Measure Has Some Bipartisan Support
PHADA President Mark Gillett.
We are almost one month into FY 24 and there is no sign of a budget deal in Congress. The Continuing Resolution (CR) lasts until November 17. At that point, lawmakers will either need to complete a final agreement or enact another CR, or parts of the government may shut down, an outcome that we obviously hope to avoid.
The acrimony in Washington seems to be an annual event, especially over the last decade when we have experienced government shutdowns, debt ceiling cliffhangers, sequestration, and some very tight caps on domestic discretionary spending. There has also been a considerable amount of irony around the unending budget debates. That is, lawmakers really have not tackled the key issues. Instead, they have misdirected their focus on non-defense domestic spending (housing, education, transportation, federal employee costs, etc.), which constitute less than 20 percent of the overall federal budget.
At the same time, Washington has done little to address the most important budget issues - entitlement programs, spiraling debt service costs, and defense spending. Congress has also enacted two major tax cuts since the turn of this century, both of which eliminated trillions of dollars in revenue that would have otherwise been available.
Present Course is Unsustainable
While there are serious disagreements between the two parties over spending and revenues, there is a growing consensus that the present course is unsustainable. Indeed, many economists, budget policy experts, and members of Congress on both sides of the aisle are warning that the situation must be addressed in the near term. If not, they worry that America could face dire economic consequences.
According to the Congressional Budget Office (CBO), the deficit for the recently concluded FY 23 totaled $1.7 trillion, more than double last year. The overall national debt is now $33–$34 trillion.
These staggering numbers have lost some of their shock value in recent years. That is because, during the pandemic, many agreed debt fears should be laid aside to deal with the public health and financial crises confronting the world.
Now that the health emergency has ended, policymakers are refocusing attention on the nation’s fiscal predicament. There are also new complications that have arisen. First, the Federal Reserve, which controls the nation’s monetary policy, has significantly raised interest rates to try and tamp down inflation. This, in turn, has raised costs for borrowers including the U.S. Government. As a result, the federal government will soon spend as much on annual debt service as the entire defense budget. In addition, the country faces enormous demographic changes in the next few years as more people from the baby boom generation retire, collect their Social Security, and go on the Medicare rolls.
The entitlement programs face their own fiscal challenges in the not-too-distant future. Indeed, the Medicare hospitalization account faces insolvency within the next five years while Social Security has about one decade before it cannot pay all its bills. At the same time, wars are raging in eastern Europe and now the Middle East. This will probably lead the U.S. to commit more resources to our country’s security and defense. This may mean even less funding available for domestic programs like ours.
Our country continues to spend way more than we take in every year while also paying more just to pay the interest on its “credit card.” In the next few years, the government will face tough decisions about spending and revenues. For example, lawmakers will have to effectively bail out Medicare or run the risk of the government shortchanging the healthcare funding of millions of Americans. Where will the government find money for domestic priorities such as housing if it must pay more for entitlements or increased borrowing costs? Is there enough political support for necessary tax increases and entitlement reform? Will Congress repeat past mistakes, focusing on a relatively small part of the budget to “solve” our fiscal problems?
Up to this point, there appeared to be little appetite in Congress to address the situation. Now some lawmakers on both sides of the aisle are urging action. Reps. Scott Peters (D-CA) and Bill Huizenga (R-MI), co-chairs of a bipartisan fiscal forum, recently introduced legislation which would establish a bipartisan, bicameral commission to tackle our nation’s long-term debt. Their idea is not new and has been tried in the past, most recently about a dozen years ago when it was not successful. The sponsors believe, however, that the situation has grown considerably worse, necessitating another attempt.
“In the next 10 years, we will spend more on interest on our debt than on defense or Medicaid,” Peters stated. “This commission allows us to finally address the unsustainable debt that endangers our children’s future. I want an expanded child tax credit. I want affordable childcare and college education. I want investments in our clean energy future. All these priorities are threatened if we cannot have frank discussions about our spending and revenues to get our fiscal house in order.”
Peters, Huizenga and other commission proponents acknowledge that everything should be on the table. This includes the need to for consideration of possible tax increases. In addition, the commission will examine Social Security, Medicare, Medicaid and determine whether programmatic changes are necessary to sustain those essential programs.
“The Fiscal Commission Act of 2023” is gaining more attention and is supported by my fellow Oklahoman, Rep. Tom Cole (R), who chairs the House T-HUD Appropriations subcommittee. The concept is also supported by several influential think tanks including the Bipartisan Policy Center, the Brookings Institution, and the National Taxpayers Union. It is possible that the commission may be added as a compromise measure to any final FY 24 spending package. More details about it are included in the box below.
How May All This Affect Us and What Can We Do?
Even if Congress establishs a commission, any recommendations suggesting tax increases or spending cuts will face some intense opposition. Nevertheless, we need to be prepared with our own recommendations.
Many HAs are already feeling financial pressures from inflation, especially major increases in utilities and insurance, and declining revenues caused by rent collection challenges. If fewer resources are available for domestic programs in the future, we practitioners will need new ways to do business to accomplish our mission.
There is already a successful model in place that the Biden Administration and Congress should look to in this context – the original Moving to Work (MTW) program. There should be a great expansion of MTW or a “Local Flexibility Option.” Essential ingredients include provisions that free HAs from burdensome regulations and red tape while still ensuring accountability to taxpayers. Also needed is the ability to use all funds flexibly, again with requisite oversight, of course.
This is a theme PHADA will continue to promote as the budget policy discussion plays out. At the same time, the association will remind policymakers they cannot solve our country’s fiscal problems by imposing harmful cuts on the smallest part of the federal budget.
Congratulations to NAHRO’s New President George Guy
NAHRO President George Guy.
I want to extend PHADA’s congratulations and best wishes to NAHRO’s new President George Guy, Executive Director of the Fort Wayne Housing Authority (IN). George was inaugurated at NAHRO’s conference earlier this month. We look forward to working with George and the rest of the NAHRO leadership through the duration of his two-year term. PHADA also appreciates the collaboration and work of Immediate Past President Patricia Wells of the Oakland Housing Authority (CA).
Background on the Proposed Fiscal Commission
16 members. Each of the four corners congressional leaders selects four members, of which three are colleagues from the respective chamber and one individual from the private sector. The final makeup would be six House members (three Republicans, three Democrats), six Senators (three Republicans, three Democrats), and four outside experts (two Republicans, two Democrats).
Fiscal Commission Vote
The Commission’s recommendations require a simple majority vote, PROVIDED, that the majority is made up of at least three members of each party.
- The Fiscal Commission shall identify policies to improve the fiscal situation in the medium term and to achieve a sustainable debt-to-GDP ratio over the long term, and for any recommendations related to Federal programs for which a federal trust fund exists, and to improve solvency for a period of at least 75 years. In carrying out these duties, the Commission shall:
- Propose recommendations to stabilize the debt-to-GDP ratio at or below 100% within 10 years.
- Propose recommendations that meaningfully improve the long-term fiscal outlook, including changes to address the growth of direct spending and the gap between revenues and expenditures.
- Requires each chamber to vote on the recommendations, without amendment.
- Provides that the motion to proceed in the Senate is subject to a 51-vote threshold, though final passage is subject to standard Rule 22 60-vote threshold.
- The Commission shall be established, and members appointed within 60 days of enactment.
- The Commission shall vote on recommendations on November 8, 2024 (the Friday after the 2024 election).
- Roughly 8 legislative days (2 weeks) for the first chamber to consider.
- Five legislative days, roughly 1 week, for the Senate to begin consideration.
- Final congressional vote during the 2024 lame duck session.