Replenishing the Highway Trust Fund: more budget shenanigans

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It’s not just a burst of illegal immigration and a screwed up Veterans Administration that motivates Congress to try budget slight-of-hand. Rebuilding a depleted Highway Trust Fund through dubious manipulations is being tried, too.

Facing depleted resources in the Highway Trust Fund that could hold up road and bridge construction across the country, and the jobs that would come with it, House Republicans and the Obama Administration are backing a bill that would inject up to $11 billion into the Fund by, among other things, making changes to corporate’ pension contributions.

So-called “pension smoothing” would allow companies to temporarily contribute less to their employees’ pension plans.

The theory behind this maneuver is that because pension contributions are tax-deductible, companies will pay higher federal taxes over the ten-year scoring period used by the Congressional Budget Office (CBO) if they put less money into their pension plans.

Senator Mr. Wyden (D – OR), Chairman of the Senate Finance Committee, already sees this as an opportunity to cleave off some of that new revenue. He’s proposing to use about $2.7 billion of the increased tax collections during that 10-year period to help out retired coal miners, who have underfunded pension and health benefits programs.

Senator Ron Wyden (D-OR)

Senator Ron Wyden (D-OR)

Wyden has expressed concern in the past about the potential burden on the Pension Benefit Guaranty Corporation from underfunded multi-employer pension plans, in which multiple employers in the same industry contribute to a single pension fund. Of particular concern are multi-employer plans established through union contracts in contracting industries, such as coal mining. Changes in the coal industry has meant fewer employers paying into pension funds on behalf of fewer employees.

But Congress’s “solution” to the Highway Trust Fund’s shortfall is a sham because the revenues that are supposedly increased because of the pension smoothing change would be largely offset in the years after the 10-year scoring period. That’s because corporations will pay less in taxes in years after the 10 year period. In other words, no real savings are realized in the long run. But because those reduced taxes wouldn’t happen until after 10 years, they don’t count in Congress’s method for calculating budget balance.

Wyden, of all people, ought to know that the whole method of producing revenue he wants to use to bulk up the coal miners’  underfunded pension plans is bogus. But why let reality intrude.

So bizarre.

Making it even more bizarre, Republicans vehemently opposed this very same “pension smoothing” policy back in March 2014 when the Democrats proposed using it to pay for the renewal of unemployment benefits.

“When they were seeking a spending offset to the five-month extension of unemployment insurance, Democrats were happy to use a budget gimmick,” the New Republic reported. “They would have preferred to use deficit spending, but a gimmick was the next best thing. If Republicans required a spending offset, better a fake one than one that cuts spending on the social safety net or other government programs.”

You have to watch them all like a hawk, don’t you.

The VA and Portland’s road fee: two peas in a pod

More money. That’s the answer, says government. More money.

Portland has a problem with maintenance of its roads. So government does what government does best, it proposes spending more money. The city has “no alternative”, said Mayor Charlie Hales but to impose new street user fees on households, apartment complex owners, businesses and government agencies, including school districts.

The city claims it needs the extra money because revenue has been declining. But John A. Charles, Jr., President and CEO of the Cascade Policy Institute, took a closer look . Charles discovered that the city’s transportation revenue has actually been growing steadily and the city’s general fund has been flush. He concluded that it’s not a lack of money, but choices on spending priorities that has put the city in its current situation with road maintenance.

Meanwhile, back in Washington, D.C., a political debate is raging about what to do with the Veterans Administration, and more money seems to be the easy answer there, too.

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Democrats are already saying the solution to the VA’s problems is more money. At the same time they are attacking Republicans for opposing a VA bill earlier this year that would have addressed the crisis with more spending.

And Senator Bernie Sanders (I-VT), Chairman of the Senate Veterans Affairs Committee, has reintroduced a bill to reform the VA that copies the free-spending elements of a similar bill defeated in the Senate earlier this year,  including a provision that would open 27 costly new VA medical centers across the US and in Puerto Rico.

Senator Bernie Sanders (I-VT)

Senator Bernie Sanders (I-VT)

But more money isn’t going to solve the VA’s problems.

A May 28, 2014 report on problems at the VA’s Phoenix, AZ Health Care System noted, for example, that while conducting its work in Phoenix, the staff and Hotline of the Office of Inspector General (OIG) “received numerous allegations daily of mismanagement, inappropriate hiring decisions, sexual harassment, and bullying behavior by mid- and senior-level managers at this facility.”

The issues with excessive patient wait times identified in current allegations are also hardly new. The May 2014 report noted that since 2005, the VA OIG has issued 18 reports that identified, at both the national and local levels, deficiencies in scheduling resulting in lengthy waiting times and the negative impact on patient care. Each of the reports listed was issued to the VA Secretary and the Congress and is publicly available on the VA OIG website.

When the Senate failed to pass Sanders bill earlier this year it was principally because of Republican opposition, with Sanders’ cynically saying he hoped opponents would have the courage to face the vets they were depriving of care.

Other Democrats tried to position the party, which rarely sees a new spending bill it doesn’t like, as the pure for-the-good-of-the-people arm of the government, by raising the old “don’t play politics” argument. “Can we put politics aside for the good of our nation’s veterans?” said Sen. Patty Murray, D-Wash. “Can we show these heroes that – despite our differences – we will work as diligently toward getting them the benefits and care they’ve earned as they have worked for our nation?”

The problem is Sanders’ bill would have cost $21 billion dollars by vastly expanding existing programs and adding new ones, when the VA budget has already been growing like topsy.

The VA, with 151 hospitals and 821 clinics, already has an annual budget that’s more than double what it was a decade ago.

According to the Office of Management and Budget, the VA budget increased in real terms from $45 billion in fiscal year 2001 to $150.7 billion in fiscal year 2014 and President Obama’s 2015 budget for the VA proposes an increase to $163.9 billion.

But Senate Majority Leader Harry Reid is already going the class warfare route in urging even more spending.

Senate Majority Leader Harry Reid (D-NV)

Senate Majority Leader Harry Reid (D-NV)

On Monday he blasted Republicans for favoring tax cuts for the wealthy over the health of vets and spending for the war in Iraq on “America’s credit card”  but not being willing to pay for the medical care of vets. All senators should support the Sanders bill regardless of its cost, he said.

With the country already facing more than $17 trillion in national debt and with annual deficits continuing to contribute to that debt, adding more debt just plain makes no sense, even if it is to serve honored veterans.

Equally, adding more veterans services and vastly expanding the pool of veterans eligible for VA services makes no sense when the VA is apparently incapable of professionally providing its services now to its existing caseload.

It would make more sense for Congress to restrain the growth of its potential clients, facilitate a shift of veterans with service-connected disabilities who don’t require specialized VA care to medical services outside the VA system, and address the serious cultural problems that have led to a dysfunctional VA bureaucracy and interminable waiting times for vets deserving of our nation’s care.

In addition, Congress owes it to our heavily indebted country to pay for any additional costs that may be incurred in connection with VA reform with real money. That would require hard choices on budget priorities. Sanders’ February bill proposed that the additional spending be paid for with overseas contingency operations funds used to fund the war in Afghanistan. His new bill would also place caps on overseas contingency operations funds . That money isn’t real savings because it wouldn’t have been spent anyway with U.S. Afghanistan operations winding down.

So watch closely as Congress tries to get out in front of the VA mess. There’s reason to be worried. As Will Rogers said, “This country has come to feel the same when Congress is in session as when a baby gets hold of a hammer.”