President Obama released his budget for fiscal year 2016 today. We’ll be continuously updating this post this afternoon with Heritage Foundation experts’ takes on the budget.
Health Care
Climate Change
Immigration
Taxes
Education
Health Care
Budget Includes Funds for Continued Implementation of Obamacare
The president’s fiscal year 2016 budget provides for the continued implementation of his health care law. The problem for taxpayers is that any effort to get America’s fiscal house in order necessitates the full repeal of the Affordable Care Act (ACA), known as Obamacare.
The raw facts are sobering. Gross spending on Obamacare’s exchange subsidies and Medicaid expansion alone is estimated by the Congressional Budget Office to cost almost $2 trillion over the next decade. As Heritage has written:
The certainty of the ACA’s massive spending combined with the uncertainty, or absence, of serious cost savings is a virtual guarantee of deficit increases. As the law advances, its reckless overreach threatens to hasten the deterioration of Washington’s increasingly unstable fiscal condition.
Obamacare is not only fiscally irresponsible; it’s also bad health policy. Congress must develop and enact a viable alternative, real health care reform that would lower costs by putting individuals in charge, rather than the government. — Alyene Senger
Obama Wants to Spend More on Children’s Health Insurance Program
After committing already $2 trillion in new health care spending for Obamacare, the administration now wants to spend more to prop up the Children’s Health Insurance Program. Ironically, to pay for it the administration plans to increase the tobacco tax. Using the tobacco tax to pay for CHIP is not new — and it’s as ridiculous as it suggests. As Heritage pointed out in 2007, not only does the tax disproportionately hit low-income workers, but if the effect of the tobacco tax is fewer smokers, then the revenues to offset the SCHIP funding goes up in smoke.
It’s worth noting that in the following policy recommendation, the administration suggests expanding access to tobacco cessation programs.– Nina Owcharenko
Price Controls in Part D
Among other policies, the president’s budget proposal would specifically give the secretary of Health and Human Services the authority to “negotiate” some drug prices in Medicare Part D. Although Congress should not have added an additional unfunded entitlement to the Medicare program, the design of delivering the benefit through a competitive market-based approach has proven successful in reducing costs and expanding access.
Government price controls will not improve upon that performance. Indeed, they would likely create incentives for gaming the system by drug manufacturers and others, such as hospitals and nursing homes. That would benefit neither taxpayers nor seniors.
Likewise, the president’s budget proposes imposing more price controls in Part D via Medicaid-style drug rebates. The important thing to understand, especially for seniors, is that any government drug price control or rebate scheme will only work if the government is willing to deny patients access to the drugs should the manufacturer not play along. As I testified in 2007:
A government that is willing to deny patients access to drugs can extract price concessions by threatening to deny manufacturers access to a major market segment. In such a situation the distinction between threatening to not cover a drug and actually refusing to cover the drug is largely irrelevant, since without a genuine willingness to deny coverage any such threat would be meaningless.
Holding seniors hostage and threatening to take away their medicines is not the way to reduce drug costs. — Ed Haislmaier
Obama’s Long-Term Care Proposal
The president proposes to expand Medicaid “home and community based services” as an alternative to institutional care for elderly and disabled persons. This would be done by “simplifying” eligibility for these services. The president’s budget also provides for a pilot program for five states to test an enhanced match for Medicaid funding for streamlining the beneficiary eligibility for improved long-term care services and supports.
Medicaid expansion is the wrong response to the long-term care problem. Federal and state officials should promote private options and revitalize the weakened long-term care insurance market. The Congressional Budget Office (CBO) has found that current asset protections ease eligibility for Medicaid long-term care, thus crowding out private insurance alternatives and other private care provisions.
Congress should build upon a growing consensus among policy analysts. Because most Americans want to “age in place,” government officials should reduce or eliminate rules or regulations that undercut the provision of less expensive, home-based care. Meanwhile, in preserving Medicaid as the safety net for the truly needy, they should also encourage a private insurance market and close loopholes that enable persons who are not needy, and who have accumulated substantial wealth and assets, to shelter their assets or income to secure welfare eligibility. — Robert Moffit
Climate Change
Reject the Billion Dollar Climate Fund Wealth Transfer
President Obama’s budget proposes $1.29 billion for the Global Climate Change Initiative. $500 million of that money would go to the United Nations Green Climate Fund, which gives money to developing countries to deal with the alleged effects of global warming. Setting the reality that the planet is not headed toward calamitous warming aside, the best way to help developing countries is not through wealth transfers, but by growing their respective economies. More economic freedom that provides greater wealth and higher standards of living will allow developing countries to actually develop and build houses and buildings more resistant to natural disasters.
Instead of establishing green funds, Congress and the administration should commit to the principles rooted in the Heritage Foundation’s Index of Economic Freedom to grow the American economy and economies abroad. Policies that sustain the four pillars of economic freedom—rule of law, limited government, regulatory efficiency and open markets—are more successful not only in stimulating economic growth and innovation, but also in gaining access to energy, improving the environment and helping countries use energy more efficiently. — Nicolas Loris
Block and Strip Away Funding for Climate Change Regulations
When the Obama administration announced its climate change regulations for America’s power sector, they claimed these regulations would force companies to make investments that would be profitable and save families and businesses money. Then why does President Obama’s budget propose $4 billion in handouts for states that exceed the carbon dioxide emission reduction targets outlined in the Clean Power Plan? If these regulations are so good for the states’ economies, they shouldn’t need extra help from Washington and from the taxpayers. But that’s not really the case.
The fact of the matter is the administration’s climate plan is a loser for all states, some more than others. Regulations on new and existing power plants will drive up the cost of affordable, reliable energy. Families would pay more to use less electricity and businesses will absorb higher costs or pass them onto consumer. Simply put, consumers would consume less and producers would produce less, resulting in lower income, reduced job creation and lost economic growth. In fact, several states have already made announcements planning for higher energy costs as a result of the new power plant regulations. And the plan will make no meaningful difference to actually affect the climate.
States should not be lured by the carrots the administration is dangling. If Congress really wants to help the states, they should not only reject the president’s $4 billion handout but also strip away the Environmental Protection Agency’s funds to implement and enforce any carbon dioxide rules. — Nicolas Loris
Immigration
States Are Really On Their Own When It Comes to Criminal Aliens
It is clear from President Obama’s latest budget proposal that when it comes to immigration enforcement, the president really doesn’t want the states helping the federal government find illegal aliens as they have in the past when there was cooperation between the feds and the states in picking up and detaining illegal aliens, particularly aliens who committed criminal acts in the U.S.
In the fiscal year 2016 budget just released by the White House under “Discretionary Cuts, Consolidations, and Savings” (page 87), the Obama administration completely cuts all funding ($185 million) for the “State Criminal Alien Assistance Program” at the Department of Justice. The SCAAP program is administered by the Office of Justice Programs and provides federal payments to reimburse states for some of the costs of “incarcerating undocumented criminal aliens who have at least one felony or two misdemeanors convictions for violations of state or local law, and who are incarcerated for at least 4 consecutive days.”
Thus, states will now be completely on their own when it comes to the costs of imprisoning illegal aliens who are committing misdemeanors and felonies in their local jurisdictions, something that is sure to increase, given the failure of Obama to secure the border and the attraction his amnesty plan generates in inducing even more aliens to cross the border surreptitiously so they can apply for amnesty and work permits. And there is nothing the states can do about that problem since it is the president who is directing an immigration policy in conflict with the comprehensive federal immigration law that is on the books.
This should not be surprise. One of the policy memoranda that was issued by Jeh Johnson, the Department of Homeland Security secretary, to implement the president’s Nov. 20 plan, announced that DHS was ending the Secure Communities program. This program “uses electronic matching of fingerprints to identify alien criminals in near-real time among the people arrested by police nationwide.” According to former federal immigration judge Mark Metcalf, that same memorandum also “directed an end to the use of immigration detainers, which enable immigration agents to take custody of arrested aliens at the conclusion of their criminal justice proceedings, and upon release from custody or any sentence imposed for their crimes.”
So not only does the president not want DHS picking up criminal aliens and deporting them after they have served their sentences for state crimes they committed, he doesn’t want the federal government reimbursing the states for any of the costs they incur for incarcerating those same criminals. — Hans von Spakovsky
Taxes
Obama’s Corporate Tax Hike Likely Dooms Tax Reform
It is fitting that President Obama released his 2016 budget on Groundhog’s Day. Like Bill Murray’s character Phil Connors in the famous movie Obama is stuck in an endless loop where he keeps pushing economically destructive tax hikes that have little chance of becoming law.
This is the seventh budget he has released, and each of them had trillions of dollars of tax hikes that would needlessly increase the tax burden on American families and increase the already bloated size of the federal government.
This year’s headline-grabbing and nonsensical tax hike targets U.S. multinational businesses. Obama wants to apply a 19 percent minimum tax on their foreign income going forward and a 14 percent tax on the foreign income they previously earned but have not yet returned to the U.S. (and therefore have not paid their U.S. tax on yet).
Businesses would have to pay the minimum tax each year. Thus, it would end the long practice of deferral, which applies extra U.S. tax to foreign earnings only when businesses return those profits home. It is unclear from the text of the budget if businesses could continue to use their foreign tax credits, or if the minimum tax would apply on top of the foreign tax businesses already pay. Either way, ending deferral and raising taxes on foreign income will reduce investment by U.S. business both abroad and here at home. The result will be fewer jobs and lower wages for U.S. workers.
This tax hike is so perplexing because the U.S. already has the worst corporate tax system in the developed world. We have the highest rate, 15 percentage points above the average of our competitors, and we are effectively the only nation in that group that taxes the foreign income of our businesses.
We should be lowering the corporate tax rate and moving to a territorial system that would not tax overseas earnings to put our businesses back on competitive footing. However, by raising rates on the foreign income of our businesses, Obama’s proposal goes in the exact opposite direction.
This is an especially alarming development because corporate tax reform was supposed to be one area of potential compromise between Obama and the new Congress. Obama has said he is interested in doing it and even has a framework of a plan. These new proposals reduce the already slim chances of advancing much-needed reform.
Obama is sure to argue that the policies he is proposing are similar to ones proposed by Republicans, such as in former Chairman of the House Ways and Means Committee Dave Camp’s tax reform proposal last year. However, like in many of the president’s policies, the context matters immensely.
Camp’s proposal was part of a tax reform plan that established a territorial tax system. As part of that system, anti-base erosion and profit shifting (BEPS) policies are necessary to stop U.S. businesses from shifting too much U.S. income abroad. Obama proposing BEPS policies without simultaneously moving to a territorial regime is like trying to install a security system on a house that has not been built yet.
The president is also likely to argue that his tax on unrepatriated earning is a tax cut, since he would apply a lower rate to them than under current law. This is nonsense. By deeming the money repatriated and forcing businesses to pay tax on it, he is forcing businesses to pay tax on money they never intended to bring back to the U.S. and therefore would never have paid tax on.
The tax hike on multinationals is supposed to pay for half of a six-year, $478 billion highway and transit program reauthorization proposal. Obama wants to dramatically increase spending on underutilized mass transit rail systems and federal grants to local rail, road and port projects. Concentrating transportation decision-making in Washington is the wrong way to go; states, localities and the private sector know the mobility needs and consumer preferences on the ground. Obama’s proposal would give them less control over their transportation funding and spending when they need more. — Curtis Dubay and Emily Goff
Education
Big Government Education from ‘Cradle-to-Career’
Warning: If you believe education is a state and local issue, read no further.
President Obama’s budget grows federal intervention in nearly every aspect of education, from preschool (including spending on programs for “expectant mothers”) through “free” community college.
The budget increases spending on programs operated by the U.S. Department of Education by more than 5 percent, from $67.1 billion (2015 enacted level) to $70.7 billion – a $3.6 billion increase. Two of the most significant expansions of federal intervention in education come in the form of “free” preschool and child care, provided by Washington, and “free” community college, also footed by federal taxpayers. — Lindsey Burke
Federally Funded Preschool and Day Care.
The president’s budget funds his “Preschool for All” initiative, which “establishes a federal-state partnership to provide all low- and moderate-income four-year-olds with high-quality preschool,” and is paid for in part through a tax increase on tobacco.
It also proposes $750 million in Preschool Development Grants (up from $500 million currently), $907 million for early intervention preschool (up $115 million from last year), a new $15 million in funding dedicated to autism programs and increased spending on the Child Care Development Block Grant program to the tune of $266 million.
The budget also increases spending on the ineffective Head Start program by $1.5 billion to create full-day Head Start and expand Early Head Start. Notably, the budget includes $15 billion for home visitation over 10 years to finance “voluntary home visiting programs, which enable nurses, social workers, and other professionals to work with current and expecting parents to help families track their children’s development, identify any health and development issues and connect them to services to address them, and utilize good parenting practices that foster healthy development and early learning.”
Perhaps most significantly, the budget also includes the administration’s “Expanding Access to Quality Child Care for Working Families” proposal, which proposes to spend $82 billion in mandatory funding over 10 years to provide child care to all low- and moderate-income families with children ages three or younger.
The federal government currently operates 45 early learning and childcare programs. Taxpayers spend more than $20 billion annually to finance them. And in all, between two-thirds and three-quarters of four-year-old children are already enrolled in some form of preschool or care program. Efforts to grow government preschool would be duplicative of existing options, and, instead of assisting families with unmet needs, would create an unnecessary preschool subsidy for middle- and upper-income families. — Lindsey Burke
K-12 Spending Continues Apace.
At the K-12 level, the budget increases Title I spending (funding for low-income school districts) by $1 billion; increases Individuals with Disabilities Education Act (IDEA) funding by $175 million, and increases spending on programs for English Language Learners by $33 million. The administration also proposes to increase spending on the School Improvement Grant (SIG) program by $50 million, and to create a new $125 million competitive grant program to “expand opportunities for girls another groups underrepresented in [Science, Technology, Engineering, and Mathematics] STEM fields.” It also increases spending on the Investing in Innovation program by $180 million.
The budget proposes $3 billion in discretionary spending and a new $1 billion mandatory spending line item to “provide broad support for educators at every phase of their careers.” – Lindsey Burke
New Higher Education and ‘Free’ Community College
In addition to increasing spending on Pell Grants, the budget supports the administration’s goal of federal taxpayers funding “free” community college. It’s bad policy for several reasons. Low-income students already have access to federal Pell Grants, which can be used to finance their tuition obligations at a community college. Indeed, the number of Pell recipients has doubled since 2008. So the proposal will serve as little more than a federal handout to the community college system. Free community college would put even less pressure on high schools to produce graduates who are prepared for college-level work, as they could expect the new free community colleges to fill in what the high schools are failing to do. The proposal is more likely to produce a six-year high school system than a two-year gratis workforce preparation experience.
The administration’s budget is a blueprint for the spending the White House hopes to garner in its goal of creating a “cradle-to-career” education system, starting with free preschool and continuing through free community college.
But education is a quintessentially local issue. The more that is spent from Washington, the less control local leaders – and most importantly – parents have in directing their children’s learning.– Lindsey Burke
Budget Increases Ineffective TRiO Program
TRiO is one of several federal means-tested student assistance programs and grants contained under Section IV of the Higher Education Act (HEA). TRiO began as three programs in 1965, but has expanded to include eight programs, costing $820 million annually. The president’s budget proposal includes an additional $20 million in new federal funding for TRiO. TRiO was created to promote equity in education by providing counseling, mentoring and tutoring services to low-income students from disadvantaged backgrounds, defined in statute, but has not proven to increase secondary education graduation rates or postsecondary attainment. In 2002, Mathematica Policy Research Institute conducted a longitudinal, random-assignment study on TRiO and found on average TRiO’s first and largest program, Upward Bound, had “no detectable effect” on whether the students enrolled in college, the type or selectivity of the institution they attended, or the likelihood that they would apply for or receive financial aid. The Department of Education’s Institute of Education Sciences gave the evaluation a high rating. Despite this evidence, the administration continues to increase funding for this ineffective program. — Brittany Corona
Social Security Policy Shouldn’t Redefine Marriage in the States
A proposal in the president’s new budget would amend the Social Security Act so that state laws regarding marriage are ignored. This revision will instruct the Social Security Administration to disregard the states’ marriage laws where the citizens reside—undermining the logic of the Supreme Court’s Windsor decision—so that a same-sex couple could be recognized as married “regardless of where they live.”
The Obama administration’s actions today go beyond the scope of the U.S. Supreme Court’s Windsor decision. Justice Anthony Kennedy’s majority opinion in that decision clearly states that marriage law is the purview of the states: “[T]he definition and regulation of marriage has been treated as being within the authority and realm of the separate States.” The Obama administration has chosen not to respect state policy on this and is further eroding the meaning of marriage.
The federal government should look to each state’s definition of marriage as governing for federal law. This respects both federalism and democratic self-government. Federal bureaucrats should not be allowed to redefine marriage across America.
For more on this, see here and here. — Ryan T. Anderson
TIGER Program Should Be Terminated, Not Getting More Funding
Each year, the Obama administration marvels at how many applications for “free” federal infrastructure grant money it receives through the Transportation Investment Generating Economic Recovery (TIGER) program. TIGER is a relic from the 2009 stimulus bill; intended to be temporary, it has lasted for six years and counting. President Obama has found a way to make TIGER a permanent program, and he wants to start by doubling its annual budget—from $600 million to $1.25 billion.
Obama would lavish the TIGER program with more money, when he should actually be proposing to terminate it. It’s a so-called competitive grant program, which is another way of saying “administrative earmarks.” For example, the Reason Foundation reported on TIGER: “Despite the moratorium on federal transportation earmarks, the U.S. Department of Transportation (DOT) has found a way to fund local economic development projects of questionable value.”
Congress and Obama should end the TIGER Program for these reasons:
It uses federal taxpayer dollars to fund local activities. For example, $5 million was awarded to Dahlonega, Ga. to revitalize the downtown area there by building sidewalks, as the Reason Foundation found. Promoting the tourism industry in historic Dahlonega is not a national or regional priority; it is a local one, and such projects should be funded at the local or state level.
It concentrates transportation decisions in Washington. States and cities know their priorities better than Washington bureaucrats do, and they shouldn’t have to come pandering to Washington for money for projects that they may or may not value at home. TIGER, and federal grant programs like it, distort state and local decisions about how to spend limited transportation funds. Often, states will commit to building a rail system or streetcar using some federal money, and then they can’t afford to operate the system later after the federal money has come and gone.
It sacrifices mobility to the anti-car, smart growth agenda. The vast majority of surface travel in the country, for work or otherwise, is in a personal car or SUV—not on a streetcar, bicycle, city bus, Amtrak train or subway. But the Obama administration, in advancing its livability initiative, wants to make it so that every American can go to the grocery store, pick up dry cleaning, drop off kids at daycare, and go to and from work all without getting in his or her car. In short, smart growth policies seek to coerce people out of their cars, onto transit and bicycles. Any government proposal or policy that eliminates choice and competition should be rejected.
The rest of the Obama budget’s transportation proposal is also bad news: tax hikes on corporate overseas earnings, overspending and prioritizing politics and ribbon-cutting over transportation in the modern sense of the term. In funding—and increasing funding for—transit and intercity rail, Obama is ignoring the transportation needs and consumer preferences on the ground in cities and towns across the country in favor of a big-government, smart-growth agenda. —Emily Goff
The post What Obama Got Right and Wrong in His 2016 Budget appeared first on Daily Signal.