Plus, the first $1 million drug?
By Yuval Rosenberg and Michael Rainey
The Fight for $15 Billion
The White House on Tuesday unveiled its package of $15.4 billion in proposed spending cuts. The [list of rescissions]( as theyâre called, includes 38 proposals ranging in size from about $519,000 to more than $5.1 billion. In all, the White House says, the suggested cuts represent the âlargest single rescissions request in historyâ â though they would do little to reduce the federal budget deficit, which is projected to total more than $800 billion this year.
The money targeted by the proposed clawbacks are mostly unused funds left over from past years â officially known as âunobligated balancesâ â but the White House Office of Management and Budget Director Mick Mulvaney said the rescissions would reduce federal expenditures by about $3 billion.
The White House also says it plans other rescission requests that would cancel spending approved under the $1.3 trillion deal passed by Congress earlier this year. Americans for Prosperity, the Koch-backed conservative group, on Monday released recommendations for [$45 billion]( in rescissions from the omnibus spending bill.
Nearly half of the current cuts, or $7 billion, would come from the health insurance program for low-income children. That includes more than $5 billion in expired funding from fiscal 2017 and nearly $2 billion from an emergency fund the White House doesnât expect states to use. White House officials say that the cuts would not affect the Childrenâs Health Insurance Program or its coverage of about 9 million children â but, in an indication of just how politically sensitive these cuts could be, they were left off of a [formal release]( highlighting some items in the rescissions package.
Roll Call notes that âCongress regularly rescinds CHIP funds, including almost $7 billion in the fiscal 2018 omnibus spending law, but typically uses the money to pay for other health-related priorities.â Rescinding the funds this way would mean simply cutting the spending rather than using the leftover funds to pay for other spending.
Factoid of the Day
[From Politico:]( âFormer President Bill Clinton was the last president to propose rescissions. His three requests totaled just $128 million, a fraction of Trumpâs request.â
Whatâs on the Trump Administrationâs List of Spending Cuts
Besides the $7 billion from CHIP, other cuts requested include:
- $4.3 billion from the Advanced Technology Vehicles Manufacturing Loan Program, which the White House says has not made a loan since 2011
- $800 million from the Center for Medicare and Medicaid Innovation program
- $252 million left over from $1.2 billion Congress designated to respond to the 2015 Ebola outbreak. The epidemic is over, but an official who headed the Office of Foreign Disaster Assistance at USAID during the outbreak [told The Hill]( that the remaining money could serve as a much-needed emergency fund for a future disease outbreak. âIn terms of substantive budget terms, itâs a rounding error, it makes barely a dent in the deficit,â Jeremy Konyndyk said. âItâs an optics exercise to say that they are giving back some money, but itâs really foolish ultimately.â
- $133 million from an unemployment insurance extended benefits program for railroad workers that the White House says expired in 2012
[See the full list here]( and Politico has a tally of the proposed cuts broken down [by department](.
Can the Rescissions Package Pass?
Under the process created by the 1974 Congressional Budget and Impoundment Control Act, Congress will have 45 days to act on the presidentâs rescissions requests, and can approve them with simple majority votes, meaning that the Senate canât block them with a filibuster. The funds being targeted are frozen until Congress acts, or if it fails to approve the request in time then the funds must be released.
House Republicans hope to pass the rescissions this month â âWe will get the rescissions package passed,â House Majority Leader Kevin McCarthy [said Tuesday]( â but the outlook is the Senate, where Republicans hold a slim 51-49 majority, is less certain.
If these rescissions fail to pass the Senate, the administrationâs other proposed cuts would likely be put on hold. âIf this one doesnât get through I think it does kill any future rescission packages until we have midterm elections,â House Freedom Caucus Chairman Mark Meadows (R-NC) said, according to [Roll Call](.
What Theyâre Saying About It
[President Trump]( âOur moral duty to the taxpayer requires us to make our government leaner and more accountable.â
[Senate Minority Leader Chuck Schumer (D-NY)]( âLetâs be honest about this: [@POTUS]( & the GOP are looking to tear apart CHIP, hurting middle-class families & low-income children, to appease the most conservative special interests & feel better about blowing up the deficit to give the wealthy & biggest corps huge tax breaks.â
[Rep. Steny Hoyer (D-MD)]( âIt defies logic that if youâre going to rescind money thatâs not being used, that the only place to look is [nondefense program such as] Medicare and Medicaid. Their logic is they want to cut nondefense discretionary spending â whatever it is. And weâre obviously opposed to that as a focus.â
[Sen. Lisa Murkowski (R-AK)]( âI donât understand why we would go after CHIP. It makes no sense to me.â
[G. William Hoagland,]( a senior vice president at the Bipartisan Policy Center and former director of the Senate Budget Committee: âThis is not a deficit reduction exercise, but more of a public relations exercise to soothe the base and convince them that the White House is fiscally responsible.â
[Maya MacGuineas,]( president of the Committee for a Responsible Federal Budget: âTodayâs specific rescission package will have little effect on the budget deficit since the proposed cuts are relatively small and most are to funds that will never be spent anyway. But every little bit helps, and getting in the habit of supporting spending cuts without putting the money toward new policies is a step in the right direction.â
[Molly E. Reynolds]( fellow at the Brookings Institution: âBy including a rescission of roughly $7 billion from the Childrenâs Health Insurance Program ... Republicans are giving their Democratic colleagues more political cover to oppose the package. Rather than be tagged as opposing cuts to wasteful federal spending, Democrats can claim they are standing up for a popular program that provides health care to kids.â
Record Budget Surplus in April
It may seem a bit odd to talk about a budget surplus at a time of soaring deficits, but tax receipts are coming in stronger than expected in April and the Congressional Budget Office is now [projecting]( a surplus of $218 billion for the month, which would break the record of $190 billion recorded in April 2001.
The preliminary estimate for tax receipts last month is $515 billion, about $40 billion higher than the CBO expected just a month ago, and $59 billion more than collected in April 2017. Most of the increase is from larger-than-expected individual income tax payments, likely due to stronger-than-expected economic activity since last fall. Corporate income tax payments fell by $14 billion (24 percent) compared to last year, likely driven by both lower final payments for 2017 and the reduction of the corporate tax rate from 35 percent to 21 percent this year.
Total spending in April increased to $297 billion, $24 billion more than a year ago. The largest increase in outlays was for net interest on the public debt, which rose by $6 billion, or 21 percent, year-over-year. Social Security benefit payments increased by $4 billion (5 percent), military spending increased by $4 billion (11 percent), and Medicaid payments rose by $3 billion (10 percent).
The larger trend, however, runs decidedly in the opposite direction. For the first seven months of the 2018 fiscal year, the overall deficit came to $382 billion, $37 billion more than it was over the same period in 2017. And CBO projects a full-year deficit of $804 billion in 2018, with trillion-dollar deficits coming in 2020.
Like this newsletter? Share it with your friends, or tell them they can [sign up here]( to get their own copy. We always welcome your feedback. Email yrosenberg@thefiscaltimes.com. Or connect with us on Twitter: [@yuvalrosenberg]( and [@TheFiscalTimes](.
Demand for Treasuries at Auction Is âLameâ
The U.S. Treasuryâs latest auction saw relatively weak demand Tuesday, with prices edging lower and interest rates moving higher. âOverall bidding at the $31 billion U.S. Treasury three-year note auction on Tuesday fell to its lowest since November with the yield coming in at 2.664 percent, the highest yield at a three-year auction in 11 years,â [Reuters]( reported.
Peter Boockvar, chief investment officer at Bleakley Advisory Group, wrote to clients Tuesday: âAgain, we have another US Treasury auction that garners lame demand,â despite an 11-year high in yields. Boockvar cited three possible reasons for the poor performance:
- rising inflation expectations,
- huge increase in supply due to rising deficits,
- trade conflicts reducing interest from investors overseas.
[MarketWatchâs Sunny Oh]( added a fourth potential factor: Driven by political concerns, traders were unloading Italian debt on Tuesday, and the selling pressure may have spilled over into the American market.
The First $1 Million Drug?
New gene therapies for hemophilia may come with a $1.5 million price tag, according to a [report]( on CNBC Tuesday. The therapies, which are designed to provide a cure with a single course of treatment, are being developed by drugmakers BioMarin, Spark Therapeutics and UniQure.
Analysts at the investment bank Leerlink say the price could be seen as a bargain. Alternative treatments for hemophilia can cost between $580,000 and $800,000 per year, so the one-time payment of $1.5 million offers significant savings over a patientâs lifetime.
Not everyone agrees with that economic logic, though. Responding to the news of the potential $1.5 million treatment, Dr. Walid Gellad of the Health Policy Institute at the University of Pittsburgh [tweeted]( âThis will be the first major example of when cost effective/cost saving fails us in pricing. Kidney transplants are life saving but the surgeon doesnât charge $1.5million.â
News
- [Ex-Trump Advisor Gary Cohn: We Need to Do 'Tax Cut 2.0' and Make Personal Cuts Permanent]( â CNBC
- [Drug Executives Express Regret Over Opioid Crisis, One Tells Congress His Company Contributed to the Epidemic]( â Washington Post
- [Congressmen Used to Love Rescissions, Until Trump Offered Them Up]( â Daily Caller
- [TCJA Is Missed Opportunity, Experts Say]( â Tax Notes
- [How an Activist Is Fighting the Tax Law]( â The Hill
- [Sherrod Brown Asks Banks How Theyâll Help US Workers Following Passage of Tax Law]( â The Hill
- [U.S. Banks' Love of the Caymans Shows Thereâs Still Room to Simplify, Fed Says]( â Bloomberg
- [The U.S. Is Facing an EpiPen Shortage]( â Bloomberg
- [Pay-to-Play on Display: 19 of the 30 Companies with the Most Complaints in the CFPB Database Contributed to Mick Mulvaney]( â Public Citizen
- [As Wisconsinâs and Minnesotaâs Lawmakers Took Divergent Paths, So Did Their Economies]( â Economic Policy Institute
- [Tom Brady Says Gisele Bündchen Picked Out His Met Gala Outfit â and People Can't Stop Mocking It]( â SI
Views
- [Here Are the Top 5 Questions About Trump's New Domestic Spending Cut Plan]( â Stan Collender, Forbes
- [How America Broke Its Economy]( â David Dayen, The New Republic
- [President Trump Will Cut $15.4 Billion in Wasteful Spending]( â Russ Vought, Wall Street Journal
- [Trump Tries to Fix Deficit Caused by Tax Cuts by Cutting Billions from Childrenâs Health Care]( â Rebekah Entralgo, ThinkProgress
- [States Try to Rein in Drug Prices]( â Isai Chavez, E21
- [Americans Are Starting to Suffer from Trumpâs Health-Care Sabotage]( â Washington Post Editorial
- [With Key Legislation Ready, Congress Must Act Now to Address Opioid Addiction]( â Bruce Weiner, The Hill
- [Bond Yields at 3% Don't Represent a Tipping Point]( â Ash Alankar, Bloomberg View
- [Washington Post Promotes Confusion on Trump Tax and Spending Cuts]( â Dean Baker, Center for Economic and Policy Research
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