds out private and other 
lenders that may have better products to meet individual 
borrowers' needs. There is also concern that as students 
struggle to pay back their student loan debt, they may delay 
important goals, such as buying a home or saving for 
    \391\``Share of Defaulters and Three-Year Default Rate by Loan 
Balance,'' Trends in Student Aid, The College Board, 2016: https://
    \392\Office of Federal Student Aid U.S. Department of Education, 
Federal Student Aid Portfolio Summary:
    \393\Federal Reserve, How Much Student Debt is Out There?, 7 August 

      Complex, overlapping Federal aid programs. 
Students and parents navigate a confusing array of grants, 
loans, and loan repayment options when trying to figure out how 
to pay for college.\394\ Each program has distinct eligibility 
criteria and terms. For example, nine loan repayment plans now 
exist, after the Obama Administration created new ones through 
the regulatory process. A borrower has some choice, but may be 
limited based on when he or she took out their loan. Comparing 
monthly payments and other features of the various repayment 
plans can be confusing and time-consuming. It is in the 
interests of students and taxpayers to have a simplified aid 
    \394\A Better Way:

    College has become more expensive, and therefore less 
accessible for many Americans. Students face a dilemma: do not 
go to college and forego the lasting benefits, or take on 
sizeable debt and associated risks, such as having trouble 
repaying loans in a weak job market. Loans are even riskier for 
students who begin but do not complete a degree or certificate; 
these borrowers are much more likely to default on their loans 
than peers who finish their programs.\395\
    \395\College Board, Trends in Student Aid, ``Two-Year Default Rates 
by Sector and Completion Status,''
    Another pernicious problem lies with how the Federal 
Government accounts for--or measures the costs of--student loan 
programs and most other Federal loan and loan guarantee 
programs. It uses accounting procedures established by the 
Federal Credit Reform Act of 1990 [FCRA]. CBO explains the 
problem with this as follows: ``FCRA accounting does not 
consider some costs borne by the government. In particular, it 
omits the risk taxpayers face because federal receipts from 
interest and principal payments on student loans tend to be low 
when economic and financial conditions are poor and resources 
therefore are more valuable.''\396\ Borrowers may have trouble 
repaying loans if they cannot find a job, or if wages are 
stagnant. Under FCRA, the government makes money on student 
loans and has a perverse incentive to issue more loans, 
regardless of the consequences for students, families, and 
taxpayers. The CBO projects that in 2018, the government will 
save 9 cents for every dollar in student loans under FCRA.\397\ 
Alternate procedures, called fair-value accounting, account for 
such risks.\398\ As a contrast to FCRA estimates, CBO projects 
the government will spend 12 cents for evfery loan dollar 
issued in 2018 under fair-value measures.\399\
    \396\Congressional Budget Office, Options to Change Interest Rates 
and Other Terms on Student Loans, June 2013, p. 2:
    \397\Congressional Budget Office 29 June 2017 Baseline Projections 
for the Student Loan Program, 25 January 2017,
    \398\The Federal Government used fair-value accounting in 
estimating the Troubled Asset Relief Program.
    \399\Congressional Budget Office June 2017 Baseline Projections for 
the Student Loan Program.
    The FCRA accounting regime discourages lawmakers from 
implementing certain reasonable policy changes. For example, 
subsidized and unsubsidized Direct Loans for undergraduates and 
graduates have borrowing limits. PLUS loan programs for 
graduate students and parents, by comparison, are limited only 
by the cost of attendance, as determined by the institution. 
Under FCRA, extending limits to PLUS loan programs would cost 
the government money.
    Unrealistic assumptions in the accounting methodology cause 
the spending for this section of the resolution--which is bound 
by the same estimating conventions--to be negative: in fiscal 
year 2018, budget authority totals -$10.5 billion, and outlays 
are -$2.0 billion. As previously explained, these figures are 
    This resolution envisions a framework that uses Federal 
dollars more efficiently, accounts for student loans in a way 
that reflects their true cost, and invests in a sustainable 
higher education system that is good for students, institutions 
of higher education, and taxpayers. Student loans are a major 
component of direct spending in this category, shown as 
Function 500 in Table 3. Additionally, the function reflects 
numerous other programs supporting higher education, and some 
others that fund social services.

              Illustrative Direct Spending Policy Options

    The transformation of programs in this area will be 
determined primarily by the Committee on Education and the 
Workforce, which has complete flexibility in determining 
policies. Committee members may be guided by some of the 
principles described above. Potential policy options include 
those below.


    Repeal New Funding from the Student Aid and Fiscal 
Responsibility Act of 2010. During the debate on the ``Student 
Aid and Fiscal Responsibility Act'' [SAFRA], the CBO provided 
estimates showing that projected future savings from a 
government takeover of all Federal student loans decreased 
dramatically when market risk was taken into account. Since 
then, the National Commission on Fiscal Responsibility and the 
Pew-Peterson Commission on Budget Reform have recommended 
incorporating fair-value accounting for all Federal loan and 
loan-guarantee programs to enable a true assessment of their 
cost to taxpayers.
    However, SAFRA exploited the higher non-adjusted savings 
projection to help subsidize the Affordable Care Act and to 
increase spending on several education programs. Although much 
of the funding allocations have already been spent, Congress 
could cancel some of the future spending by repealing 
expansions to some Federal income-based repayment programs. The 
Income-Based Repayment Program, created by the ``College Cost 
Reduction and Access Act of 2007'', and accelerated by the 
Obama Administration, is one example. In addition to rolling 
back the expansions and streamlining the number of repayment 
plans tied to a borrower's income, the Education and the 
Workforce Committee could consider limiting how much taxpayer-
funded loan forgiveness the government offers under income-
based repayment. The expansions could disproportionately 
benefit graduate and professional students who over-borrow and 
struggle to repay their loans; graduate and professional 
students would have considerable amounts of debt forgiven, at a 
steep cost to taxpayers. Moreover, the expansions could 
encourage students to borrow too much, which is the opposite 
signal policymakers should send.\400\ One version of a reform 
to income-driven repayment plans appeared in President Trump's 
fiscal year 2018 budget, with the goal of streamlining the 
financing options students face. Congress should reform these 
programs to ensure they are meeting their intended goals, are 
designed to give students proper incentives, and are protecting 
taxpayer dollars.
    \400\See American Enterprise Institute, Balancing Risk and 
Responsibility: Reforming Student Loan Repayment, 19 November 2015, p. 

    Accept the Fiscal Commission's Proposal to Eliminate In-
School Interest Subsidies for Undergraduate Students. The 
Federal Government focuses aid decisions on family income prior 
to a student's enrollment and then provides a number of 
repayment protections and, in some cases, loan forgiveness 
after a period of repayment. There is no evidence that in-
school interest subsidies are critical to individual 
matriculation. Ending these subsidies for future graduates 
would create parity with graduate loans; with enactment of the 
``Budget Control Act of 2011'', the Federal Government ceased 
to pay interest on graduate loans while borrowers are in 

    Simplify the Existing Higher Education Programs to Protect 
Students and Taxpayers. The current Federal aid system is 
unduly complicated. Students and their parents must wade 
through an array of six loans, nine loan repayment plans, as 
well as eight loan forgiveness programs and 32 options for loan 
deferment and forbearance.\401\ As the House Education and the 
Workforce Committee describes it: ``Many students, particularly 
first-generation and low-income students, are bogged down with 
the complexity of the current system, which ultimately deters 
them from accessing aid that will make college an affordable 
    \401\Committee on Education and the Workforce, Rep. Guthrie Opening 
Statement, Hearing on ``Improving Federal Student Aid to Better Meet 
the Needs of Students,'' 21 March 2017:
    \402\Committee on Education and the Workforce, Budget Views and 
Estimates for Fiscal Year 2018, 3 March 2017.
    Simplifying both the aid and repayment options available to 
students and parents is important. Actions taken by the 
committee of jurisdiction to reduce duplication and make the 
financing system less complicated could include ending the 
Public Service Loan Forgiveness [PSLF] Program and the Teacher 
Loan Forgiveness program, or limiting forgiveness under either 
program. The Government Accountability Office estimates the 
Teacher Loan Forgiveness Program is benefiting only 0.8 percent 
of people eligible; students may be unaware of the program or 
have difficulty understanding how it interacts with other loan 
repayment and forgiveness arrangements.\403\ Borrowers who work 
full time in a public service job can have their loan balance 
forgiven after making 120 cumulative monthly loan payments (10 
years) under a qualifying income-based plan, as part of the 
PSLF program. The first borrowers will be eligible for 
forgiveness in October 2017. The exact number who will seek 
debt relief in the coming years is unknown, as is the dollar 
amount of loan forgiveness, because borrowers can verify their 
employment and other requirements with the Department of 
Education at the end--after 10 years of payments. Public 
service in this program has a broad definition--so broad that 
the GAO estimates one-quarter of all workers are in public 
service.\404\ As borrowers increasingly enroll in income-based 
repayment plans, not only will more borrowers potentially be 
eligible for loan forgiveness under those plans, but one can 
expect the taxpayer-funded debt relief through PSLF to 
increase. President Trump's fiscal year 2018 budget also 
proposed ending PSLF as part of a package of reforms to 
simplify student loan financing and repayment.
    \403\Government Accountability Office, ``Better Management of 
Federal Grant and Loan Forgiveness Programs for Teachers Needed to 
Improve Participant Outcomes,'' February 2015:
    \404\Government Accountability Office, Federal Student Loans: 
Education Could Do More to Help Ensure Borrowers Are Aware of Repayment 
and Forgiveness Options, August 2015, p. 27:

    Phase out Underused TEACH Grants. The budget also assumes a 
consolidation of Federal grant aid for students to simplify the 
system and better target resources. One option would be to 
phase out the Teacher Education Assistance for College and 
Higher Education [TEACH] Grant Program. TEACH Grants are aimed 
at encouraging promising undergraduate and graduate students to 
teach in high-needs fields in low-income schools. Undergraduate 
students can receive up to $16,000, and graduate students can 
receive up to $8,000. They must teach subjects such as math, 
science, and foreign language for four years within eight years 
of graduating. If they do not complete the service requirement, 
their grants become loans with interest. The GAO has reported 
several troubling findings about TEACH grants: one-third of the 
grants have been converted to loans--some erroneously, the 
program has only a 19-percent utilization rate among eligible 
students, and the Department of Education does not yet 
adequately evaluate the program's effectiveness.\405\
    \405\Government Accountability Office, ``Better Management of 
Federal Grant and Loan Forgiveness Programs for Teachers Needed to 
Improve Participant Outcomes.'' Factors ranging from securing and then 
maintaining a teaching position at a qualifying school for four years 
to completing necessary paperwork can make fulfilling the program 
requirements a challenge.

                            SOCIAL SERVICES

    Terminate the Duplicative Social Services Block Grant. The 
Social Services Block Grant is an annual payment sent to 
States--without any matching, accountability, or evaluation 
requirements--intended to help achieve a range of social goals, 
including by providing child care, health, and employment 
services. Most of these activities are also funded by other 
Federal programs designed to support these same services. 
States are given wide discretion in determining how to spend 
this money and are not required to demonstrate the outcomes of 
this spending, so there is no evidence of its effectiveness. 
The budget assumes the elimination of this duplicative 


                   Function Summary: Direct Spending

    The fiscal year 2018 budget resolution continues to support 
policies that will make America's natural resources available 
to producers who can provide a fair return to taxpayers. In 
addition to receipts the Federal Government collects from 
royalties, rents, and bonus bids, increased economic activity 
on Federal land will create jobs and boost economic output.
    Farm security, rural investment programs, and the Fish and 
Wildlife Service's Federal aid in wildlife restoration programs 
are among the largest direct spending programs in this 
category. The remaining funds are distributed among numerous 
smaller programs. The direct spending budget totals for these 
programs are $385 million in budget authority and $1.0 billion 
in outlays for fiscal year 2018; over 10 years, the figures are 
-$12.4 billion in budget authority and -$11.1 billion in 
outlays. (See Function 300 in Table 3.)
    Oil and gas production on Federal land fell significantly 
under the Obama Administration, but the decline was more than 
offset by increased production on private lands. In fiscal year 
2009, the U.S. produced 5.6 million barrels of oil per day, 
with production on Federal property accounting for 31 percent 
of the total.\406\ By fiscal year 2015 (the most recent figures 
available), the U.S. produced 9.4 million barrels per day, but 
production on Federal lands represented only 21 percent of the 
    \406\Marc Humphries, U.S. Crude Oil and Natural Gas Production in 
Federal and Non-Federal Areas, Congressional Research Service, 22 April 
    Similarly, timber harvests on Federal land have declined 
for decades since peaking in the late 1980s and early 1990s. In 
fiscal year 1988, 14.6 million board feet of timber were 
harvested on Federal land, with a total value of roughly $2.5 
billion (in 2013 dollars).\408\ In fiscal year 2014 (again, the 
most recent available figures), only 2.4 million board feet 
were harvested, generating less than $150 million.\409\ This 
dramatic reduction in economic activity in States and counties 
that have Federal lands within their borders has wreaked havoc 
on their ability to fund local services, such as schools.
    \408\Katie Hoover, National Forest System Management: Overview, 
Appropriations, and Issues for Congress, Congressional Research 
Service, 29 January 2015.
    One large culprit: The previous administration kept Federal 
lands under lock and key, while pressing its politically 
motivated climate change agenda. On 15 January 2016, the Obama 
Administration unilaterally imposed a moratorium on new leases 
for coal mined from Federal land.\410\ This halt dealt another 
crushing blow to the coal industry. Mining on Federal lands 
accounts for 42 percent of the coal production in America, and 
approximately 34 percent of U.S. coal reserves is located on 
Federal lands.\411\ The Bureau of Land Management estimated 
that nearly 1.9 billion tons of coal reserves in nine States 
would be placed off limits due to the Secretarial Order.
    \410\Joby Warrick and Juliet Eilperin, ``Obama Announces Moratorium 
on New Federal Coal Leases,'' The Washington Post, 15 January 2016:
    \411\Marc Humphries, The Federal Coal Leasing Moratorium, 
Congressional Research Service, 30 March 2017.
    Moreover, Federal coal leases provide thousands of jobs as 
well as revenue for State and local communities. The moratorium 
was rescinded by Secretary Zinke on 29 March 2017.\412\ This 
budget supports the Trump Administration's efforts to reverse 
the past eight years of Federal subjugation over domestic 
energy production and the communities who were devastated by 
former President Obama's Federal fiat. Domestic energy 
independence is a priority for the United States, and will have 
a far-reaching effect on not just the economy and American 
jobs, but foreign policy and international affairs as well.
    \412\U.S. Department of the Interior, ``Secretary Zinke Takes 
Immediate Action to Advance American Energy Independence, 29 March 
    The Federal Government owns ``somewhere between 635 million 
and 640 million acres of land--almost a third of the United 
States.''\413\ The government cannot properly manage all this 
land and, as a result, Federal agencies struggle with a 
maintenance backlog estimated at $17 billion to $22 
billion.\414\ The budget resolution supports giving States and 
localities more control over the resources within their 
borders. This will lead to increased resource production and 
regulatory efficiency, while allowing States and localities to 
take advantage of the benefits of increased economic activity.
    \413\House Committee on Natural Resources, Views and Estimates for 
Fiscal Year 2018.

                  Illustrative Direct Spending Options

    As it develops policies in these areas, the Committee on 
Natural Resources may wish to consider the factors above. Below 
are options that could emerge from such consideration.

    Maintaining Existing Land Resources. As noted, the Federal 
Government already struggles with its $17-billion-to-$22-
billion maintenance backlog, but the Obama Administration 
sought to acquire even more land. This budget keeps funding for 
land acquisition under congressional oversight, giving States 
and localities more control over the land and resources within 
their borders.

    Expand Access to Federal Land for Timber Harvest. Timber 
harvest rates on Federal land have declined for nearly 30 
years. As a result, the States and localities that depend on 
their share of the receipts have been shortchanged the funding 
they expected to receive to pay for schools and other local 
priorities. Increased timber harvests will generate economic 
growth in localities throughout the country, increase receipts 
to the Federal Government, States, and localities, and reduce 
the need for funding replacement programs, such as Secure Rural 

    Expand Onshore and Offshore Natural Resource Production. 
Despite the existence of abundant domestic resources, the 
Federal Government has adopted policies that hinder American 
production of oil and natural gas on Federal lands and in 
Federal waters. Breaking free of future dependence on energy 
supplies from countries whose interests differ from those of 
the United States requires producing more energy at home.
    Unlocking domestic energy supplies in a safe, 
environmentally responsible manner will increase receipts from 
bonus bids, rental payments, royalties, and fees. The budget 
allows for greater access in areas such as Alaska, the Outer 
Continental Shelf, the Gulf of Mexico, and the Intermountain 
    Expanding the authority of the Department of the Interior 
to allow for leasing of helium and other critical gases will 
provide a new revenue stream for the United States and ensure a 
consistent supply for the Nation's medical, military, and 
technology industries.

                         OTHER DIRECT SPENDING

                 General Science, Space, and Technology

    Almost all the government's science and technology funding 
is discretionary. Nevertheless, there is a small amount of 
direct spending within the National Science Foundation that 
funds the Directorate for Education and Human Resources [EHR]. 
The EHR focuses on science, technology, engineering, and math 
programs at all educational levels.
    The resolution calls for $107 million in direct spending 
budget authority and $105 million in outlays in fiscal year 
2018.The 10-year totals are $1.0 billion for both budget 
authority and outlays. The figures appear in Table 3, Function 

                   Community and Regional Development

    The main direct spending component of this function 
(Function 450 in Table 3) is the National Flood Insurance 
Program [NFIP]. The NFIP reauthorization will expire 30 
September 2017. The Committee on Financial Services says: 
``[T]here is little to no private sector alternative to the 
NFIP, exposing taxpayers to virtually all of the nation's 
insured flood risk. Forty-nine years after the NFIP's creation, 
given the dynamics of the market and the information now 
available, the Committee believes the biggest impediment to the 
development of a private flood insurance market is the 
subsidized monopoly of the NFIP. The Committee will explore 
legislative initiatives to facilitate the establishment of a 
private flood insurance market that serves the needs of all 
Americans and reduces the significant financial risk faced by 
taxpayers.''\415\ In January 2017, the NFIP announced another 
$1.6 billion is needed from taxpayers to cover flood insurance 
losses in 2016. This brings the total cumulative debt of the 
NFIP to $24.6 billion.
    \415\Committee on Financial Services, U.S. House of 
Representatives, Views and Estimates, 3 March 2017.
    Other direct spending programs within the function include 
activities such as Community Development Financial 
Institutions, Rural Energy for America, the Bureau of Indian 
Affairs and Indian Education, and activities of the Gulf Coast 
Restoration Trust Fund. The resolution calls for -$767 million 
in direct spending budget authority and -$975 million in 
outlays in fiscal year 2018. The 10-year totals for direct 
spending budget authority and outlays are -$10.7 billion and 
-$10.3 billion, respectively.
    A potential savings option here is to reduce energy 
subsidies for commercial interests. The budget recommends 
spending reductions for rural green-energy loan guarantees. 
These loan guarantees come with Federal mandates that channel 
private investments into financing the administration's 
preferred interests at taxpayers' expense.

                          Financial Management


    The remaining categories chiefly concern major non-
programmatic financing mechanisms for the Federal Government. 
Net Interest, for example, represents payments resulting from 
the government's prior borrowing. Allowances is a placeholder 
function for budgetary effects that the Congressional Budget 
Office [CBO] has not yet assigned to other specific categories. 
Undistributed Offsetting Receipts represents payments to the 
government that are recorded as negative budget authority and 
outlays. These three functions round out the spending 
components of the budget overall.

                              NET INTEREST

                            Function Summary

    As the government runs chronic deficits, it continues 
running up interest costs. These payments provide no benefits, 
and finance no government service or operations. They are 
simply excess costs resulting from a history of spending beyond 
the government's means. According to the Congressional Budget 
Office, if government programs are not reformed, net interest 
payments are projected to nearly triple over the next decade, 
rising from $270 billion this year to $768 billion in 2027. 
During this time, the Federal Government will reach a point at 
which it spends more on interest payments than it does on 
national defense, Medicaid, education, and infrastructure, 
among others. Interest on the debt will become the government's 
third largest program, following only Social Security and 
    These costs are reflected in this category (Function 900 in 
Tables 1 and 3), which presents the interest paid for the 
Federal Government's borrowing minus the interest received by 
the Federal Government from trust fund investments and loans to 
the public. It is a mandatory payment, in the true sense of the 
word, with no policy options and no discretionary components.
    Reducing interest costs will require sustained spending 
restraint. This budget resolution provides such restraint, and 
it reduces net interest by $628 billion over 10 years compared 
with the CBO baseline.

                    Summary of Net Interest Payments

    The resolution calls for $295.3 billion of direct spending 
for net interest payments in fiscal year 2018. Over 10 years, 
interest payments are expected to total $4.6 trillion.
    On-budget direct spending--or net interest payments 
unrelated to Social Security--sum to $376.8 billion in fiscal 
year 2018 and $5.3 trillion over 10 years. The on-budget figure 
is larger than the budget Function 900 total, because the 
former is offset by off-budget interest payments to the Social 
Security Trust Fund. These off-budget payments are presented as 
negative numbers, because they reflect money coming into, 
rather than flowing out of, the Treasury. Off-budget direct 
spending is -$81.5 billion in fiscal year 2018 and -$669 
billion over 10 years.


                            Function Summary

    The Allowances categories represent place-holders for 
certain budgetary effects to which CBO has yet to assign to a 
specific budget function. In the case of this resolution, there 
are two presented as Function 920 and 990 in the summary 
tables. The particulars of the categories are described below.

                              Function 920

    In August 2011, the former President Obama and Congress 
enacted the Budget Control Act [BCA] of 2011 (Public Law 112-
25), which provided for significant spending reductions, 
enforced by statutory spending caps and an automatic 
enforcement procedure. The BCA did not specify a distribution 
of spending reductions in specific budget functions other than 
for National Defense (Function 050) and Medicare (Function 
570), even though the law does require reductions in non-
defense and non-Medicare areas of the budget. At the time of 
its January 2017 baseline release, the Congressional Budget 
Office did not provide forward-looking, function-level 
information on what non-defense and non-Medicare reductions are 
under the terms of the BCA. The CBO has, instead, assigned the 
non-defense and non-Medicare reductions required by the BCA to 
Function 920.
    In Function 920, the budget resolution includes reductions 
of $499.2 billion in budget authority and $450.8 billion in 
outlays over 10-years to reflect the impact of the BCA on non-
defense and non-Medicare spending.

                              Function 990

    The CBO baseline for Function 990 includes reductions of 
$10.3 billion in budget authority and $9.7 billion in outlays 
over 10 years, to reflect the impact of an across-the-board cut 
contained in the fiscal year 2017 continuing resolution. The 
budget resolution recommends no changes in this function, 
leaving it instead at the CBO baseline levels.


                            Function Summary

    Offsetting receipts to the Treasury are recorded in this 
category as negative budget authority and outlays. Receipts 
appearing here are either intra-budgetary (a payment from one 
Federal agency to another, such as agency payments to the 
retirement trust funds) or proprietary (a payment from the 
public for some kind of business transaction with the 
government). The main types of receipts presented are the 
payments Federal agencies make to employee retirement and 
health care funds; payments made by companies for the right to 
explore and produce oil and gas on the Outer Continental Shelf; 
and payments by those who bid for the right to buy or use 
public property or resources, such as the electromagnetic 
spectrum. The category also contains an off-budget component 
that reflects the Federal Government's share of Social Security 
contributions for Federal employees.
    All transactions in this area are recorded as direct 
spending and appear in Function 950 of Table 3. On a unified 
basis, the resolution calls for -$100.5 billion in budget 
authority and outlays in fiscal year 2018 (the minus sign 
indicates receipts flowing into the Treasury). Over 10 years, 
budget authority and outlays total -$1.2 trillion.
    On-budget amounts are -$83.2 billion in budget authority 
and outlays for fiscal year 2018, and -$1.0 trillion in budget 
authority and outlays over 10 years.
    Off-budget amounts are -$17.3 billion in budget authority 
and outlays for fiscal year 2018, and -$200.0 billion in budget 
authority and outlays over 10 years. The major program in the 
off-budget category is Federal agency matching payments for 
retirement contributions on behalf of Federal employees to the 
Federal Old Age and Survivors and Disability Insurance Trust 
Fund--or Social Security. The budget resolution recommends no 
policy changes to the off-budget portion of Function 950.

                      Illustrative Policy Options

    Federal Real-Property Sales and Management. The Federal 
Government's management, maintenance, and ownership of real 
property continues to plague the Nation's fiscal health. While 
the General Services Administration [GSA] is the primary 
authority tasked with managing this portfolio, the sheer size 
of the government's real estate and property management 
footprint is impossible to ascertain in real time. Adding to 
the burden, the GSA is not equipped to manage this portfolio of 
buildings, structures, and leases. As an agency, GSA lacks 
significant authorities to rein in the desires of other 
agencies and departments to continue leasing buildings and 
other real estate when adequate federally owned property is 
already available. The Federal real-property inventory is so 
massive that the report accounting for it lags two years behind 
the current budget year. Complex procedural requirements, lack 
of organization, and delayed data reporting provide agencies 
with few incentives to dispose of unneeded properties and even 
fewer repercussions for holding onto these properties 
indefinitely. Real-property management has been on the 
Government Accountability Office's list of ``high risk'' 
government activities since 2003. According to the most recent 
Federal Real Property Profile, from fiscal year 2015, the 
Federal Government owns more than 273,000 buildings and 496,000 
structures, with a total of over 2.8 billion square 
    \416\General Services Administration, Summary of Fiscal Year 2015 
Federal Real Property Profile Open Data Set:
    The government has a poor track record for real-estate 
asset sales. The fiscal year 2015 report shows that of the 
14,400 assets the Federal Government disposed of in that year, 
2,369, or almost 20 percent, were disposed of by way of 
demolition. Just more than 1 percent were disposed of through a 
sale. Many assets were conveyed, or given away, at below-market 
value or for free.\417\
    \417\General Services Administration, FY2015 Federal Real Property 
Profile (FRPP) Open Data Set:
    The House Committee on Oversight and Government Reform has 
worked tirelessly to bring accountability, transparency, and 
actionable solutions to fix the Federal real-property 
portfolio. The ``Federal Property Management Reform Act of 
2016'', which became law in December 2016, established a 
Federal Real Property Council tasked with reforming the current 
Federal property management system, and updating the current 
practices that have been unable to provide accurate and up-to-
date metrics on the Federal Government's real estate 
investments.\418\ Using these reforms as a foundation, the 
resolution urges the Office of Management and Budget to 
streamline the asset-sale process; loosen regulations for the 
disposal and sale of Federal property to eliminate red tape and 
waste; set enforceable targets for asset sales; and hold 
government agencies accountable for the buildings they oversee 
and leasing practices of non-governmental real estate. If these 
actions are done correctly, the Federal Government could save 
billions of dollars from selling unused government property and 
realize savings from forcing agencies to utilize government 
real property before entering into outside leases.
    \418\Public Law 114-318.

    Federal Land. Currently, the Federal Government owns nearly 
650 million acres of land--almost 30 percent of the land area 
of the United States. In addition to Federal real-property 
sales, this resolution supports examining Federal lands, in 
consultation with State and local communities, to identify 
where certain lands may be more efficiently managed, thus 
reducing the burden on the Federal government. Excluded from 
this policy are National Parks, wilderness areas, wildlife 
refuges, and wild and scenic rivers.

    Reduce Strategic Petroleum Reserve Through Asset Sales. The 
The Strategic Patroleum Reserve was created following the 
energy crisis of 1973 when the Organization of Petroleum 
Exporting Countries members proclaimed an oil embargo. Since 
then the U.S. has significantly reduced its dependence on 
overseas oil. Furthermore, the recent expansion of U.S. oil 
supplies allows the Federal Government to safely draw down the 
number of barrels it holds in reserve.

                         REVENUE AND TAX REFORM


    The U.S. tax code is notoriously complex, patently unfair, 
and highly inefficient. Its complexity distorts decisions to 
work, save, and invest, which leads to slower economic growth, 
lower wages, and less job creation. This budget proposes to 
address these problems with a reformed pro-growth tax code that 
is simpler and fairer--one that cuts out confusion and lowers 
rates for families and workers. A revamped tax code could raise 
just as much revenue as does the system in place today, without 
the harmful tax policies embedded in current law. A 
restructured and more efficient tax code would also spark 
greater economic growth and job creation. Congress and the 
President have an opportunity to open the door for a tax code 
that is among the most competitive in the world. That means 
more businesses being able to choose to stay here in America, 
rather than being driven by the tax code to move offshore.
    The budget resolution's revenue projections--$3.542 
trillion in fiscal year 2018 and $41.953 trillion through 
2027--are built on a tax reform model derived from the 
principles below.

                             The Challenge

    The current tax code is needlessly complex. It is estimated 
that individuals, families, and employers spend more than 8.9 
billion hours and $409 billion a year trying to negotiate a 
labyrinth of special rules, deductions, and tax schedules.\419\ 
Since 2001, there have been more than 5,800 changes made to the 
tax code. Many of the major changes made over the years have 
carved out special preferences, exclusions, or deductions for 
various activities or groups. These tax breaks sum to roughly 
$1.4 trillion per year (see the tax expenditures table that 
follows this discussion).\420\ To put that figure in 
perspective, the government collected about $1.5 trillion in 
individual income taxes last year.
    \419\The Speaker's Tax Reform Task Force, A Better Way: Our Vision 
for a Confident America--Tax, 24 June 2016.
    \420\National Taxpayer Advocate, Annual Report To Congress 2016.
    As the tax code has grown in complexity, the Internal 
Revenue Service [IRS] has increased its funding requests to 
support an army of tax examiners and agents. To cite just one 
example, the Treasury Department requested more than $402 
million in fiscal year 2017 simply to administer the tax 
elements of the Affordable Care Act. Ways and Means Committee 
Chairman Kevin Brady (R-TX) envisions that, under the House's A 
Better Way tax reform proposal, most Americans will be able to 
do their own taxes on a simple form, roughly the size of a 
postcard. The plan also redesigns the IRS to have a single 
focus--customer service.
    The large amount of tax preferences that pervade the code 
end up narrowing the tax base. A narrow tax base requires much 
higher tax rates to raise a given amount of revenue. Standard 
economic theory shows that high marginal tax rates dampen 
incentives to work, save, and invest, which reduces economic 
output and job creation. Lower economic output, in turn, drains 
off the intended revenue gain from higher marginal tax rates.
    The top tax rate has risen and fallen dramatically 
throughout U.S. history, with little effect on tax revenue as a 
share of the economy. For instance, the top U.S. tax rate for 
individuals has been as high as 90 percent and as low as 28 
percent. Income tax revenue has remained fairly steady, despite 
these sharp rate swings. It turns out that the biggest driver 
of Federal revenue is not higher tax rates, but economic 
growth. A sizable majority of economists point out that a broad 
base and low rates are key in a tax system that fosters 
economic growth and competitiveness. Legislators on both sides 
of the aisle agree on this basic principle.
    One hallmark of the U.S. economy is the role of smaller, 
unincorporated businesses. Roughly half of U.S. active business 
income and half of private sector employment are derived from 
business entities (such as partnerships, S corporations, and 
sole proprietorships) that are taxed on a ``pass-through'' 
basis. This means income derived from a business is passed 
through to the business owner, who pays taxes on it at the 
individual income tax rate. Small businesses, in particular, 
tend to choose this form for Federal tax purposes, and the top 
effective Federal tax rate on such small business income can 
reach nearly 45 percent. For these reasons, sound economic 
policy requires lowering marginal rates on these pass-through 
    The U.S. has the highest corporate income tax rate in the 
industrialized world, at 35 percent, not including State and 
local taxes. The tax itself raises relatively little revenue: 
only about 10 percent of total Federal tax revenue comes from 
taxing corporate income. Furthermore, corporate income is taxed 
twice: first at the corporate entity level, as it is earned, 
and also at the shareholder level, when corporations distribute 
earnings. The current tax structure discourages investment and 
job creation, distorts business activity, and puts American 
businesses at a competitive disadvantage against foreign 
competitors. Policymakers should consider options to limit 
double taxation when comprehensive tax reform is considered. 
Any tax that raises little revenue, yet creates many economic 
distortions is particularly ripe for reform.
    A high corporate tax rate hinders American competitiveness 
by making the U.S. a less desirable destination for investment 
and jobs. Decisions about where to locate a business and make 
investments are becoming more sensitive to country tax rates, 
as global integration increases. Foreign investment is 
important to an economy, because it is a key source of funding 
to finance innovation and jobs. Many countries have been 
lowering their business tax rates to increase their 
competitiveness. The U.S. continues to risk falling behind as 
it maintains a high tax rate while other countries lower 
theirs. The U.S. corporate tax constrains economic growth and 
job creation, because it deters potential investment. Also, the 
U.S. tax rate differential with other countries fosters a 
variety of complicated multinational corporate behaviors 
intended to avoid the tax--profit shifting, corporate 
inversions, and transfer pricing--which have the effect of 
moving the tax base offshore, destroying American jobs, and 
decreasing corporate revenue.
    The structure of U.S. international taxation is also out of 
sync with the international standard used by the majority of 
other countries, putting U.S. businesses operating abroad at a 
competitive disadvantage. Most countries operate under a so-
called ``territorial'' system of international taxation, 
whereby their businesses operating abroad are only subject to 
the tax of the country where they do business. The U.S. has an 
antiquated ``worldwide'' system of international taxation, in 
which U.S. multinational businesses operating abroad pay both 
the foreign-country tax and U.S. corporate taxes when profits 
are repatriated. They are essentially taxed twice. This puts 
them at an obvious competitive disadvantage.
    Reforming the U.S. tax code to an international system 
would boost the competitiveness of U.S. companies operating 
abroad and would also reduce incentives for tax avoidance.

                    Solution: Pro-Growth Tax Reform

    Given the many problems with the current system, Congress 
should enact legislation that provides for a comprehensive 
reform of the U.S. tax code to promote economic growth, create 
American jobs, and increase wages. While the Committee on Ways 
and Means continues to develop specific policies, these aims 
can be achieved through revenue-neutral, fundamental tax reform 
that does the following:

     LSimplifies the tax code to make it fairer to 
American families and businesses and reduces the amount of time 
and resources necessary to comply with tax laws;

     LLowers tax rates for individuals, and 
consolidates the current seven individual income tax brackets;

     LRepeals the Alternative Minimum Tax;

     LReduces the corporate tax rate; and

     LTransitions the tax code from a ``worldwide'' 
system to a ``territorial'' system.

    Economists have shown that lowering overall rates and 
broadening the tax base would create greater economic growth 
and support more job creation by the private sector. A faster-
growing economy would help reduce the budget deficit. According 
to the Congressional Budget Office [CBO], raising productivity 
growth by just 0.1 percentage point per year would reduce the 
deficit by $273 billion over the next decade.
    This resolution calls for comprehensive tax reform and lays 
out several principles. As indicated, there are many good ideas 
on this front--growth-oriented tax plans that could strengthen 
the economy and support the Nation's spending priorities.
    For instance, Representative Rob Woodall (R-GA) has a plan 
that would eliminate taxes on wages, corporations, self-
employment, and capital gains in favor of a personal 
consumption tax providing the economic certainty that American 
businesses, entrepreneurs, and taxpayers desire. The plan also 
eliminates the gift and death taxes.
    Representative Bob Goodlatte (R-VA) has also submitted 
legislation establishing a structure for a tax system that 
encourages job creation and a healthy economy. Without 
prescribing any specific tax system, it calls for a low tax 
rate for all Americans, tax relief for working individuals, 
protection for the rights of taxpayers, and a reduction in tax 
collection abuses. Additionally, under this legislation, the 
tax system would support savings and investment, and would not 
penalize marriage or families.
    It is no secret that Washington has a spending problem, not 
a revenue problem. The tax expenditure table below shows just 
how complex the current tax code is--offering preferential tax 
treatment in the form of credits, deductions and exclusions to 
various categories of industries and individuals. The Joint 
Committee on Taxation estimates this spending through the tax 
code to cost the Federal Government $1.6 trillion in 2017.
    CBO projects Federal revenue will exceed 18.0 percent of 
gross domestic product throughout the next decade, well above 
the 17.4-percent average annual level of the past half century. 
Nevertheless, spending will persistently outpace revenue, 
producing chronic and growing deficits. This is primarily due 
to the growing costs of health and retirement benefits. 
Therefore, Congress should reject proposals that seek to raise 
revenue with the introduction of a new and additional tax to 
finance out of control spending. Such proposals would 
discourage savings and investment and increase the costs of 
individual, family, and employee retirement accounts. The focus 
should be on restraining spending.
    One way to relieve the ever-increasing burden of automatic 
spending is to encourage individuals and families to save. 
Maintaining and strengthening the critical role of the private 
sector in helping all Americans achieve retirement security is 
important. Tax reform that encourages taxpayers to save is pro-
growth economic policy that would consequently enable 
individuals and families to rely less on the Federal 
    Congress should consider these and the full range of pro-
growth plans as it moves toward implementing the tax reform 
called for under this budget.

                                    TABLE 8.--TAX EXPENDITURE ESTIMATES BY BUDGET FUNCTION, FISCAL YEARS 2016-2020\1\
                                                                  [Billions of dollars]
                                                                      Corporations                                 Individuals
                      Function                       ------------------------------------------------------------------------------------------   Total
                                                        2016     2017     2018     2019     2020     2016     2017     2018     2019     2020    2016-20
National Defense:
  Exclusion of benefits and allowances to armed       .......  .......  .......  .......  .......      5.5      5.6      6.1      6.4      6.5      30.1
   forces personnel.................................
  Exclusion of military disability benefits.........  .......  .......  .......  .......  .......      0.3      0.3      0.3      0.3      0.3       1.3
  Deduction for overnight-travel expenses of          .......  .......  .......  .......  .......      0.1      0.1      0.1      0.1      0.1       0.5
   national guard and reserve members...............
  Exclusion of combat pay...........................  .......  .......  .......  .......  .......      1.2      1.3      1.4      1.4      1.4       6.7
International Affairs:
  Exclusion of certain allowances for Federal         .......  .......  .......  .......  .......      1.3      1.3      1.4      1.4      1.5       6.8
   employees abroad.................................
  Exclusion of foreign earned income:
    Housing.........................................  .......  .......  .......  .......  .......      1.1      1.2      1.2      1.2      1.2       5.9
    Salary..........................................  .......  .......  .......  .......  .......      6.6      7.0      7.5      8.0      8.5      37.6
  Inventory property sales source rule exception....      1.7      1.8      1.8      1.8      1.8  .......  .......  .......  .......  .......       8.9
  Deduction for foreign taxes instead of a credit...      0.3      0.3      0.3      0.3      0.3  .......  .......  .......  .......  .......       1.5
  Interest expense allocation:
    Unavailability of symmetric worldwide method*...     -1.2     -1.2     -1.2     -1.1     -1.1  .......  .......  .......  .......  .......      -5.8
    Separate grouping of affiliated financial             0.4      0.4      0.4      0.4      0.5  .......  .......  .......  .......  .......       2.1
  Apportionment of research and development expenses      0.1      0.2      0.2      0.2      0.3  .......  .......  .......  .......  .......       1.0
   for determination of foreign tax credits.........
  Special rules for interest-charge domestic              0.9      0.9      1.0      1.0      1.0  .......  .......  .......  .......  .......       4.8
   international sales corporations.................
  Tonnage tax.......................................      0.1      0.1      0.1      0.1      0.1  .......  .......  .......  .......  .......       0.5
  Deferral of active income of controlled foreign       102.7    119.0    121.8    120.5    123.1  .......  .......  .......  .......  .......     587.2
  Deferral of active financing income...............      9.1      9.4      9.7      9.9     10.3  .......  .......  .......  .......  .......      48.5
General Science, Space, and Technology:
  Credit for increasing research activities (Code         9.4      9.8     10.3     10.9     11.4      1.0      1.0      1.1      1.2      1.3      57.5
   section 41)......................................
  Expensing of research and experimental                  2.0      2.0      2.0      2.0      2.0      0.1      0.1      0.1      0.1      0.1      11.0
  Therapeutic research credit.......................      0.1      0.1  .......  .......  .......      0.1      0.1  .......  .......  .......       0.5
  Credit for energy-efficient improvements to         .......  .......  .......  .......  .......      0.5      0.4  .......  .......  .......       0.9
   existing homes...................................
  Credit for holders of clean renewable energy bonds    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)      0.1      0.1      0.1       0.6
   (Code sections 54 and 54C)\2,3\..................
  Exclusion of energy conservation subsidies          .......  .......  .......  .......  .......    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
   provided by public utilities.....................
  Credit for holders of qualified energy              .......  .......  .......  .......  .......    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.3
   conservation bonds\2,3\..........................
  Energy credit (section 48)........................      2.3      2.5      2.5      2.5      2.7      0.3      0.2      0.1      0.1      0.1      13.6
    Solar...........................................      2.2      2.4      2.4      2.4      2.6      0.2      0.2      0.1      0.1      0.1      12.3
    Geothermal......................................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)     (\4\)
    Fuel Cells......................................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)     (\4\)
    Microturbines...................................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)     (\4\)
    Combined heat and power.........................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)     (\4\)
    Small wind......................................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)     (\4\)
    Geothermal heat pump systems....................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)     (\4\)
  Credits for electricity production from renewable
   resources (section 45):..........................
    Wind............................................      3.1      4.0      4.8      5.2      5.4      0.2      0.2      0.3      0.3      0.3      23.7
    Closed-loop biomass.............................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
    Geothermal......................................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
    Qualified hydropower............................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
    Small irrigation power..........................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
    Municipal solid waste...........................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.4
    Open-loop biomass...............................      0.1      0.2      0.2      0.3      0.3    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       1.2
  Special rule to implement electric transmission        -0.2     -0.2     -0.2     -0.2     -0.2  .......  .......  .......  .......  .......      -1.0
  Credits for investments in clean coal facilities..      0.2      0.2      0.2      0.2      0.2  .......  .......  .......  .......  .......       1.0
  Coal production credits:
    Refined coal....................................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)  .......  .......  .......  .......  .......       0.1
    Indian coal.....................................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)  .......  .......  .......  .......  .......       0.1
  Credits for alternative technology vehicles:
    Other alternative fuel vehicles.................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)  .......  .......  .......  .......  .......       0.1
  Residential energy-efficient property credit......  .......  .......  .......  .......  .......      1.1      1.0      0.4      0.4      0.4       3.2
  Credit for plug-in electric vehicles..............      0.2      0.3      0.3      0.4      0.4      0.1      0.4      0.5      0.5      0.6       4.4
  Credit for investment in advanced energy property.      0.2      0.2      0.1      0.1    (\4\)      0.1      0.1      0.1      0.1      0.1       0.8
  Exclusion of interest on State and local              (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.7
   government qualified private activity bonds for
   energy production facilities.....................
  Expensing of exploration and development costs,
    Oil and gas.....................................      1.4      1.2      1.1      1.0      0.9      0.4      0.4      0.4      0.3      0.3       7.4
    Other fuels.....................................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.6
  Excess of percentage over cost depletion, fuels:
    Oil and gas.....................................      0.7      0.8      0.9      0.9      1.0    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       4.3
    Other fuels.....................................      0.2      0.2      0.2      0.1      0.1    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.9
  Amortization of geological and geophysical              0.1      0.1      0.1      0.1      0.1    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.6
   expenditures associated with oil and gas
  Amortization of air pollution control facilities..      0.5      0.8      0.9      1.0      1.0  .......  .......  .......  .......  .......       4.2
  Depreciation recovery periods for energy-specific
    Five-year MACRS for certain energy property           0.2      0.2      0.2      0.2      0.6      0.1      0.1      0.1      0.1      0.2       2.0
     (solar, wind, etc.)............................
    10-year MACRS for smart electric distribution         0.1      0.1      0.1      0.1      0.1  .......  .......  .......  .......  .......       0.5
    15-year MACRS for certain electric transmission       0.1      0.1      0.1      0.1      0.1  .......  .......  .......  .......  .......       0.5
    15-year MACRS for natural gas distribution line.      0.2      0.2      0.2      0.1      0.1  .......  .......  .......  .......  .......       0.8
  Exceptions for publicly traded partnership with     .......  .......  .......  .......  .......      0.9      1.0      1.0      1.0      1.0       4.9
   qualified income derived from certain energy-
   related activities...............................
Natural Resources and Environment:
  Special depreciation allowance for certain reuse      (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
   and recycling property...........................
  Expensing of exploration and development costs,         0.1      0.1      0.1      0.1      0.1    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.5
   nonfuel minerals.................................
  Excess of percentage over cost depletion, nonfuel       0.1      0.1      0.1      0.1      0.1    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.5
  Expensing of timber-growing costs.................      0.3      0.3      0.3      0.3      0.3    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       1.6
  Special rules for mining reclamation reserves.....    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.2
  Special tax rate for nuclear decommissioning            0.2      0.3      0.3      0.3      0.3  .......  .......  .......  .......  .......       1.4
   reserve funds....................................
  Exclusion of contributions in aid of construction     (\4\)    (\4\)    (\4\)    (\4\)    (\4\)  .......  .......  .......  .......  .......       0.2
   for water and sewer utilities....................
  Exclusion of earnings of certain environmental        (\4\)    (\4\)    (\4\)    (\4\)    (\4\)  .......  .......  .......  .......  .......       0.1
   settlement funds.................................
  Amortization and expensing of reforestation             0.1      0.1      0.1      0.1      0.1      0.1      0.1      0.1      0.2      0.2       1.3
  Capital gains treatment for qualified timber        .......  .......  .......  .......  .......      0.3      0.4      0.4      0.4      0.4       1.9
   income (including coal and iron ore).............
  Treatment of income from exploration and mining of  .......  .......  .......  .......  .......      0.1      0.1      0.1      0.1      0.1       0.5
   natural resources as qualifying income under the
   publicly-traded partnership rules................
  Expensing of soil and water conservation              (\4\)    (\4\)    (\4\)    (\4\)    (\4\)      0.1      0.1      0.1      0.1      0.1       0.6
  Expensing of the costs of raising dairy and           (\4\)    (\4\)    (\4\)    (\4\)    (\4\)      0.2      0.1    (\4\)    (\4\)    (\4\)       0.4
   breeding cattle..................................
  Exclusion of cost-sharing payments................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
  Exclusion of cancellation of indebtedness income    .......  .......  .......  .......  .......      0.1      0.1      0.1      0.1      0.1       0.5
   of farmers.......................................
  Income averaging for farmers and fishermen........  .......  .......  .......  .......  .......      0.2      0.2      0.2      0.2      0.2       1.0
  Five-year carryback period for net operating          (\4\)    (\4\)    (\4\)    (\4\)    (\4\)      0.1      0.1      0.1      0.1      0.1       0.4
   losses attributable to farming...................
  Expensing by farmers for fertilizer and soil          (\4\)    (\4\)    (\4\)    (\4\)      0.1      0.1      0.1      0.1      0.1      0.2       0.9
   conditioner costs................................
  Cash accounting for agriculture...................    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
Commerce and Housing:
    Deduction for mortgage interest on owner-         .......  .......  .......  .......  .......     59.0     63.6     72.4     78.7     83.4     357.0
     occupied residences............................
    Exclusion of income attributable to the           .......  .......  .......  .......  .......      2.3      1.2  .......  .......  .......       3.5
     discharge of principal residence acquisition
    Deduction for premiums for qualified mortgage     .......  .......  .......  .......  .......      1.0      0.8  .......  .......  .......       1.7
    Deduction for property taxes on real property...  .......  .......  .......  .......  .......     31.2     33.3     36.4     38.5     40.5     180.0
    Exclusion of capital gains on sales of principal  .......  .......  .......  .......  .......     29.2     32.1     33.4     34.9     36.8     166.3
    Exclusion of interest on State and local              0.4      0.4      0.4      0.4      0.4      0.9      1.0      1.0      1.1      1.1       7.1
     government qualified private activity bonds for
     owner-occupied housing\5\......................
    Credit for low-income housing...................      7.9      8.2      8.6      9.0      9.6      0.3      0.3      0.4      0.4      0.4      45.1
    Credit for rehabilitation of historic structures      0.7      0.7      0.8      0.8      0.9      0.2      0.2      0.2      0.2      0.2       4.8
    Credit for rehabilitation of structures, other      (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)      0.1      0.1      0.1       0.3
     than historic structures.......................
    Exclusion of interest on State and local              0.3      0.3      0.3      0.3      0.3      0.7      0.8      0.8      0.9      0.9       5.6
     government qualified private activity bonds for
     rental housing.................................
    Depreciation of rental housing in excess of           0.4      0.4      0.4      0.4      0.4      4.0      3.8      3.7      3.6      3.5      20.7
     alternative depreciation system................
  Other business and commerce:
    Exclusion of interest on State and local              0.1      0.1      0.1      0.1      0.1      0.3      0.3      0.3      0.3      0.4       2.2
     government small-issue qualified private
     activity bonds.................................
    Carryover basis of capital gains on gifts.......  .......  .......  .......  .......  .......      2.5      2.0      3.2      4.5      4.9      17.0
    Deferral of gain on non-dealer installment sales      6.8      6.7      6.7      6.7      6.7      1.7      1.4      1.2      1.2      1.2      40.3
    Deferral of gain on like-kind exchanges.........     11.1     11.4     11.7     12.2     12.7      5.9      6.0      6.2      6.4      6.6      90.2
    Expensing under section 179 of depreciable           34.2     24.1     17.9     12.9      8.2     53.0     37.4     27.8     20.0     12.7     248.2
     business property..............................
    Amortization of business startup costs..........    (\4\)    (\4\)    (\4\)    (\4\)      0.1    (\4\)    (\4\)    (\4\)      0.1      0.1       0.4
    Reduced rates on first $10,000,000 of corporate       3.0      3.1      3.1      3.3      3.4  .......  .......  .......  .......  .......      15.9
     taxable income.................................
    Exemptions from imputed interest rules..........    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)      0.6      0.7      0.7      0.7      0.8       3.5
    Expensing of magazine circulation expenditures..      0.2    (\4\)    (\4\)    (\4\)    (\4\)      0.1    (\4\)    (\4\)    (\4\)    (\4\)       0.3
    Special rules for magazine, paperback book, and     (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.2
     record returns.................................
    Completed contract rules........................      0.9      0.9      1.0      1.0      1.1      0.1      0.1      0.1      0.1      0.1       5.5
    Cash accounting, other than agriculture.........      0.3      0.3      0.3      0.3      0.3      1.9      1.9      2.0      2.0      2.1      11.5
    Credit for employer-paid FICA taxes on tips.....      0.5      0.5      0.5      0.5      0.6      1.0      1.0      1.0      1.1      1.1       7.8
    Deduction for income attributable to domestic        14.5     14.6     14.7     14.9     15.3      5.5      5.5      5.6      5.7      5.8     102.1
     production activities..........................
    Credit for the cost of carrying tax-paid            (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
     distilled spirits in wholesale inventories.....
    Reduced rates of tax on dividends and long-term   .......  .......  .......  .......  .......    130.9    133.6    135.9    137.3    139.9     677.7
     capital gains..................................
    Surtax on net investment income*................  .......  .......  .......  .......  .......    -28.4    -29.3    -30.3    -31.1    -32.5    -151.6
    Exclusion of capital gains at death.............  .......  .......  .......  .......  .......     32.9     33.8     35.6     37.7     39.6     179.4
    Expensing of costs to remove architectural and      (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
     transportation barriers to the handicapped and
    Exclusion for gain from certain small business    .......  .......  .......  .......  .......      1.1      1.2      1.3      1.3      1.3       6.2
    Distributions in redemption of stock to pay       .......  .......  .......  .......  .......    (\4\)    (\4\)    (\4\)      0.1      0.1       0.2
     various taxes imposed at death.................
    Exclusion from UBTI of certain payments to          (\4\)    (\4\)    (\4\)    (\4\)    (\4\)  .......  .......  .......  .......  .......       0.1
     controlling exempt organizations...............
    Inventory methods and valuation:
      Last in first out.............................      1.3      1.4      0.1      1.4      1.4      0.2      0.2      0.2      0.2      0.3       8.1
      Lower of cost or market.......................      0.1      0.1      0.1      0.1      0.1    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.4
      Specific identification for homogeneous           (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
    Exclusion of gain or loss on sale or exchange of    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)  .......  .......  .......  .......  .......       0.1
     brownfield property............................
    Income recognition rule for gain or loss from       (\4\)    (\4\)    (\4\)    (\4\)    (\4\)      1.0      1.0      1.0      1.1      1.1       5.4
     section 1256 contracts.........................
    Net alternative minimum tax attributable to net      -0.5     -0.5     -0.5     -0.5     -0.5     -0.1     -0.1     -0.1     -0.1     -0.1      -3.0
     operating loss limitation*.....................
    Exclusion of interest on State and local            (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
     qualified private activity bonds for green
     buildings and sustainable design projects......
    Depreciation of buildings other than rental           0.2      0.2      0.2      0.2      0.2      0.2      0.2      0.2      0.2      0.2       2.1
     housing in excess of alternative depreciation
    Depreciation of equipment in excess of the           17.3     25.1     17.6      7.6    -21.1      7.1     10.3      7.2      3.1     -8.6      65.7
     alternative depreciation system\6\.............
Financial institutions:
  Exemption of credit union income..................      2.6      2.7      2.9      3.0      3.2  .......  .......  .......  .......  .......      14.4
  Insurance companies:
    Small life insurance company taxable income         (\4\)    (\4\)    (\4\)    (\4\)    (\4\)  .......  .......  .......  .......  .......       0.0
    Special treatment of life insurance company           3.2      3.3      3.3      3.3      3.4  .......  .......  .......  .......  .......      16.5
    Special deduction for Blue Cross and Blue Shield      0.4      0.4      0.4      0.5      0.5  .......  .......  .......  .......  .......       2.2
    Tax-exempt status and election to be taxed only       0.1      0.1      0.1      0.1      0.1  .......  .......  .......  .......  .......       0.5
     on investment income for certain small property
     and casualty insurance companies...............
    Interest rate and discounting period assumptions      2.4      2.6      2.6      2.6      2.6  .......  .......  .......  .......  .......      12.8
     for reserves of property and casualty insurance
    Proration for property and casualty insurance         0.4      0.4      0.4      0.4      0.5  .......  .......  .......  .......  .......       2.1
  Exclusion of employer-paid transportation benefits  .......  .......  .......  .......  .......      5.1      5.3      5.4      5.6      5.7      27.2
   (parking, van pools, and transit passes).........
  Deferral of tax on capital construction funds of        0.1      0.1      0.1      0.1      0.1  .......  .......  .......  .......  .......       0.5
   shipping companies...............................
  Exclusion of interest on State and local              (\4\)    (\4\)      0.1      0.1      0.1      0.1      0.1      0.1      0.1      0.1       0.7
   government qualified private activity bonds for
   highway projects and rail-truck transfer
  Exclusion of interest on State and local              (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
   government qualified private activity bonds for
   high-speed intercity rail facilities.............
  Exclusion of interest on State and local                0.3      0.3      0.3      0.3      0.3      0.7      0.7      0.7      0.8      0.8       5.1
   government qualified private activity bonds for
   private airports, docks, and mass-commuting
  Provide a 50 percent tax credit for certain             0.2      0.1  .......  .......  .......  .......  .......  .......  .......  .......       0.2
   expenditures for maintaining railroad tracks.....
Community and Regional Development:
  Empowerment zone tax incentives...................      0.2      0.1    (\4\)    (\4\)    (\4\)      0.1      0.1    (\4\)    (\4\)    (\4\)       0.4
  New markets tax credit............................      1.2      1.2      1.2      1.2      1.1    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       5.9
  District of Columbia tax incentives...............    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)     (\4\)
  Credit for Indian reservation employment..........    (\4\)    (\4\)  .......  .......  .......    (\4\)    (\4\)  .......  .......  .......       0.1
  Exclusion of interest on State and local                0.1      0.1      0.1      0.1      0.1      0.3      0.4      0.4      0.4      0.4       2.5
   government qualified private activity bonds for
   sewage, water, and hazardous waste facilities....
  Recovery zone economic development bonds\2,3\.....    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)      0.2      0.2      0.2      0.2      0.2       0.9
  Eliminate requirement that financial institutions       0.5      0.5      0.5      0.5      0.5  .......  .......  .......  .......  .......       2.6
   allocate interest expense attributable to tax-
   exempt interest..................................
  Disaster Relief:
    National disaster relief........................
                                                                  [Estimate contained in other provisions]
Education, Training, Employment, and Social
  Education and training:
    Deduction for interest on student loans.........  .......  .......  .......  .......  .......      2.2      2.3      2.4      2.5      2.6      11.9
    Exclusion of earnings of Coverdell education      .......  .......  .......  .......  .......      0.1      0.1      0.1      0.1      0.1       0.5
     savings accounts...............................
    Exclusion of scholarship and fellowship income..  .......  .......  .......  .......  .......      3.5      3.7      3.9      4.1      4.4      19.5
    Exclusion of income attributable to the           .......  .......  .......  .......  .......      0.2      0.2      0.2      0.2      0.2       0.9
     discharge of certain student loan debt and NHSC
     and certain State educational loan repayments..
    Exclusion of employer-provided education          .......  .......  .......  .......  .......      1.2      1.2      1.3      1.3      1.3       6.3
     assistance benefits............................
    Exclusion of employer-provided tuition reduction  .......  .......  .......  .......  .......      0.3      0.3      0.3      0.3      0.3       1.6
    Parental personal exemption for students aged 19  .......  .......  .......  .......  .......      4.3      4.5      4.5      4.7      4.9      23.0
     to 23..........................................
    Exclusion of interest on State and local              0.2      0.2      0.2      0.2      0.2      0.4      0.4      0.5      0.5      0.5       3.1
     government qualified private activity bonds for
     student loans..................................
    Exclusion of interest on State and local              1.0      1.0      1.0      1.1      1.1      2.6      2.8      2.9      3.1      3.2      19.8
     government qualified private activity bonds for
     private nonprofit and qualified public
     educational facilities.........................
    Credit for holders of qualified zone academy          0.2      0.2      0.2      0.2      0.2      0.1      0.1      0.1      0.1      0.1       1.5
    Deduction for higher education expenses.........  .......  .......  .......  .......  .......      0.4      0.1  .......  .......  .......       0.5
    Deduction for teacher classroom expenses........  .......  .......  .......  .......  .......      0.2      0.2      0.2      0.2      0.3       1.2
    Deduction for charitable contributions to             0.9      0.9      0.9      1.0      1.0      9.3      9.6      9.9     10.2     10.5      54.2
     educational institutions.......................
    Credits for tuition for post-secondary            .......  .......  .......  .......  .......     18.4     19.6     20.0     20.0     20.1      98.2
    Exclusion of tax on earnings of qualified
     tuition programs:..............................
    Prepaid tuition programs........................  .......  .......  .......  .......  .......  .......  .......      0.1      0.1      0.1       0.2
    Savings account programs........................  .......  .......  .......  .......  .......      0.7      1.0      1.1      1.3      1.4       5.5
    Qualified school construction bonds\2,3\........    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)      1.1      1.2      1.3      1.4      1.5       6.5
    Exclusion of employee meals and lodging (other    .......  .......  .......  .......  .......      3.0      3.1      3.2      3.3      3.5      16.1
     than military).................................
    Exclusion of benefits provided under cafeteria    .......  .......  .......  .......  .......     31.3     32.8     33.9     34.7     36.0     168.8
    Exclusion of housing allowances for ministers...  .......  .......  .......  .......  .......      0.8      0.8      0.8      0.8      0.8       4.1
    Exclusion of miscellaneous fringe benefits......  .......  .......  .......  .......  .......      7.7      7.8      8.0      8.2      8.4      40.2
    Exclusion of employee awards....................  .......  .......  .......  .......  .......      0.3      0.4      0.4      0.4      0.4       1.9
    Exclusion of income earned by voluntary           .......  .......  .......  .......  .......      2.5      2.5      2.6      2.7      2.8      13.1
     employees' beneficiary associations............
    Special tax provisions for employee stock             1.4      1.4      1.5      1.5      1.5      1.6      1.6      1.6      1.7      1.7      15.5
     ownership plans (ESOPs)........................
    Deferral of taxation on spread on acquisition of     -1.1     -1.2     -1.2     -1.2     -1.3      0.4      0.3      0.3      0.3      0.3      -4.5
     stock under incentive stock option plans*......
    Deferral of taxation on spread on employee stock     -0.2     -0.2     -0.2     -0.2     -0.2    (\4\)    (\4\)      0.1      0.1      0.1      -0.7
     purchase plans*................................
    Disallowance of deduction for excess parachute       -0.3     -0.3     -0.3     -0.3     -0.3  .......  .......  .......  .......  .......      -1.4
     payments (applicable if payments to a
     disqualified individual are contingent on a
     change of control of a corporation and are
     equal to or greater than three times the
     individual's annualized includible
    Limits on deductible compensation\8\*...........     -0.7     -0.8     -0.9     -1.0     -1.0  .......  .......  .......  .......  .......      -4.3
    Work opportunity tax credit.....................      1.4      1.6      1.7      1.8      1.1      0.1      0.1      0.1      0.1      0.1       8.2
  Social services:
    Credit for children under age 17\3\.............  .......  .......  .......  .......  .......     55.0     54.6     54.2     53.6     53.1     270.5
    Credit for child and dependent care and           .......  .......  .......  .......  .......      4.2      4.3      4.4      4.4      4.5      21.7
     exclusion of employer-provided child care\3,9\.
    Credit for employer-provided dependent care.....    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
    Exclusion of certain foster care payments.......  .......  .......  .......  .......  .......      0.4      0.4      0.4      0.5      0.5       2.2
    Adoption credit and employee adoption benefits    .......  .......  .......  .......  .......      0.3      0.3      0.4      0.4      0.4       1.8
    Deduction for charitable contributions, other         1.9      2.0      2.0      2.1      2.1     41.5     42.8     44.1     45.2     46.6     230.5
     than for education and health\10\..............
    Credit for disabled access expenditures.........    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.3
  Exclusion of employer contributions for health      .......  .......  .......  .......  .......    155.3    164.7    173.0    180.6    189.5     863.1
   care, health insurance premiums, and long-term
   care insurance premiums\11\......................
  Exclusion of medical care and TRICARE medical       .......  .......  .......  .......  .......      2.7      2.9      3.0      3.1      3.3      15.0
   insurance for military dependents, retirees, and
   retiree dependents not enrolled in Medicare......
  Exclusion of health insurance benefits for          .......  .......  .......  .......  .......      0.9      1.0      1.0      1.1      1.2       5.2
   military retirees and retiree dependents enrolled
   in Medicare......................................
  Deduction for health insurance premiums and long-   .......  .......  .......  .......  .......      5.7      5.9      6.4      6.8      6.4      31.2
   term care insurance premiums by the self-employed
  Deduction for medical expenses and long-term care   .......  .......  .......  .......  .......     10.0     10.1     10.9     12.1     13.4      56.6
  Exclusion of workers' compensation benefits         .......  .......  .......  .......  .......      5.0      5.1      5.2      5.3      5.4      26.1
   (medical benefits)...............................
  Health savings accounts...........................  .......  .......  .......  .......  .......      2.2      2.5      2.9      3.4      4.0      15.0
  Exclusion of interest on State and local                0.7      0.7      0.7      0.7      0.7      1.8      1.9      2.0      2.1      2.2      13.5
   government qualified private activity bonds for
   private nonprofit hospital facilities............
  Deduction for charitable contributions to health        1.1      1.1      1.1      1.1      1.2      4.4      4.5      4.6      4.7      4.9      28.7
  Credit for purchase of health insurance by certain  .......  .......  .......  .......  .......    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.2
   displaced persons\3\.............................
  Credit for orphan drug research...................      1.3      1.7      2.1      2.6      3.2    (\4\)      0.1      0.1      0.1      0.1      11.2
  Tax credit for small businesses purchasing              0.2      0.1      0.1      0.1      0.1      1.2      0.8      0.6      0.7      0.7       4.7
   employer insurance\3\............................
  Subsidies for insurance purchased through health    .......  .......  .......  .......  .......     41.3     55.8     68.9     77.9     82.7     326.6
   benefit exchanges\3\.............................
Income Security:
  Exclusion of amounts received under life insurance      2.2      2.3      2.3      2.4      2.4     22.2     22.8     23.3     23.9     24.5     128.3
  Exclusion of workers' compensation benefits         .......  .......  .......  .......  .......      2.9      3.1      3.2      3.3      3.3      15.8
   (disability and survivors payments)..............
  Exclusion of damages on account of personal         .......  .......  .......  .......  .......      1.7      1.7      1.7      1.8      1.8       8.6
   physical injuries or physical sickness...........
  Exclusion of special benefits for disabled coal     .......  .......  .......  .......  .......    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
  Net exclusion of pension contributions and
    Plans covering partners and sole proprietors      .......  .......  .......  .......  .......      7.1      8.6     13.9     16.3     17.1      63.0
     (sometimes referred to as ``Keogh plans'').....
    Defined benefit plans...........................  .......  .......  .......  .......  .......     58.6     70.4     83.4     97.9    114.0     424.3
    Defined contribution plans......................  .......  .......  .......  .......  .......     90.4    102.0    115.3    129.8    146.1     583.6
  Individual retirement arrangements:
    Traditional IRAs................................  .......  .......  .......  .......  .......     15.2     16.1     17.1     18.2     19.3      85.8
    Roth IRAs.......................................  .......  .......  .......  .......  .......      7.3      8.1      8.9      9.7     10.6      44.6
  Credit for certain individuals for elective         .......  .......  .......  .......  .......      1.4      1.4      1.4      1.4      1.4       7.0
   deferrals and IRA contributions..................
  Exclusion of other employee benefits:
    Premiums on group term life insurance...........  .......  .......  .......  .......  .......      4.1      4.2      4.3      4.4      4.5      21.5
    Premiums on accident and disability insurance...  .......  .......  .......  .......  .......      4.2      4.4      4.6      4.8      5.0      23.1
  Additional standard deduction for the blind and     .......  .......  .......  .......  .......      3.4      3.6      3.7      3.9      4.2      18.7
   the elderly......................................
  Deduction for casualty and theft losses...........  .......  .......  .......  .......  .......      0.4      0.4      0.4      0.4      0.5       2.1
  Earned income credit\3\...........................  .......  .......  .......  .......  .......     73.0     73.4     74.4     75.6     77.0     373.4
  Phase out of the personal exemption for the         .......  .......  .......  .......  .......    -16.1    -17.1    -18.0    -18.8    -19.9     -89.8
   regular income tax, and disallowance of the
   personal exemption and the standard deduction
   against the alternative minimum tax*.............
  Exclusion of survivor annuities paid to families    .......  .......  .......  .......  .......    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
   of public safety officers killed in the line of
  Exclusion of disaster mitigation payments.........    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.2
  ABLE accounts\12\.................................  .......  .......  .......  .......  .......    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
Social Security and Railroad Retirement:
  Exclusion of untaxed Social Security and railroad   .......  .......  .......  .......  .......     38.4     40.2     42.5     45.0     47.8     213.8
   retirement benefits..............................
Veterans' Benefits and Services:
  Exclusion of veterans' disability compensation....  .......  .......  .......  .......  .......      8.3      8.4      8.2      9.4      9.8      44.1
  Exclusion of veterans' pensions...................  .......  .......  .......  .......  .......      0.2      0.2      0.2      0.2      0.2       0.9
  Exclusion of veterans' readjustment benefits......  .......  .......  .......  .......  .......      1.7      1.7      1.7      1.9      2.0       9.0
  Exclusion of interest on State and local              (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.3
   government qualified private activity bonds for
   veterans' housing................................
General Purpose Fiscal Assistance:
  Exclusion of interest on public purpose State and       9.8     10.1     10.3     10.6     10.9     25.9     26.6     29.1     29.8     31.6     194.7
   local government bonds...........................
  Deduction of nonbusiness State and local            .......  .......  .......  .......  .......     65.4     69.3     74.1     78.0     82.0     368.8
   government income taxes, sales taxes, and
   personal property taxes..........................
  Build America bonds\2,3\..........................  .......  .......  .......  .......  .......      3.2      3.2      3.2      3.2      3.2      16.0
  Deferral of interest on savings bonds.............  .......  .......  .......  .......  .......      1.3      1.3      1.3      1.3      1.3       6.4
Note: Details may not add to totals due to rounding. An ``*'' indicates a negative tax expenditure for the 2016-2020 period.
\1\Reflects legislation enacted by December 15, 2016.
\2\Estimate includes an outlay to State and local governments. For the purposes of this table outlays are attributed to individuals.
\3\Estimate includes refundability associated with the following outlay effects:

                                                                      Corporations                                 Individuals
                                                        2016     2017     2018     2019     2020     2016     2017     2018     2019     2020    2016-20
    Credit for holders of clean renewable energy      .......  .......  .......  .......  .......    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.2
    Credit for holders of qualified energy            .......  .......  .......  .......  .......    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.3
     conservation bonds.............................
    Recovery zone economic development bonds........  .......  .......  .......  .......  .......      0.2      0.2      0.2      0.2      0.2       0.8
    Credit for holders of qualified zone academy      .......  .......  .......  .......  .......      0.1      0.1      0.1      0.1      0.1       0.3
    Credits for tuition for post-secondary education  .......  .......  .......  .......  .......      6.4      6.4      6.8      6.8      6.9      33.3
    Qualified school construction bonds.............  .......  .......  .......  .......  .......      1.1      1.2      1.3      1.4      1.5       6.4
    Credit for children under age 17................  .......  .......  .......  .......  .......     32.8     32.7     32.7     32.5     32.4     163.1
    Credit for child and dependent care and           .......  .......  .......  .......  .......      0.9      0.9      0.9      0.9      0.9       4.5
     exclusion of employer-provided child care......
    Credit for purchase of health insurance by        .......  .......  .......  .......  .......    (\4\)    (\4\)    (\4\)    (\4\)    (\4\)       0.1
     certain displaced persons......................
    Tax credit for small businesses purchasing          (\4\)    (\4\)    (\4\)    (\4\)    (\4\)      0.1      0.1    (\4\)    (\4\)    (\4\)       0.4
     employer insurance.............................
    Subsidies for insurance purchased through health  .......  .......  .......  .......  .......      0.1      0.1    (\4\)    (\4\)    (\4\)       0.4
     benefit exchanges..............................
    Earned income credit............................  .......  .......  .......  .......  .......     63.9     64.2     64.8     65.8     66.8     325.5
    Build America bonds.............................  .......  .......  .......  .......  .......      3.2      3.2      3.2      3.2      3.2      16.0
\4\Positive tax expenditure of less than $50 million.
\5\Estimate includes effect of credit for interest on certain home mortgages (Section 25).
\6\Includes bonus depreciation and general acceleration under MACRS.
\7\Estimate includes amounts of employer-provided health insurance purchased through cafeteria plans and employer-provided child care purchased through
  dependent care flexible spending accounts. These amounts are also included in other line items in this table.
\8\Estimate does not include effects of changes made by the Emergency Economic Stabilization Act of 2008.
\9\Estimate includes employer-provided child care purchased through dependent care flexible spending accounts.
\10\In addition to the general charitable deduction, the tax expenditure accounts for the higher percentage limitation for public charities, the fair
  market value deduction for related-use tangible personal property, the enhanced deduction for inventory, the fair market value deduction for publicly
  traded stock and exceptions to the partial interest rules.
\11\Estimate includes employer-provided health insurance purchased through cafeteria plans and TRICARE medical insurance, which are also includedin
  other line items on this table.
\12\Estimate does not include outlays due to Medicaid.



    It is no secret that waste and mismanagement are all too 
common throughout the government, at both the State and Federal 
level. The extent of government-wide payment errors is higher 
than most think. These ``improper payments'' are defined as any 
government payment made in an incorrect amount (mostly 
overpayments), to the wrong individual or entity, or for the 
wrong reason. According to the Government Accountability Office 
[GAO], these payments totaled a stunning $144.3 billion in 
2016, up from $107.1 billion in 2012. Worse, this figure likely 
understates the full extent of the problem; 18 government 
programs deemed susceptible to improper payments did not even 
submit error estimates last year, according to GAO. Thus, the 
estimated total may very well represent a floor rather than a 
    \421\Government Accountability Office, briefing to the House Budget 
Committee, 29 March 2017.

        FIGURE 7

    These payment errors occur widely throughout government, 
including 112 government programs across 22 agencies, GAO 
reports. More than 75 percent of the problem, however, lies 
with three large programs: Medicare, Medicaid and the Earned 
Income Tax Credit [EITC]. In fact, the EITC program has an 
estimated payment error rate of 24.0 percent, meaning that 
nearly one in four dollars that leaves the Treasury for this 
program is deemed to be incorrect. Other notable government 
programs with improper payment problems include Unemployment 
Insurance [UI], Direct Student Loans, and the National School 
Lunch Program. One example of an improper payment would be a UI 
check going to someone who has already returned to work. 
Another example would be an EITC payment going to an individual 
who has earned income above the program's qualifying 

        FIGURE 8

    Congress has passed legislation over the years to try to 
address the problem of improper payments. The Improper Payment 
Information Act [IPIA] was enacted 2002, requiring agencies to 
report a formal estimate of improper payments throughout their 
programs and how they might be prevented. Subsequently, 
however, the data showed annual payment error numbers continued 
to rise. In 2010, Congress expanded upon IPIA by passing the 
Improper Payments Elimination and Recovery Act [IPERA], which 
tried to make agency reviews of this problem more thorough and 
comprehensive. For instance, IPERA sought to improve agency 
methodologies for estimating improper payments. It also 
required agencies to identify the specific causes of improper 
payments, as well as the actions they were taking to reduce and 
recover improper payments. The Inspector General of each agency 
is charged with annually reviewing the agency's actions to 
determine compliance with IPERA requirements.\423\
    \423\Committee on Oversight and Government Reform, U.S. House of 
Representatives, The Improper Payments Elimination and Recovery Act: An 
Analysis of Five Years of Data, October 2016: https://
    The results have not been encouraging. GAO has found that 
15 of the 24 Chief Financial Officers Act agencies failed to 
comply with the criteria in IPERA in 2015. According to the 
House Oversight and Government Reform Committee, nine Federal 
agencies have never complied with the requirements in 
    In December 2012, Congress passed the Improper Payments 
Elimination and Recovery Audit Improvement Act [IPERIA],\425\ 
which further built upon the structure established by previous 
legislation. IPERIA requires the Office of Management and 
Budget to identify for greater oversight ``high priority'' 
government programs that are particularly susceptible to 
improper payments. Agencies with such programs must submit 
annual reports on the steps they are taking to prevent or 
recover improper payments.\426\ This legislation also created 
the so-called ``Do Not Pay'' initiative, a centralized, data-
matching service for agencies to use to help to verify an 
individual's program eligibility before a payment is made.\427\ 
This web-based system comprises six databases, included the 
Social Security Death Master File and the Treasury's Debt Check 
Database.\428\ Although this was an important first step, 
experts agree that Do Not Pay should be expanded to include 
other data sources beyond those listed in the statute, such as 
the National Directory of New Hires.\429\
    \425\Enacted 10 January 2013, Public Law 112-248.
    \426\Congressional Research Service, Improper Payments Legislation: 
Key Provisions, Implementation, and Selected Proposals in the 114th 
Congress, 7 December 2016.
    \427\Government Accountability Office, Addressing Improper Payments 
and the Tax Gap Would Improve the Government's Fiscal Position, 1 
October 2015.
    \428\Op. cit., Congressional Research Service.
    \429\Op. cit., Committee on Oversight and Government Reform.
    Despite these legislative efforts, tangible progress on 
reducing improper payments remains elusive. Late last year, the 
Congressional Research Service summarized its view of the 
impact of the various legislative initiatives, stating that 
``the data show that over time, while individual programs have 
reduced their improper payment rates and amounts, there has 
been no sustained progress on a government-wide basis, and 
several programs with billions of dollars in annual improper 
payments have seen no substantial improvement.''\430\
    \430\Op. cit., p. 12 (italics added), Congressional Research 
    Many agencies seem to still follow a ``pay and chase'' 
model for addressing improper payments. The agencies focus on 
``getting the checks out the door,'' only to determine after 
the fact that many were improper. This determination sparks a 
laborious and sometimes costly process to recoup such payments. 
GAO believes one key to curbing improper payments is to prevent 
them from being made in the first place. In GAO's words: 
``[S]trong preventive controls can serve as the frontline 
defense against improper payments.''\431\ One such control is 
``up-front eligibility validation through data sharing.''\432\ 
Agencies need access to the broadest and most accurate 
databases available, and they need to systematically leverage 
this information to ensure their payments are accurate and 
going to the correct persons or entities. GAO has also provided 
agencies with numerous program-specific recommendations over 
the years for bolstering internal controls to reduce improper 
payments. Nevertheless, agencies are not obligated to act on 
these recommendations. GAO has made nearly 130 recommendations 
over the past five years that the various agencies have not 
fully acted upon.
    \431\Op. cit., p. 28, Government Accountability Office.
    \432\Ibid., p. 28.

           Reducing Improper Payments: `50 Percent Within 5'

    As discussed above, the legislative initiatives in recent 
years have produced little progress in reducing improper 
payments; the majority of government agencies are not even 
complying with the requirements of those laws. Similarly, GAO 
has produced a plethora of good, program-specific 
recommendations to promote more efficient financial management, 
but many agencies have failed to institute them in their 
operations. Clearly, something is not working and there is not 
a proper incentive structure for agencies to become better 
stewards of taxpayer dollars.
    This budget resolution proposes the establishment of an 
independent commission to find tangible solutions to reduce 
government-wide improper payments by the end of the year. Such 
a commission would be akin to the Bowles-Simpson Commission of 
2010 that was charged with putting the government back on a 
sustainable fiscal path by reducing deficits and debt over 
    This new commission would be charged with finding ways to 
tangibly reduce government-wide improper payments by 50 percent 
within the next five years. This timeframe recognizes that this 
problem is complex and there is not one silver-bullet solution 
that could be implemented overnight. Rather, the commission 
should methodically solicit input from experts within 
government, such as GAO, and the private sector to determine 
the best ways to tackle this problem. In recent testimony 
before the House Budget Committee, Office of Management and 
Budget Director Mulvaney affirmed this level of improper 
payment reduction was attainable. Speaking about reducing 
government-wide improper payments, Director Mulvaney said it 
was ``reasonable * * * to go as high as 40 or 50 percent in 
that. I think that's a goal that you should shoot for.''\433\
    \433\Mick Mulvaney, Director of the Office of Management and 
Budget, testimony before the Committee on the Budget, U.S. House of 
Representatives, 24 May 2017.
    No matter how useful the solutions, it will be incumbent 
upon the agencies to implement them--and the Committee supports 
the Trump Administration's efforts in this area. In addition, 
the commission should be required to develop a tighter system 
of agency oversight to ensure agencies comply with commission 
recommendations and are achieving the reduction goal over time. 
This could include penalties and funding reductions for 
agencies that fail to meet the established target. Where States 
play a large role in administrating a government program, such 
as Medicaid, incentives should also be established to reduce 
their improper payments. For instance, States with Medicaid 
improper payment rates that exceed the national average of the 
previous five years could face penalties for doing so.
    Reducing government-wide improper payments is no easy task. 
It will take innovative and comprehensive solutions and an 
incentive structure to make sure agencies act upon them. 
Nevertheless, even reducing these improper payments by half 
would save the government, and taxpayers, hundreds of billions 
of dollars over the budget window.



    Another form of effectively automatic Federal spending goes 
toward programs that are no longer, or never were, authorized 
by Congress. In January 2016, the Congressional Budget Office 
[CBO] reported: ``Lawmakers appropriated about $310 billion for 
fiscal year 2016 for programs and activities whose 
authorizations of appropriations have expired and whose 
appropriations could be identified.'' For perspective, $310 
billion in unauthorized appropriations constituted more than 26 
percent of all discretionary spending for fiscal year 2016. 
That is, more than a quarter of the taxpayer dollars Congress 
appropriated were neither reviewed nor authorized to be spent. 
This reflected 256 laws that Congress has not reauthorized, 
says CBO.\434\
    \434\Congressional Budget Office, Unauthorized Appropriations and 
Expiring Authorizations, 15 January 2016.
    When CBO produced its report in January, it could not cite 
a comparable figure for the current year, fiscal year 2017, 
because most of the government's activities at that time were 
funded under a temporary continuing resolution that expired on 
28 April 2017.\435\ (Congress has since enacted appropriations 
for the balance of the year, but CBO does not expect to update 
its report on unauthorized spending for this year.) 
Nevertheless, CBO identified $648.7 billion in appropriations 
whose authorizations would expire by the end of the fiscal 
year, 30 September 2017 (see Table 9 and Table 10). In failing 
to authorize these programs, Congress misses a key opportunity 
to conduct oversight of existing programs and Executive Branch 
    \435\Only one regular appropriations bill for the year--the 
Military Construction, Veterans Affairs, and Related Agencies 
Appropriations Act (Public Law 114-223)--has been enacted. 
Consequently, CBO cannot assess most of the government's full-year 
    By regularly failing to reauthorize these programs--or by 
failing to prevent the reappropriation of expired 
authorizations--Congress shirks its legislative responsibility 
to exercise spending discretion. The Constitution endows the 
Legislative Branch with the power of the purse.\436\ Congress 
abdicates this power when it permits programs to continue 
operating without the check of regular order budgeting.
    \436\Constitution of the United States, Article I, Section 9, 
Clause 7.
    This budget resolution strongly supports efforts to reverse 
this bias toward higher spending and reassert Congress's 
constitutional authority over fiscal policy.

                                   Authorizations of    Authorized (in
   Appropriations subcommittee     appropriations\a\      millions of
Agriculture/Rural Development...                  7                 171
Commerce/Justice/ Science.......                 10                  68
Defense.........................                  1             583,626
Energy/Water Development........                  3              19,425
Homeland Security...............                  9               9,515
Interior/Environment............                  3                   4
Labor/HHS.......................                 10               8,915
Mil. Con./VA....................                 12               9,907
State/Foreign Operations........                 10                 270
Transportation/HUD..............                  8              16,764
      Total.....................                 73             648,669
Source: Congressional Budget Office, Expired and Expiring
  Authorizations, 13 January 2017.
\a\Number of explicit authorizations of appropriations within the
  jurisdiction of each appropriations subcommittee that expire on or
  before 30 September 2017.
\b\Amounts specified in statute, a conference report, or other
  legislative history.

                                   Authorizations of    authorized (in
         House committee           appropriations\a\      millions of
Armed Services..................                  6             611,532
Education and the Workforce.....                  5               4,928
Energy and Commerce.............                 14               4,216
Foreign Affairs.................                 10                 270
Homeland Security...............                  2                  11
Judiciary.......................                  6                  44
Natural Resources...............                  2                   4
Science, Space, and Technology..                  4                  21
Transportation and                               14              25,990
Veterans Affairs................                 10               1,653
      Total.....................                 73             648,669
Source: Congressional Budget Office, Expired and Expiring
  Authorizations, 13 January 2017.
\a\Number of explicit authorizations of appropriations within the
  jurisdiction of each House committee that expire on or before 30
  September 2017.
\b\Amounts specified in statute, a conference report, or other
  legislative history.


    Congress from early on distinguished between funding 
bills--appropriations--and other kinds of legislation. Although 
not required by the Constitution, the distinction ``was 
reflected in the designation of measures containing budget 
authority for more than one purpose as `supply bills,' 
highlighting their purpose as supplying funds to carry out 
government operations already established in law.''\437\ The 
distinction can be generally explained as follows. An 
authorization may be described as ``a statutory provision that 
defines the authority of the government to act,'' whereas an 
appropriation can be described as ``a statutory provision that 
permits a federal agency to incur obligations and make payments 
from the Treasury for specified purposes, usually during a 
specified period of time.''\438\
    \437\Jessica S. Tollestrup, Congressional Research Service, 
Spending on Unauthorized Programs, testimony to the Committee on the 
Budget, U.S. Senate, 3 February 2016.
    This separation serves as the foundation for the two-step 
process under which congressional committees operate. Just 
after the Civil War, and running through the end of the 19th 
century, the structure of House and Senate Committees embraced 
the distinction. Up to that point, budgetary matters fell to 
the Committee on Ways and Means in the House and the Committee 
on Finance in the Senate. After the war, the two Chambers 
separated spending and revenue authority, giving the former to 
the newly created Appropriations Committees. Then, starting in 
the 1870s, the authorizing committees seized control of roughly 
half of government spending, further reinforcing the two-step 
process of authorizing and appropriating.
    During the 1920s, Congress began including explicit 
provisions in bills that authorized specific amounts for future 
appropriations of programs authorized.\439\ This practice 
enabled authorizing committees to exert more control over 
funding decisions carried out by appropriators.

                     Significance of the Breakdown

    Even if this two-step process of authorizations and 
appropriations may lengthen the time needed to fund agencies 
and programs, there are sound reasons for separating the two, 
and Congress should follow its own regular order of budgeting. 
Congress designed a two-step paradigm wherein program funding 
must undergo scrutiny on two distinct levels before taxpayer 
dollars can be committed. Without this full consideration, the 
practice of funding unauthorized programs also has the effect 
of converting a range of discretionary programs into another 
form of automatic spending.
    The two-step authorization-appropriation process loses 
legitimacy each time an unauthorized program persists without 
express congressional consent. When Congress releases 
appropriations without clear reauthorization, it effectively 
gives priority to those select programs. As such, outdated 
grant programs receive spending priority over vital functions 
such as defense spending and military readiness, which do 
undergo the regular appropriations process. By bypassing 
regular order, unauthorized appropriations function as a 
secondary stream of direct spending. This unauthorized stream 
has no legal justification.

                      The Failure of Current Rules

    The House and Senate have had rules restricting the 
consideration of appropriations for programs that have never 
been authorized or whose authorizations have expired. In 1837, 
Congressional Research Service notes, the House first 
promulgated formal rules prohibiting any appropriations for 
``any expenditure not previously authorized by law.'' ``These 
rules were motivated, at least in part, by concern over the 
increasing delays in enacting appropriations due to the 
inclusion of `debatable matters of another character.'''\440\ 
That arrangement, however, has broken down. While the Congress 
continues to maintain similar prohibitions,\441\ these rules 
are regularly waived.
    \440\Ibid., citing Asher C. Hinds, Hinds' Precedents of the House 
of Representatives of the United States (Washington: Government 
Printing Office, 1907-1908), vol 4, Sec. 3578.
    \441\These prohibitions are currently located in House Rule 
XXI(2)(a) and Senate Rule XVI(1).
    In the 114th Congress, the House waived its own Rule 
XXI(2)(a), which prohibits unauthorized appropriations, 14 
separate times.\442\ Each instance that Congress waives this 
rule, it relinquishes its hold on the Federal purse strings, 
and at the same time, furthers the bias toward unchecked 
spending. Furthermore, waiving these rules calls into question 
the credibility of the budget, as the action bypasses 
Congressional scrutiny of spending.
    \442\Committee on Rules, U.S. House of Representatives, ``Survey of 
Activities of the House Committee on Rules for the 114th Congress,'' 2 
January 2017:

                           Potential Reforms

    During the 114th Congress, the House Budget Committee 
developed a method to address unauthorized spending in its 
``Proposed Rewrite of the Congressional Budget Process.''\443\ 
The draft proposal would reduce the statutory discretionary 
spending limits, or caps, by the amount appropriated for 
unauthorized programs exceeding a certain level. The level 
would be determined with consideration given to the amount of 
lapsed time since the latest authorization expired.
    \443\Committee on the Budget, U.S. House of Representatives, 
``Proposed Rewrite of the Congressional Budget Process: Discussion 
Draft: Description and Rationale,'' 30 November 2016: http://
    This budget includes a policy statement that each 
authorizing committee should review all programs with 
unauthorized appropriations and reauthorize those deserving 
continued funding.
    Another proposal for addressing the problem is H.R. 2174, 
the ``Unauthorized Spending Accountability Act of 2017'', 
introduced by Representative Cathy McMorris Rogers (R-WA), 
Chair of the House Republican Conference.\444\ The legislation 
would put all unauthorized programs on a path to sunset in 
three years, and require any new authorizations to include a 
sunset clause.
    \444\H.R. 2174, the ``Unauthorized Spending Accountability Act of 
2017'', 115th Congress: 1st Session, 26 April 2017.


    To unwind this pattern of reckless spending, Congress must 
proactively reclaim its authority over the Federal purse 
strings. Unauthorized appropriations move the country toward 
the trend of higher spending. This budget makes the case for 
moving away from higher spending and returning to fiscal 
    The budget supports efforts to eliminate the practice of 
unauthorized spending. Requiring new authorizations to have 
sunset provisions and scheduling reauthorizations for expired 
and expiring programs are prudent steps. Nevertheless, like the 
budget resolution itself, no proposal can succeed without 
proper enforcement. That is a fundamental requirement of fiscal 

                          `HIGH-RISK' FEDERAL
                        PROGRAMS AND ACTIVITIES


    Every two years, at the beginning of each Congress, the 
Government Accountability Office [GAO] publishes an updated 
list of government programs and activities considered at high 
risk for waste, fraud, abuse, and mismanagement. The 2017 
report, on which the discussion below is based, identifies 34 
high-risk programs across a wide range of agencies.\445\ Among 
the more prominent are the following: Medicare; Medicaid; 
Federal disability programs; Pension Benefit Guaranty 
Corporation insurance programs; the National Flood Insurance 
Program; and veterans' health care.
    \445\Government Accountability Office, High-Risk Series: Progress 
on Many High-Risk Areas, While Substantial Efforts Needed on Others, 15 
February 2017:

                          The Medicare Program

    Medicare was designated as a high-risk program by GAO in 
1990 due to its size, complexity, and susceptibility to 
mismanagement and improper payments. In 2016, Medicare was 
projected to spend $696 billion and provide health care 
coverage to more than 57 million beneficiaries. More than 1 
million health care providers, contractors, and suppliers--
including private health plans, physicians, hospitals, skilled 
nursing facilities, durable medical equipment suppliers, 
ambulance providers, and many others--receive payments from 
    Every year, Medicare pays more than a billion claims 
submitted by these health care providers. According to the 
Congressional Budget Office [CBO], in fiscal year 2016, 
Medicare outlays totaled more than was spent on defense ($579 
billion) and almost double the Federal spending on Medicaid 
($365 billion in net outlays). Medicare spending in 2016 
accounts for approximately 17.8 percent of the approximately 
$3.9 trillion in Federal outlays. The majority of fee-for-
service claims are handled by private insurers called Medicare 
Administrative Contractors [MACs]. They process Medicare claims 
for nearly 70 percent of the program's total beneficiaries, 
about 37.5 million people in the fee-for-service program. Taken 
together, they process more than 1.2 billion Medicare fee-for-
service claims annually at a value of more than $360 billion in 
    CBO projects that, in just 10 years (in 2026) under current 
law, Medicare spending will reach $1.3 trillion. The Medicare 
Trustees 2016 report stated that, under current law, Medicare's 
cost as a percentage of gross domestic product would rise to 
5.6 percent by 2040. For these reasons, even small changes can 
have large effects of the overall spending of the Medicare 
Program. It is critical that Medicare be closely monitored to 
ensure that accurate payments are made for services.

                          The Medicaid Program

    GAO has designated Medicaid as high-risk since 2003, 
largely due to ``concerns about the adequacy of fiscal 
oversight.'' State flexibility complicates oversight of 
payments and patient access to care. Medicaid experiences 
dramatic swings in enrollment and funding requirements. Periods 
of higher enrollment, higher costs, and less State revenue 
stability contribute to risk for improper payments and poor 
access to services.
    The Centers for Medicare and Medicaid Services [CMS] has 
insufficient data on Medicaid from States. GAO describes the 
lack of accurate, timely data as an ``overarching challenge'' 
for oversight of the Medicaid Program. Often, available data 
are three years behind. GAO lists five key areas in Medicaid 
needing improved oversight:

     LFinancing and provider payment transparency and 
oversight. CMS needs better information to determine whether 
expenditures are appropriate and to ensure States continue to 
contribute their shares.

     LManaged care payments and utilization oversight. 
GAO could not fully assess utilization patterns for managed 
care patients in 19 States, as the data was either unavailable 
or unreliable.

     LGrowing expenditures for and oversight of large 
Medicaid demonstrations. Medicaid demonstrations have grown to 
a third of Medicaid spending and result in billions of dollars 
expended for costs not otherwise approved.

     LMonitoring and measurement of access to quality 
care. Data suggests that Medicaid enrollees have a hard time 
accessing preventative, oral, and mental health services. More 
conclusive reporting is needed.

     LGrowing expenditures for long-term care services. 
Personal care services are among the highest at risk for 
improper payments (including for services billed but never 

                      Federal Disability Programs

    Like Medicaid, Federal disability programs were designated 
high risk in 2003. GAO reports three of the Federal 
Government's largest disability programs--two run by the Social 
Security Administration [SSA] and one by the Department of 
Veterans Affairs [VA]--allocated about $256 billion in cash 
benefits to more than 20 million people in fiscal year 2015, 
but are struggling to make timely decisions about who is 
eligible for benefits.
    The workload problems are most evident in appeals, GAO 
reports. Between 2012 and 2015, the number of appeals increased 
by 30 percent at the SSA and 34 percent at the VA. Workloads 
for these agencies are likely to remain a challenge as the 
population ages and large numbers of service-members are 
expected to transition out of the military in the next several 
    In addition, the SSA and the VA rely on outdated criteria 
to determine whether individuals qualify for benefits, 
according to GAO. While these agencies reported efforts to 
update their rules, they continue to emphasize individuals' 
medical conditions without sufficiently considering whether 
improvements in workplace accommodations or ``assistive 
technologies'' would make it possible for them to work.
    GAO found another 45 disability programs across nine 
different Federal agencies ``that provide a patchwork of 
employment supports to people with disabilities.'' These 
programs, GAO reported, ``lack a unified vision, strategy, or 
set of goals to guide their outcomes.''

        Pension Benefit Guaranty Corporation Insurance Programs

    The Pension Benefit Guaranty Corporation [PBGC] runs two 
pension insurance programs: one for single-employer pensions 
and one for multi-employer pensions. Single-employer pension 
plans are sponsored by one employer and cover eligible workers 
employed by the plan sponsor. Multi-employer plans are 
collectively bargained plans to which more than one company 
makes contributions.
    PBGC covers roughly 40 million current workers and retirees 
in 24,000 private-sector pension programs. In fiscal year 2016, 
PBGC had a net accumulated financial deficit of $79.4 billion, 
an increase of $44 billion since 2013. GAO has identified the 
single-employer program as ``high risk'' since 2003 and the 
multi-employer program since 2009. PBGC projects the multi-
employer program will be insolvent by 2025. Since 2013, the 
deficit in the multi-employer program, comprising about 1,400 
plans, has increased by more than 400 percent.
    In December 2014, Congress increased premiums for PBGC-
covered multi-employer plans to try to address the looming 
insolvency, but the increase has had little impact.

                            Flood Insurance

    The National Flood Insurance Program [NFIP] has appeared on 
the GAO high-risk list since 2006. According to the GAO, the 
NFIP program does not collect enough premiums both to cover its 
insured losses and to repay taxpayers. Furthermore, the NFIP 
has never collected enough premiums to cover ``catastrophic 
loss years'' and will likely need more taxpayer bailouts in the 
    Indeed, the ``NFIP's overall rate-setting structure was not 
designed to be actuarially sound in the aggregate,'' GAO says, 
``nor was it intended to generate sufficient funds to fully 
cover all losses. Instead, Congress authorized the Federal 
Emergency Management Agency [FEMA], which manages the NFIP, to 
borrow from Treasury, within certain limits, when needed. 
``Until the 2005 hurricanes,'' GAO says, ``FEMA had used its 
authority to borrow intermittently and was able to repay the 
loans. As of March 2016, FEMA owed Treasury $23 billion, up 
from $20 billion in November 2012. FEMA made a $1 billion 
principal repayment at the end of December 2014--its first such 
payment since 2010.''
    In 2016, the NFIP had 5 million policies collecting $3.3 
billion in premiums on $1.2 trillion of insurance in force. As 
of mid-April 2017, the NFIP owed $25 billion to taxpayers. 
Since 2010, NFIP has repaid only $1 billion to taxpayers. In 
January 2017, the NFIP announced it would need $1.6 billion 
more from taxpayers to cover losses incurred in 2016.
    The NFIP runs on outdated information technology, policy 
and risk management systems. As a result, the NFIP cannot 
accurately price its policies to reflect the risk of flooding 
for each property and policy.
    In 2012, Congress passed a long-term reauthorization of the 
NFIP: the ``Biggert-Waters Flood Insurance Reform Act of 2012'' 
(Public Law 112-141). The NFIP authorization expires on 30 
September 2017.

                  Veterans Administration Health Care

    The VA health care system was placed on GAO's high-risk 
list in 2015, for its inability to ensure allocated resources 
are being used in a ``cost-effectively and efficiently to 
improve veterans''' health care access, safety, and quality. VA 
has problems with the reliability, transparency, and 
consistency of its budget estimates for medical services, as 
well as weaknesses in tracking obligations for medical services 
and estimating budgetary needs for future years. The budget 
troubles were evident in June 2015, when the VA requested 
additional funds from Congress due to VA officials' failure to 
project a fiscal year 2015 funding gap of about $3 billion in 
its medical services.
    Although VA's budget and the total number of medical 
appointments provided have substantially increased for at least 
a decade, there have been numerous reports in this same 
period--by GAO, VA's Office of the Inspector General, and 
others--of VA facilities failing to provide timely health care. 
VA's lack of medication continuation policy is an example of 
the administration's risk. The failure of the VA, the 
Department of Defense, and community providers to promptly 
communicate important clinical information, such as medication, 
can increase the risk of adverse health effects and/or result 
in harm to veterans.
    Other programs and activities on GAO's 2017 ``high-risk'' 

                    Strengthening the Foundation for
                      Efficiency and Effectiveness

     LStrategic human capital management.

     LManaging Federal real property.

     LFunding the Nation's surface transportation 

     LModernizing the U.S. financial regulatory system 
and the Federal role in housing finance.

     LRestructuring the U.S. Postal Service to achieve 
sustainable financial viability.

     LManagement of Federal oil and gas resources.

     LLimiting the Federal Government's fiscal exposure 
by better managing climate change risks.

     LImproving the management of IT acquisitions and 

     LImproving Federal programs that serve tribes and 
their members.

     LU.S. Government environmental liabilities.

                Transforming Department of Defense [DOD]
                           Program Management

     LSupply chain management.

     LWeapon systems acquisition.

     LFinancial management.

     LBusiness systems modernization.

     LSupport infrastructure management.

     LApproach to business transformation.

                  Ensuring Public Safety and Security

     LEnsuring the security of Federal information 
systems and cyber-critical infrastructure, and protecting the 
privacy of personally identifiable information.

     LStrengthening Department of Homeland Security 
management functions.

     LEnsuring the effective protection of technologies 
critical to U.S. national security interests.

     LImproving Federal oversight of food safety.

     LProtecting public health through enhanced 
oversight of medical products.

     LTransforming the Environmental Protection 
Agency's processes for assessing and controlling toxic 

     LMitigating gaps in weather satellite data.

             Managing Federal Contracting More Effectively

     LThe Department of Energy's contract management 
for the National Nuclear Security Administration and Office of 
Environmental Management.

     LNational Aeronautics and Space Administration 
acquisition management.

     LDOD contract management.

             Assessing the Efficiency and Effectiveness of
                         Tax Law Administration

     LEnforcement of tax laws.



    Compounding the problem of mounting Federal deficits and 
debt is the wasteful spending that constantly seeps out of 
Federal bureaucracies. Despite numerous reforms and fiscal 
commissions tasked with reducing government bloat, taxpayers 
are forced to continue funding Federal programs and activities 
that are unnecessary, obsolete, or just plain ridiculous. The 
following examples highlight just some of the more egregious 
and wasteful ways the government spends taxpayers' dollars. 
Many such items were initially cited in work published by 
Senators Jeff Flake (R-AZ) and Lankford (R-OK), whose offices 
annually compile summaries of the most questionable spending 
activities of the Federal Government. Their ``waste books'' are 
titled The Farce Awakens (Senator Jeff Flake, 2015); PORKemon 
Go (Senator Jeff Flake, 2016); Federal Fumbles (Senator James 
Lankford, 2015); Federal Fumbles Vol. 2 (Senator Lankford, 
2016). Below is a sampling from these works, which contain a 
variety of additional examples that illustrate the extent to 
which the Federal Government throws away taxpayers' money at 
unnecessary, wasteful, and even fraudulent spending. (All the 
items are annually appropriated, discretionary spending, unless 
otherwise indicated.)
    The items are organized below by budget function 

                     Function 050: National Defense

    Spaceport to Nowhere. The Alaska Aerospace Development 
Corporation [AADC] was established as an independent State 
agency in 1991 to build ``space-related economic development'' 
in Alaska. The Department of Defense [DOD] and Air Force 
opposed the AADC funding request to build a rocket launching 
site in Alaska, because the military already had rocket launch 
sites throughout the country. Nevertheless, DOD employees and 
defense contractors arranged an illegal scheme to fund the 
launch site in Alaska, and received kickbacks worth $1.6 
million for steering $350 million to contractors. (PORKemon Go, 
2016, p. 5-9)

    It's a PR Problem. Federal contracts for advertising and 
public relations average $1 billion per year, with DOD paying 
60 percent of overall public relations contracts, amounting to 
$626.2 million last year. DOD also employs the largest number 
of public relations staff. According to a Pew Research Center 
poll, 32 percent of Americans have ``a favorable impression of 
the federal government,'' with 68 percent having an unfavorable 
impression. (PORKemon Go, 2016, p. 46-47)

    High-Priced Gasoline. According to the Special Inspector 
General for Afghanistan Reconstruction, the Department of 
Defense spent $43 million to build ``the world's most expensive 
gas station'' in Afghanistan to distribute natural gas, which 
few Afghan cars run on. The contract to build the gas station 
was estimated to cost the Federal Government less than $3 
million. In the end, DOD spent $43 million for the construction 
and supervising of the operation for the station. (The Farce 
Awakens, 2015, p. 32-34)

                  Function 150: International Affairs

    Lights, Camera, Action. The State Department announced a 
partnership with a non-profit arts organization to create 
``Global Media Makers''--an international film exchange program 
in which the U.S. will bring 12 to 18 international film and 
video professionals to the U.S. to educate them; at a cost to 
taxpayers of $1 million. (Federal Fumbles Vol 2, 2016, p. 77)

    Shocked. The State Department signed two contracts to build 
office and living buildings near the U.S. Embassy of Kabul at a 
cost of $793 million. Once completed it was discovered that due 
to contractor negligence, potentially lethal levels of 
electrical current were flowing through the buildings without 
proper insulation and protection. (Federal Fumbles Vol 2, 2016, 
p. 36)

          Function 250: General Science, Space, and Technology

    Save the Mudskipper. The National Science Foundation [NSF] 
spent $1.5 million on grants to the University of California-
San Diego Institution of Oceanography to study the fitness 
levels of mudskippers on a treadmill; bluegills in treadmill-
like swim tunnels; and the effect of oxygen and PH levels on 
the performance of rockfish. (PORKemon Go, 2016, p. 17)

    Icelandic Culture. The NSF spent $500,000 in multiple 
grants to determine the connection among religion, politics, 
and cemeteries in 12th-century Iceland. Additional NSF grants 
this year for Iceland studies included volcanoes, ``calcium and 
strontium isotope geochemistry of weathering,'' the flow of 
water from Denmark to Iceland, and the spread of flies at a 
lake in Iceland. (Federal Fumbles Vol. 2, 2016, p. 9)

                          Function 270: Energy

    Carbon Capture Comes up Empty. The Department of Energy 
[DOE] has spent hundreds of millions of dollars to capture man-
made carbon dioxide [CO2]. The Summit Power Group 
LLC's Texas Clean Energy Project was expected to capture 
CO2 emitted during the production of energy from 
coal. The compressed gas would then be used for ``enhanced oil 
recovery,'' which pushes more crude oil out of the ground. The 
project is six years behind schedule and has cost the DOE $450 
million. (PORKemon Go, 2016, p. 37)

            Function 300: Natural Resources and Environment

    Dirtbag Beach. The Downtown Montauk Emergency Stabilization 
Project required the Army Corps of Engineers to spend $8.4 
million to plow away the beach's natural dunes and construct a 
wall made up of 14,000 1.7-ton geotextile bags holding orange, 
non-beach sand to protect against erosion. Waves of protestors 
assembled to halt the project and many have questioned whether 
the town has ``destroyed the beach in order to save it.'' 
(PORKemon Go, 2016, p. 52-55)

    What's Upstream? A lobbying campaign in Washington State 
titled ``What's Upstream'' was paid for with a portion of a 
$12-million Environmental Protection Agency [EPA] grant to the 
Northwest Indian Fisheries Commission. ``The effort, which 
disparaged farmers as `polluters of our waterways,' included a 
website and advertisements on billboards, buses, and the 
radio.'' EPA records show the campaign was used to lobby the 
State to implement tougher regulations than even allowed under 
the Federal Clean Water Act. (PORKemon Go, 2016, p. 64-67)

    Duck, Duck, Goose? For almost 20 years, the U.S. Fish and 
Wildlife Service [FWS] has used a method to count sea ducks 
that it either knew or suspected was ineffective. FWS has 
offered a $180,000 grant for an outside group to develop an 
effective way to count and tag sea ducks. (Federal Fumbles Vol. 
2, 2016, p. 11)

    Minecraft: The Federal Video Game Edition. The EPA's 
Environmental Education grant provided $36,700 in Federal funds 
to a group in Massachusetts to develop a Minecraft video game 
customized specifically for the Berkshires to engage children 
in ``environmental conservation.'' (PORKemon Go, 2016, p. 100-

                       Function 350: Agriculture

    Fast and Furious. At the U.S. Department of Agriculture 
[USDA] Wildlife Services' National Wildlife Research Center in 
Ohio, nearly $118,000 has been spent on studies trying to 
determine the speed an automobile must be traveling to hit a 
bird before it can fly to safety. (PORKemon Go, 2016, p. 102-

    Cornhusker, Kick Back. Using Agriculture and Food Research 
Initiative Grant funding from the USDA's National Institute of 
Food and Agriculture, University of Nebraska football fans were 
provided with ``Ultimate Tailgating Packages'' that included a 
koozie, aprons, and other tailgating ``essentials.'' The 
project was part of a larger grant linking scientific research 
to outreach and education. (The Farce Awakens, 2015, p. 97-98)

               Function 370: Commerce and Housing Credit

    World Tour. ``The U.S. Small Business Administration's 
State Trade and Export Promotion program pays for international 
trips, design of international marketing products and 
campaigns, and export trade show exhibits for small businesses. 
These include excursions to international fashion shows, air 
shows, and wine fairs'' at a cost to taxpayers of $18.9 
million. (PORKemon Go, 2016, p. 125-126)

                      Function 400: Transportation

    The Fast Track to Nowhere. More than $3.1 billion in 
grants, including stimulus funds, have been dedicated to 
constructing a high-speed rail line between San Francisco and 
Los Angeles. The project, however, has experienced tens of 
billions of dollars in cost overruns and a series of delays. 
(PORKemon Go, 2016, p. 24-26)

    Reefer Madness. Colorado's Department of Transportation 
[CDOT] used a National Highway Traffic Safety Administration 
grant to install a 28-foot tall, 3-D billboard of a wrecked car 
shaped like a marijuana joint. The billboard is an effort to 
educate people about the danger of driving under the influence 
of marijuana. The total cost, $35,000, included $16,600 that 
CDOT paid to the advertising agency that designed the 
billboard. (PORKemon Go, 2016, p. 48-49)

    Tax Dollars at `Work.' An audit of the Lake Sumter, FL 
Metropolitan Planning Organization found $892,000 in misspent 
funds over four years, with the money going to fund ``golf 
tournaments, a music and wine festival, holiday wine glasses, 
and a private boat cruise.'' More than $100 million goes to 
this local planning entity every year, in the form of Federal 
and State grants. (PORKemon Go, 2016, p. 96-99)

    App-Solute Failure. The Transportation Security 
Administration contracted with IBM to enhance their software 
systems, which included $47,400 for an iPad app that randomly 
directs airline passengers to enter the left or right line at 
an airport security screening station. (Federal Fumbles Vol. 2, 
2016, p. 98)

            Function 450: Community and Regional Development

    Tastes Good, Good for Whom? The USDA provided $250,000 in 
Value-Added Producer grants to Ocean Spray to produce and ship 
three new juice drinks. Ocean Spray's current annual sales are 
around $2 billion. (Federal Fumbles Vol 2, 2016, p. 21)

    K-9 Clothier. A total of $210,000 in Federal funding via 
Community Development Block Grants [CDBGs] went to Maine 
Stitching Specialties. ``The company designs dog vests and 
accessories for L.L. Bean and Orvis, including leashes and 
collars as well as the collar kerchief.'' (The Farce Awakens, 
2015, p. 38-39)

    Got Yogurt? The Michigan Economic Development Corporation 
allocated $76,886 in CDBG funds for the Yogurtopia Building 
Facade project this year. Yogurtopia offers a variety of more 
than 50 flavors of yogurt. (The Farce Awakens, 2015, p. 175)

           Function 500: Education, Training, Employment, and
                            Social Services

    How the Cookie Crumbles. Using a $150,000 Institute of 
Museum and Library Services grant, the Oregon Museum of Science 
and Industry organized a series of ``Gingerbread Adventures'' 
workshops. Participants still had to purchase tickets for the 
various workshops. (PORKemon Go, 2016, p. 50-51)

    Here's Johnny! The National Endowment for the Arts [NEA] 
provided a $70,000 grant to the Minnesota Opera to perform an 
adaption of Stephen King's novel The Shining. ``Despite the 
show's financial success, taxpayers were still haunted with the 
production's costs.'' (PORKemon Go, 2016, p. 114-115)

    The Most Interesting Man in the World. The Smithsonian 
Institution, which receives about 60 percent of its annual 
budget from the Federal Government, announced an American 
Brewing History Initiative that will research home brewing and 
its history. Included in the initiative is a ``beer 
historian,'' which the Smithsonian announced is a three-year 
position that pays $64,540 annually. (Federal Fumbles Vol. 2, 
2016, p. 58)

    A Government Solution. The Department of Labor provided 
almost $30 million in National Emergency Grants to help 6,835 
laid-off workers retain jobs. Out of the near 7,000 displaced 
workers, only 1,231 participated. Of those, just 357 found jobs 
with assistance from the program. (PORKemon Go, 2016, p. 112)

                          Function 550: Health

    Tooth Terror. The National Institute of Health [NIH] 
provided $3.5 million in grants to West Virginia University to 
determine why people are scared of the dentist. (PORKemon Go, 
2016, p. 116-117)

    Kappa Tappa Kegga. The NIH's National Institute on Alcohol 
Abuse and Alcoholism provided $5 million in grants to Brown 
University to study drinking at fraternities. The studies' 
findings were on the drinking culture of campus Greek life. 
(PORKemon Go, 2016, p. 20-23)

    Pay First, Ask Questions Later. The Centers for Medicare 
and Medicaid Services have paid more than $3 million in 
improper payments to barred providers who are kicked out of 
Medicaid or Medicare for cause (fraud, poor quality, or 
conviction for a crime). These providers are prohibited under 
Federal law from participating in the programs in other States, 
but the Congressional Budget Office estimates barred providers 
still collect $3 million in mandatory spending, annually, under 
Medicaid and Children's Health Insurance Program. (PORKemon Go, 
2016, p. 109-110)

    Up in Smoke. More than $5 million dollars, provided by the 
NIH, was used for parties thrown for hipsters where the 
organizers hoped to convince millennials not to smoke, and to 
take a stand against tobacco corporations. If the party failed, 
the participants were paid $100 to quit smoking. Researchers 
found these ``events'' did not change smoking rates. (The Farce 
Awakens, 2015, p. 11-13)

                     Function 600: Income Security

    Lifestyles of the Rich and Federally Subsidized. In 2015, 
the Department of Housing and Urban Development [HUD] paid $104 
million to subsidize housing for 25,000 families that exceed 
the HUD maximum income threshold. ``For example one New York 
City family living in a public housing apartment had a November 
2013 annual household income of $497,911, more than seven times 
the low-income family threshold of $67,100 in New York City.'' 
(Federal Fumbles, 2015, p. 71)

    Slumlord Millionaires. HUD officials blocked Tennessee 
housing officials from conducting safety inspections at a 
subsidized housing development operated by Global Ministries 
Foundation [GMF], which has received more than $60 million 
annually to provide low income housing in Memphis. ``Residents 
at GMF reported living in deplorable conditions with broken 
pipes, exposed electrical sockets, and infestation with 
roaches, bedbugs, and rodents.'' (The Farce Awakens, 2015, p. 

    Taxpayer U-Haul. HUD spends $2 million annually to pay 
relocation and travel expenses for HUD employees. ``In all, 
nearly $2.9 million has been spent since 2013 to move about 125 
HUD employees. The average cost paid per employee relocated is 
nearly $23,000.'' (The Farce Awakens, 2015, p. 74)

                     Function 650: Social Security

    Lost in Translation. The Social Security Administration 
[SSA] is spending millions of mandatory dollars paying Social 
Security Disability Insurance benefits to hundreds of Puerto 
Ricans because they do not speak English. The official language 
of Puerto Rico is Spanish, as enacted by the territorial 
government of Puerto Rico. ``The SSA policy contradicts a 1987 
court ruling. A U.S. District Court upheld a U.S. Court of 
Appeals decision `that, for the most part, it is the ability to 
communicate in Spanish, not English, that is vocationally 
important in Puerto Rico.''' (The Farce Awakens, 2015, p. 130-

              Function 700: Veterans Benefits and Services

    Costly Outreach. Federal contracts for advertising and 
public relations average $1 billion per year, with the 
Department of Veterans Affairs [VA] having the largest 
percentage increase in public relations staff over the past 
decade. VA public relations staff grew from ``144 employees in 
2006 to 286 in 2014,'' and the department currently spends 
nearly $24 million per year in advertising and public 
relations. (PORKemon Go, 2016, p. 46-47)

    Total Recall. The Madison VA Medical Center in Wisconsin 
purchased two robots at a cost of $313,000 each, only to sell 
them back to the manufacturer for less than $2,000 each after 
leaving them unused for two years. The robots were acquired to 
assist with the distribution of supplies throughout the VA 
facility. (PORKemon Go, 2016, p. 120-121)

                Function 750: Administration of Justice

    Show Me the Money. The Department of Justice [DOJ] has used 
settlements with defendants, particularly defendant 
corporations, to compel payments of mandatory funds to third-
party groups without permission from Congress. ``Here is how 
this works: DOJ prosecutes a person or company, generally 
larger companies. Then when that company reaches a settlement 
with the government that includes fines or payments, DOJ 
induces the company to pay at least part of the fine to an 
outside group instead of to the government.'' (Federal Fumbles 
Vol. 2, 2016, p. 42)

    Knock on Wood. Nearly $1.2 million dollars were spent to 
purchase, install, and then remove a giant wooden sculpture 
from the Federal Bureau of Investigation's Miami field office. 
The sculpture caused severe allergic reactions that 
hospitalized at least a dozen staffers, including the 
facility's nurse. (PORKemon Go, 2016, p. 94-95)

                    Function 800: General Government

    You've Got Mail. The Internal Revenue Service [IRS] has 
spent more than $12 million for ``an e-mail archiving system 
that the IRS has never used. While the IRS has been paying 
subscription and renewal fees over the past two years beginning 
in June 2014 for the service, the software to activate the 
program was never even deployed, according to a review by the 
Treasury Inspector General for Tax Administration.'' (PORKemon 
Go, 2016, p. 88-89)

    Campaign Cash. The Presidential Election Campaign Fund is 
an antiquated leftover from the scandal-plagued Watergate era. 
It was created to limit the influence of big money in 
presidential campaigns by enticing candidates to accept free 
money in exchange for limiting private donations and campaign 
spending. In 2016, Martin O'Malley was the only major party 
candidate to accept public, mandatory funding. (PORKemon Go, 
2016, p. 27-29)

    The Big Picture. During renovation of the Federal 
courthouse in Los Angeles, CA, the General Services 
Administration paid almost $1 million for a single picture of 
Yosemite Falls in Yosemite National Park. The picture was to be 
cut into six pieces and hung in the atrium of the courthouse. 
(Federal Fumbles Vol. 2, 2016, p. 35)

                         BUDGET PROCESS REFORM


    Since the adoption of the Congressional Budget Act in 1974, 
the budget process has been amended several times, adding 
complexity and confusion to an already complicated exercise. 
The process has become so cumbersome, frustrating, and 
ineffective that Congress now frequently abandons it in favor 
of manufactured, ad hoc procedures. This deterioration only 
weakens Congress's power of the purse, and thus its capacity to 
govern. In addition, fiscal conditions have changed 
dramatically over the past 43 years, including the inexorable 
growth of automatic spending as a share of the total budget and 
the recent explosion of government debt that threatens to 
overwhelm the budget and the economy.
    Incremental, piecemeal fixes will not correct these deep 
and fundamental failings in the budget process. What is needed 
is a thorough rewrite of congressional budget practices. 
Following an extensive series of hearings and working papers, 
the House Budget Committee has developed the attached 
discussion draft describing a proposed overhaul of the process.
    During the 114th Congress, the Committee on the Budget 
conducted extensive research in the practices of congressional 
budgeting. The examination included several hearings and a 
series of working papers. The aim was to develop a deeper 
understanding of the nature of congressional budgeting and its 
role in governing. The following discussions--updated from 
their original publication in 2016--reflect some of the major 
considerations in that exploration.

                  Reclaiming Constitutional Authority
                    Through the `Power of the Purse'


    Choosing priorities and allocating financial resources is 
the most fundamental way for a legislature to shape governing 
policies. Moreover, a government's budgeting process is central 
to determining the kind of governing system a country has. 
Hence, a vigorous practice of budgeting is fundamental to 
Congress's policymaking authority under Article I of the 
    The United States Federal Government is not a parliamentary 
system. To the extent Congress cedes control of the budget, the 
Executive Branch--which is independent of Congress--gains 
power, undermining the Constitution's carefully drawn balance 
of powers. The Founders established this constitutional system 
precisely to prevent such concentrations of power, which could 
ultimately threaten individual freedoms. Therefore, the budget 
process must strive to reinforce Congress's constitutional 
authority and the U.S. Government's arrangement of three 
separate but coequal branches.

                        BUDGETING AND GOVERNING

    Most discussions of budget process reform focus on the 
practical mechanisms of budgeting, and evaluate the budget's 
constitutional role only secondarily, if at all. In truth, 
however, the budget is a principal means of policymaking and of 
exercising constitutional government. ``[T]he budget is much 
more than a matter of dollars. It finances federal programs and 
agencies and is a vital means of establishing and pursuing 
national priorities. In a fundamental sense, the federal 
government is what it spends.''\446\
    \446\Allen Schick, The Federal Budget: Politics, Policy, Process--
Third Edition (Washington, DC: Brookings Institution Press, 2007), p. 
    As one scholar put it a century ago: ``The budget in 
practically all current discussions is treated as an incidental 
or a minor thing. It is regarded primarily as a matter of 
finance or of accounting procedure. It is viewed too often 
merely as a question of the manipulation of figures. While as a 
matter of fact instead of being a secondary thing it is of the 
first importance; instead of being a subordinate thing it is a 
fundamental thing; instead of being merely the manipulation of 
figures it is decisive in its relation to the health, education 
and welfare of all the citizens and residents of the state or 
nation concerned.''\447\
    \447\Edward Augustus Fitzpatrick, Budget Making in a Democracy (New 
York: The MacMillan Company, 1918), p. vii.

                          `POWER OF THE PURSE'

    Although America's Founders had little sense of formalized 
budget practices, they knew control over spending and taxation 
was one of the most powerful instruments of government--one 
that had to rest with the legislature. ``Centuries of struggle 
in England between Parliament and the Crown over the power of 
the purse culminated in the principle that the government's 
authority to tax and spend must be conferred by legislation. It 
took centuries to implant this principle in England, but by the 
time the American colonies were waging war for their 
independence, its acceptance on this side of the Atlantic was a 
basic tenet of limited, democratic government.''\448\
    \448\Op. cit., p. 10, Schick.
    Indeed, budgeting plays a critical role in maintaining the 
constitutional order itself: ``When you have decided on your 
budget procedure you have decided on the form of government you 
will have as a matter of fact. Make the executive the 
dominating and controlling factor in budget-making and you 
have, irrespective of what label you put on it, an autocratic 
actual government. If, recognizing the large part the executive 
or the administration may play in budget-making, you give the 
dominating and controlling influence to the representatives of 
the people elected to the legislature, you have, irrespective 
of what label you put on it, a democratic or a representative 
actual government.''\449\
    \449\Op. cit., p. viii, Fitzpatrick.
    The most often-cited source of Congress's power of the 
purse is the constitutional requirement that Federal spending 
can occur only pursuant to an appropriations act (Article I, 
Section 9). In fact, however, the congressional budgeting 
authority lies in several provisions of the Constitution:

      Article I, Section 7, First Clause: ``All Bills 
for raising revenue shall originate in the House of 
Representatives; but the Senate may propose or concur with 
Amendments as on other Bills.''

      Article I, Section 8, First Clause: ``The 
Congress shall have the Power To lay and collect Taxes, Duties, 
Imposts and Excises, to pay the Debts and provide for the 
common Defence and general Welfare of the United States; but 
all Duties, Imposts and Excises shall be uniform throughout the 
United States;''

      Article I, Section 8, Second Clause: [The 
Congress shall have the Power] ``To borrow money on the credit 
of the United States;''

      Article I, Section 9, Seventh Clause: ``No Money 
shall be drawn from the Treasury, but in Consequence of 
Appropriations made by Law; and a regular Statement and Account 
of the Receipts and Expenditures of all public Money shall be 
published from time to time.''

      Amendment XVI: ``The Congress shall have the 
power to lay and collect taxes on incomes, from whatever source 
derived without apportionment among the several States, and 
without regard to any census or enumeration.''\450\
    \450\See Committee on the Budget, U.S. House of Representatives, A 
Compendium of Laws and Rules of the Congressional Budget Process, 
Committee Print Serial No. CP-1, August 2015, p. 580-582.

    Notwithstanding this authority, the Constitution prescribes 
no particular budgeting procedures. Those came about from 
practices that started from the beginning of the republic and 
evolved over time, eventually leading to formal budget laws and 
rules in the House and Senate.\451\ This tangle of laws and 
procedures has contributed to the complexity of today's budget 
process, making budgeting itself more difficult.

                      HOW CURRENT BUDGET PRACTICES

    When adopted in 1974, the Congressional Budget Act sought 
to reassert legislative control over budgeting after several 
years of discord between Congress and both Presidents Johnson 
and Nixon. Nevertheless, as the process has unfolded, various 
procedures, or failures in budget practices, have come to 
actually erode Congress's policymaking authority. In some 
cases, Congress has ceded power, in concrete ways, to the 
Executive Branch. The following discussion presents some 

                         The President's Budget

    Until the early 20th century, the Federal Government had no 
formal or comprehensive budgeting procedure. Generally, agency 
heads would visit their respective committees of jurisdiction 
on Capitol Hill and submit their budget requests, with no 
overall coordination by the White House, and the committees 
would determine how much to provide.
    This was a period of legislative dominance over budgeting. 
``The various requests were compiled by the Treasury in an 
annual Book of Estimates, but little effort was made to 
coordinate spending by individual agencies or to ensure that 
they totaled to an acceptable amount and were in accord with 
national policy.''\452\ Congress controlled not only the 
totals, but also individual spending items by making detailed 
appropriations. Perhaps surprisingly, throughout this period--
during which balanced budgets were the fiscal norm in 
peacetime--Congress maintained fiscal stability without a 
formal budget plan to coordinate expenditures and revenues. 
``As long as the government was small and its financial needs 
modest, a national budget was not necessary for producing 
acceptable outcomes.''\453\
    \452\Op. cit., p. 14, Schick.
    \453\Ibid., p. 13.
    By the early 20th century, the stability had begun to break 
down. Between 1894 and 1915, Federal spending doubled in 
nominal terms, producing chronic deficits. ``Spending exceeded 
revenues in 11 of the 17 years from 1894 to 1910.''\454\ World 
War I (then known as The Great War) caused spending to soar, 
from $726 million in 1914 to $19 billion five years later. 
``The public debt followed a similar trend in those five years, 
escalating from $1 billion to $26 billion.''\455\ That was 
about 33 percent of gross domestic product [GDP] at the time. 
(Today, the Federal Government's publicly held debt is 77.5 
percent of GDP, and gross debt--including amounts owed to 
government accounts--is about 106 percent of GDP.\456\)
    \454\Ibid., p. 14.
    \455\Ibid., p. 14.
    \456\Congressional Budget Office, Updated Budget Projections: 2016-
2026, March 2016.
    Progressive reformers at the time--favoring ``experts'' 
over politicians--encouraged a more centralized, administrative 
form of government. They expressed this impulse, in part, by 
proposing an organized practice of Federal budgeting, situated 
in the Executive Branch. This led to the Budget and Accounting 
Act of 1921.\457\ The measure contained the following main 
    \457\Public Law 67-13, 42 Stat. 20, enacted 10 June 1921.

      It required the President to submit to Congress 
every year a comprehensive budget reflecting all the agencies' 

      It created the Bureau of the Budget (renamed the 
Office of Management and Budget in 1971), originally situated 
in the Treasury Department.

      It also created the General Accounting Office 
(now the Government Accountability Office) to provide 
congressional oversight of Executive Branch fiscal activities.

    The arrangement was consciously modeled on that of the 
United Kingdom. ``A simile--be like Britain--justified 
recommendations for budget hierarchy in the United 
States.''\458\ Thus, the Budget and Accounting Act imposed on 
the U.S. Constitution's arrangement of three separate but 
coequal branches a budget procedure designed for a 
parliamentary system of government. In effect, it attempted to 
straddle the constitutional separation of powers.
    \458\Aaron B. Wildavsky, The New Politics of the Budgetary Process 
- Third Edition (New York: Addison-Wesley Educational Publishers Inc., 
1997), p. 35.
    The President's budget never had any legislative 
authority--it still does not--but it provided the President a 
platform to spell out a national agenda. Although actual 
spending and taxation still could result only from acts of 
Congress, congressional action on fiscal matters was piecemeal. 
Only the President's budget reflected an overall view of the 
government. President Franklin D. Roosevelt understood the 
value of this instrument for shifting control of government and 
policy to the Executive Branch. ``[T]he seeds of a new form of 
governing had been sown. The initial change can be seen in the 
New Deal, which brought significant new interventions in the 
national economy and the creation of the entitlement programs 
that threaten our fiscal stability today. FDR recognized the 
constitutional significance of this shift when he moved the 
Bureau of the Budget (established under the 1921 Budget and 
Accounting Act) from the Treasury to the new Executive Office 
of the President, establishing that henceforth control of the 
budget would be key to controlling and directing the new form 
of American government.''\459\
    \459\Matthew C. Spalding, Congress, Budget Control, and 
Constitutional Self-Government, testimony to the Committee on the 
Budget, U.S. House of Representatives, 25 May 2016. President Roosevelt 
moved the Bureau of the Budget in his 1939 government reorganization 
    After World War II, presidents consciously expanded the use 
of the budget to express their policy agendas. ``During the 
1950s and 1960s, it became customary for the president to 
prepare a legislative program in tandem with the annual budget. 
The president used the budget to propose spending initiatives, 
which shaped Congress's agenda and media coverage. * * * This 
was the age of the `imperial presidency,' a term coined by 
scholars to characterize the extent to which the president 
dominated national policy. The budget was one of his chief 
tools, enabling him to formulate programs, promote spending 
initiatives, and preside over a new burst of governmental 
expansion that culminated in the Great Society legislation 
enacted in 1964 and 1965.''\460\
    \460\Op. cit., p. 17, Schick.
    By the second half of the 1960s, budgetary conflict became 
more common. ``[T]he simultaneous pressures on expenditures of 
social programs and the Vietnam War strained the budget. 
Faltering economic growth ended the fiscal dividend, and with 
it the politics of accommodation among advocates of social 
spending, defense spending, more or less balanced budgets, and 
tax reductions. The legacy of earlier policies--entitlements, 
indexing, tax cuts, Keynesian economics, federal credit--was 
now visible in the changed composition and dynamics of the 
federal budget. This budget was much less flexible, far more 
difficult to control, and extraordinarily vulnerable to 
breakdown as underlying the old order collapsed.''\461\ 
President Nixon provoked Congress even further by impounding 
funds not merely for fiscal management, but to thwart 
congressional policy aims. In 1974, lawmakers therefore adopted 
the ``Congressional Budget and Impoundment Control Act''. It 
was intended to restore congressional power over budgeting, and 
at least theoretically, it did: Individual spending and tax 
bills would now be written pursuant to the congressional budget 
resolution--a new instrument created under the Budget Act--
rather than the President's budget. ``The budget resolution 
augmented the wholly decentralized approach that had existed to 
that point, in which individual committees considered pieces of 
the budget, but the Congress never considered the budget as a 
unified whole.''\462\ Because the congressional budget 
resolution was the formal vehicle of fiscal policy, the 
President's actions--limited to signing or vetoing spending and 
tax bills--became piecemeal. Nevertheless, the President's 
budget still came first in the process, and was considered the 
start of budget development (both are still the case today). 
Most experts refer to the congressional budget as a 
``response'' to the President's, not as the main blueprint for 
fiscal policy.
    \461\Op. cit., p. 68, Wildavsky.
    \462\Philip G. Joyce, testimony to the Committee on the Budget, 
U.S. House of Representatives, on ``Reclaiming Congressional Authority 
through the Power of the Purse,'' 25 May 2016.

              The Dominance of Automatic Federal Spending

    The problem of automatic government spending traces as far 
back as the post-Civil War period. For the first 75 years of 
the republic, both spending and revenue were handled by the 
House Committee on Ways and Means and the Senate Committee on 
Finance. After the Civil War, the House and Senate carved out 
separate Appropriations Committees to handle spending matters. 
``The arrangement allowed for unified control of spending in 
one committee. Yet, it did not have authority to control all 
spending--the size of pensions and other permanent 
appropriations (together constituting over half the budget) 
were determined by other committees.''\463\
    \463\Op. cit., p. 30, Wildavsky.
    That problem returned and worsened with the dawn of 
President Johnson's Great Society. Most of the Federal 
Government's automatic spending--formally known as ``direct'' 
or ``mandatory'' spending\464\--flows from effectively 
permanent authorizations. Programs funded this way--mainly 
entitlements--pay benefits directly to groups and individuals 
without an intervening appropriation. They spend without limit. 
Their totals are determined by numerous factors outside the 
control of Congress: caseloads, the growth or contraction of 
GDP, inflation, and many others. To put it simply, spending in 
these programs is uncontrolled and uncontrollable--because it 
is designed to be.
    \464\Section 250 of the ``Balanced Budget and Emergency Deficit 
Control Act of 1985'' defines ``direct spending'' as ``(A) budget 
authority provided by law other than appropriations Acts; (B) 
entitlement authority; and (C) the Supplemental Nutrition Assistance 
    In 1965, Washington's automatic spending, including 
interest payments (a mandatory payment in the true sense of the 
word), represented about 34 percent of the budget. By 1974, 
when the Congressional Budget Act was adopted, it had swollen 
to nearly 49 percent of total spending. By 2016, direct 
spending programs and interest payments had surged to more than 
two-thirds of the budget,\465\ and will reach 81 percent by 
2040.\466\ Automatic spending is the sole source of Federal 
spending growth as a share of the economy and the main driver 
of government debt. (See further discussion of automatic 
spending below.)
    \465\Op. cit., Table 1, Congressional Budget Office.
    \466\Ibid., Table 1.
    Even these figures, however, fail to fully capture the 
pervasiveness of the problem. Control of spending, properly 
understood, means the power to spend or not to spend taxpayer 
money. Automatic/mandatory spending destroys Congress's ability 
not to spend. By design, automatic spending requires a 
Presidential signature to turn off--the very opposite of the 
constitutional provision that spending can occur only pursuant 
to positive legislation appropriating funds. It should be 
Congress, not the President, deciding whether or not money is 
spent. Yet even if Congress passes legislation to alter the 
course of any automatic spending program, the President can 
veto the change. Unless both Chambers of Congress can muster a 
two-thirds supermajority to overrule the President, automatic 
spending will continue on its current path. With two-thirds of 
the budget no longer in the control of Congress, the so-called 
``power of the purse'' has been effectively ceded to the 
Executive Branch.

                     Abandoning the `Regular Order'

    On numerous occasions, Congress has failed to follow 
normal, basic budget procedures. In the five years ending in 
fiscal year 2016, the House and Senate had produced only one 
budget resolution conference report, and had finished none of 
its regular appropriations bills on time. In the past 10 years, 
Congress wrapped up just five of 120 regular appropriations on 
schedule. These lapses resulted in continuing resolutions of 
varying magnitudes and amounts, lasting well after the start of 
the fiscal year, and sometimes late in the calendar year, just 
as Members are leaving Washington for the Christmas and New 
Year's holidays. Sometimes these lapses of appropriations--
coupled with impasses between Congress and the White House--
have resulted in temporarily shutting down agencies and 
activities considered non-essential for health, safety, or 
national security.
    Although lawmakers themselves are ultimately responsible, 
the current process allows them to postpone politically 
sensitive bills until a late-year or post-election rush, with 
no immediately apparent consequences. Furthermore, the process 
lacks incentives to ensure timely consideration of regular 
appropriations, leading to increasingly frequent use of omnibus 
spending bills.
    This breakdown of the ``regular order'' diminishes 
Congress's policymaking authority in several ways.

      First, the simple inability of Congress to follow 
its own budget procedures is a de facto failure to exercise its 
governing authority.

      Second, in recent years, the total discretionary 
spending amounts have been decided not through the budget or 
appropriations, but in ad hoc, short-term budget agreements 
negotiated among a few Members of Congress and the 
administration, often behind closed doors. This cedes to the 
Executive Branch partial authority to determine aggregate 
spending levels--a decision that, under the Congressional 
Budget Act, belongs solely to Congress.

      Third, adopting huge omnibus spending bills means 
Members are forced to take a single vote up or down on a 
trillion-dollar package. They cannot differentiate their votes 
on individual preferences; it is a take-it-or-leave-it 
proposition for the entire discretionary budget.

      Fourth, such legislation may contain important 
policy choices heavily influenced by the administration. This 
was the case with the ``Bipartisan Budget Act of 2013''--which 
followed a two-week partial shutdown of government activities 
in October--and the ``Bipartisan Budget Act of 2015''. In these 
measures, the administration demanded that every increase in 
defense discretionary spending had to be matched dollar-for-
dollar by increases in non-defense discretionary spending, and 
Congress accepted.

    These budgeting failures also corrode Congress's authority 
in the eyes of the public. ``I have no specific evidence 
concerning precisely how all of the recent talk about 
government shutdowns, `fiscal cliffs,' and late budgets has 
translated into a specific loss of public faith in the 
Congress. But it can't have helped. If the Congress is viewed 
only as a source of gridlock, it not only invites unilateral 
executive action, but reinforces the notion that the President 
can get things done and the Congress cannot. I would therefore 
conclude that timely adherence to the budget timetable not only 
makes the government work better and cost less, it also 
strengthens the Congress as an institution.''\467\
    \467\Op. cit., Joyce.

                       User Fees and Collections

    According to the Office of Management and Budget, the 
Federal Government will collect an estimated $356.2 billion in 
user fees in 2017.\468\ A user fee typically reflects optional 
business-like transactions between private parties and the 
government rather than compulsory taxes. These fees, which are 
booked as offsets to spending rather than as revenue, arguably 
mask the true size and scope of government activity.
    \468\Office of Management and Budget, Analytical Perspectives: 
Budget of the U.S. Government--Fiscal Year 2017, p. 213.
    Equally important, an estimated $231.8 billion of these 
collections will be credited directly to expenditure accounts 
and can be spent when they are collected, without further 
congressional action.\469\ This weakens congressional oversight 
and accountability. In some cases, the practice prevents 
Congress from influencing agency behavior because the agencies 
can essentially operate through fee collections, without 
appropriations. In other cases, such as in the Asset Forfeiture 
Fund, user fees are seen as fostering incentives for potential 
abuse, because the more assets an agency seizes, the larger its 
budget becomes.
    \469\Ibid., p. 215.


    Piecemeal, incremental fixes to the current budget process 
will no longer suffice to restore the practice of congressional 
budgeting. A complete rewrite of the Congressional Budget Act 
is needed, built on the following principles: exercising 
constitutional government by reinforcing Congress's power of 
the purse; promoting and sustaining fiscal responsibility; 
restoring congressional control of spending and taxing; 
improving oversight and facilitating orderly decision-making; 
and reflecting the true costs of government programs.
    For Congress to reclaim its full authority under Article I 
of the Constitution, this rewrite of the Budget Act must reach 
deeper than practical or mechanical elements. It should aim not 
just at fixing current problems in the budget process--of which 
there are many--but at actually enhancing constitutional 
government. Among the considerations that can help guide the 
process are the following:

                          Limiting Government

    The principle of limited government runs throughout the 
Constitution, but is clearly stated in the Tenth Amendment: 
``The powers not delegated to the United States by the 
Constitution, nor prohibited by it to the States, are reserved 
to the States respectively, or to the people.'' In other words, 
the Federal Government may not expand beyond the powers 
expressly defined in the Constitution.
    The most readily available means of implementing this 
principle is the control of spending. If the Constitution was 
intended to provide a framework for a limited government, 
limiting spending is one of the best ways to achieve it. 
Spending is how government does what it does, the reason 
government taxes and borrows. Hence, spending is the root cause 
of every other fiscal consequence. Total spending also is one 
of the best measures of the size and scope of government and 
its burden on the economy.\470\
    \470\See Douglas J. Holtz-Eakin, testimony in hearing, Economic 
Effects of Long-Term Federal Obligations, Committee on the Budget, U.S. 
House of Representatives, 24 July 2003.
    Controlling spending is therefore a principal means of 
limiting government and should be a focus of the budget 
process. To limit spending is to limit government itself and to 
validate the principle that ``budgeting is governing.''

                 Enhancing Congress's Policymaking Role

    Budgeting should be viewed as more than a mechanical or 
accounting process. It should strengthen Congress's 
constitutional role as the policymaking institution of the 
Federal Government. Therefore, the budget resolution--the only 
legislative vehicle that views the government comprehensively--
should define the priorities guiding its allocation of 
resources. It should reflect the delegation of powers between 
the Federal and State governments as envisioned in the 
Constitution. Embracing these principles gives meaning to the 
budget resolution as an instrument for governing, and provides 
coherence to the spending and tax bills that follow.
    Congress also must return to a regular and systematic 
practice of budgeting. This should include passing separate 
appropriations bills, as the budget process intends, and 
developing methods of regaining control over automatic spending 
programs. The best incentive for budgeting, of course, is 
simply a firm commitment by lawmakers to fulfill their 
legislative obligations. Nevertheless, the budget process can 
provide incentives to support that commitment, and a rewrite of 
the Budget Act should strive to create them.

                   Reinforcing the Balance of Powers

    The Congressional Budget Act of 1974 made the budget a 
concurrent resolution--not requiring the President's 
signature--for a reason. The President still prepares his 
budget--an expression of his own agenda, his own priorities and 
policy proposals--independently of Congress. The President also 
has the important budgeting role of either signing or vetoing 
the spending and tax bills that implement the congressional 
budget. Through veto messages, he can encourage, but not 
compel, changes in those measures.
    The United States Government is not a parliamentary system, 
and its budgeting procedures--so central to governing--should 
not be designed that way. The budget process should reinforce 
the Constitution's arrangement of three separate, coequal 
branches of government by separating powers, not combining 
them. Preventing a concentration of power in any one branch is 
essential to preventing the emergence of an autocratic 
government. The congressional budget should assertively define 
the allocation of resources in a way that aligns with 
Congress's vision of national priorities. Congress also should 
periodically review all spending, including direct spending 

                  Controlling the Administrative State

    The vast expansion of the Executive Branch has led to an 
ever-growing role of government in American society--through 
regulation rather than legislation. The Progressive impulses 
that promoted this trend relied largely on policy ``experts,'' 
shielded from political influence.
    In their regulatory capacities, these bureaucrats have come 
to assume authorities of all three branches of government: 
legislative, executive, and judicial. Thus, America's 
constitutional government has increasingly become an 
administrative state largely run by unelected career government 
employees. ``In fact, the vast majority of `laws' governing the 
United States are not passed by Congress but are issued as 
regulations, crafted largely by thousands of unnamed, 
unreachable bureaucrats.''\471\
    \471\Jonathan Turley, ``The Rise of the Fourth Branch,'' The 
Washington Post, 26 May 2013,
    ``Whether the regulatory agencies are `executive agencies,' 
`executive departments,' `federal departments,' or `independent 
regulatory commissions' is irrelevant. In whatever form they 
may take, the myriad agencies and departments that make up this 
administrative state operate as a `fourth branch' of government 
that typically combines the powers of the other three and makes 
policy with little regard for the rights and opinions of 
citizens.''\472\ (See further discussion of regulatory 
budgeting elsewhere in this report.)
    \472\Joseph Postell, From Administrative State to Constitutional 
Government, Heritage Foundation Special Report No. 116, 7 December 
2012, p. 5:
    In addition to taking firmer control of the regulatory 
process itself, Congress could address this problem through 
budgeting. ``Reversing the trend of a diminishing legislature 
and the continued expansion of the executive falls largely to 
Congress, which must rebuild itself to control the operations 
of government, break the administrative state, and provide a 
robust check on the modern executive * * * This will be a 
battle that must be fought on many fronts, but a crucial piece 
of that effort will be reviving the power of the purse as a 
tool to help return lawmaking powers to Congress and restore 
fiscal responsibility.''\473\
    \473\Op. cit., Spalding.


    No single activity consumes as much of Congress's time as 
budgeting--choosing priorities and allocating financial 
resources accordingly. These are among the most fundamental 
ways for a legislature to shape governing policies. Moreover, 
the budget process amounts to a direct exercise of the form of 
government a country has. In the United States, the budget 
system is essential to maintaining the Federal Government's 
arrangement of three separate but coequal branches. The budget 
process must reinforce basic constitutional principles.
    The Founders granted Congress the principal role in 
formulating national policy, and created a separate, 
independent Executive Branch to execute it. It is not a 
parliamentary structure; it consists of three coequal branches, 
each with distinct powers. The budget process should not merely 
accommodate the constitutional system, but should actively 
strive to enhance it. Strengthening Congress's Article I 
authority should be a central consideration of budget process 

                     The Importance of Fiscal Goals


    When policymakers and the public have a consensus about the 
broad guidelines of government's fiscal policy, that 
understanding naturally leads to incremental budgetary targets 
that discipline spending and taxation. For much of America's 
early history, the standard was the balanced budget. Since that 
principle was abandoned, no other norm has emerged to take its 
place, and fiscal policy has been adrift.
    An alternative to the balanced budget standard is ``fiscal 
sustainability''--but its definition is elusive. It may refer 
to a stable or declining ratio of debt to gross domestic 
product; limiting deficits as a percentage of the economy; 
establishing spending or revenue targets; or several other 
options. Whatever standard is defined, it is not enough that it 
be economically and fiscally defensible; it must be politically 
compelling to ensure the public's acceptance. The congressional 
budget process should then be constructed to achieve that goal.


    Through most of America's early history, policymakers 
broadly accepted the aim of balancing the Federal budget in 
peacetime--and they often succeeded. During the Nation's first 
century-and-a-half, the budget was balanced roughly two-thirds 
of the time (see Figure 9).\474\ ``Most of the exceptions were 
during wartime, when a surge in federal spending led to 
deficits. But the deficits were small and short-lived; when the 
war ended, budgetary balance was restored. Deficits were also 
occasioned by adverse economic conditions; these, too, tended 
to disappear when the economy recovered.''\475\ Even with two 
major wars in the 20th Century, along with the Cold War and 
other conflicts, Congress achieved balanced budgets in 31 
fiscal years. Since World War II, the budget has been balanced 
in 12 fiscal years: 1947-1949; 1951; 1957-1958; 1960; 1969; and 
1998-2001. The Federal Government has run deficits every year 
since 2001.\476\
    \474\Historical Statistics of the United States: Colonial Times to 
1970, 93rd Congress, First Session, H. Doc. 78, part 2, Y 335-38.
    \475\Allen Schick, The Federal Budget: Politics, Policy, Process--
Third Edition (Washington, DC: The Brookings Institution, 2007), p. 10. 
Data drawn from the Historical Statistics of the United States: 
Colonial Times to 1970, 93rd Congress, First Session, H. Doc. 78, part 
2, Y 335-38.
    \476\Office of Management and Budget, Budget of the U.S Government: 
Fiscal Year 2017--Historical Tables.

    For many, the belief in balancing budgets was merely common 
sense: Government simply should not outspend its resources. As 
President Truman put it: ``There is nothing sacred about the 
pay-as-you-go idea except that it represents the soundest 
principle of financing that I know.''\477\ For others, however, 
balancing budgets ref