Combing through the documents there are some positive moves. The administration is looking to clamp down on affluent tax cheats and improve customer service with an 11 percent increase at the IRS. The abusive budgetary practice of the Pentagon having the “off-budget” Overseas Contingency Operations (OCO) account as a relief valve is over. We’ve long advocated for its end and for a real debate on a resource-informed national defense strategy. The budget makes a fiscally and environmentally wise move by eliminating dozens of unnecessary tax breaks for oil and gas industries. And overall is an acknowledgement that climate change poses both an economic risk to people and a fiscal threat to taxpayers.
These, however, are mostly outweighed by some disappointments. While the budget mentions climate change repeatedly, it’s silent on federal policy’s role as a climate driver. Below-market royalty rates, leasing loopholes, and taxpayers bailing out companies from cleaning up the pollution they leave on public lands are also a type of subsidy. The budget fails to dismantle these. Actually it proposes MORE federal spending on clean-up. Even the notion of eliminating those oil and gas tax cuts may not hold water as we’ve seen these proposed repeatedly with no follow-through. And you can spend infinite amounts “incentivizing” agriculture to reduce its emissions, but if a duplicative, costly subsidy system underwriting the status quo is kept, you’ll make no progress.
Perhaps worse than failing to dismantle unhelpful policies, the budget actually endorses a number of fiscally harmful proposals. New and expanded biofuels programs are proposed ($7 billion for aviation fuels, a record $1 billion in biofuels infrastructure subsidies) despite existing programs failing to mitigate climate change. A nuclear tax credit for building new nuclear plants hasn’t been tapped once since its creation in 2005. Instead of acknowledging that’s because costs and risks of building new nuclear plants are too high, the budget proposes creating a new tax credit expressly for existing nuclear plants that are failing to compete. Subsidizing the industry that’s apparently too broke to fail would cost taxpayers roughly $10 billion over a decade.
There are some aspects that stopped even us seasoned budget experts in our tracks. The era of big government deficits is back. Technically it was already here, but this budget request is a full-throated endorsement of deficit spending looking to add nearly $1.4 trillion for a 10-year total deficit of $14.5 trillion. It doesn’t even include a “Terminations, Reductions, and Savings” supplement. Renamed over the years, it’s this part of the budget where the president proposes some cutbacks. The change in priorities is most obvious in agriculture. An area of rare bipartisan agreement (both Trump and Obama proposed significant reforms to farm subsidies averaging $28 billion annually) there are exactly ZERO savings this year. This in a year when duplication, excess, and border-line bribery brought farm subsidies to their highest level in a generation. Not one cent of savings?
Then there is a whole passel of programs representing a missed opportunity for reform. The budget proposes lowering the bar for green lighting Army Corps of Engineers projects. This part of the budget routinely produces economic-losing projects for federal taxpayers. Lowering fiscal standards may also open the floodgates to additional boondoggles when billions are added in an infrastructure package. There are only modest increases in agricultural conservation programs. Farmers could become more economically and environmentally resilient with significant increases in conservation spending – paid for by reforming the excessive financial safety net.
Finally the F-35 continues to gather steam, even after a so-called “legacy systems review” by the Biden Administration. The total FY2022 request is $9.5 billion for 85 aircraft spread across the three military services that fly tactical jets.
BUT, and unfortunately Congress likes big buts (and they cannot lie), the military services have also submitted their annual wish lists for items that didn’t quite make it into the massive $715 billion Pentagon request. The Air Force asks for another $1.4 billion for 12 additional planes. The Navy asks for another five aircraft and $535 million. While the Marine Corps doesn’t ask for any additional airframes over the 17 in the budget, it does request an additional $246.6 million in spares and support equipment. So, if past is prologue, these requests will be granted and taxpayers will end up footing the bill for at least another $2.8 billion for a whopping great $12.3 billion for 102 airframes.
The whole budget process this year has been exasperating. As of this writing (Thurs.), we’re still waiting to see certain Department of Interior (DOI) and Department of Energy (DOE) budget justifications even though the budget release was last Friday.
Not only are we – as budget watchdogs – still short on details, but the info we do have is perplexing in places. With the Administration proposing trillions more in infrastructure and other spending, some of this bled into the budget. While in some places it appeared wasteful subsidies were finally abandoned, reading between the lines meant funding zeroed out in one place actually meant $14.5 billion for the U.S. Department of Agriculture’s (USDA) Biorefinery Assistance Program in another. Other examples of numbers not aligning within budget documents themselves tells us the budget exercise was a bit of checking the box.
With COVID-19 and infrastructure debates stealing the show, a $1.5 trillion annual discretionary budget can be small potatoes. But in some form those budgetary potatoes will get cooked – the government will be spending money to operate in FY2022. Whether it’s the budget, infrastructure, or families plan, every President’s Budget Request is aspirational, Congress writes the bills. If they want to do more, then they need to figure out where to do (and spend) less.