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Thune Reintroduces Sweeping Budget Reform Bill

Bill seeks to repair broken budget process

March 2, 2011

WASHINGTON, D.C. —  Senator John Thune (R-S.D.), a member of the Senate Budget Committee, today reintroduced legislation that would transform Congress' broken budget process through common sense reforms and reduce the rapid growth of discretionary spending. Senators Saxby Chambliss (R-Ga.), Mike Crapo (R-Idaho), Jim Inhofe (R-Okla.), Mark Kirk (R-Ill.), Mike Johanns (R-Neb.), and Rob Portman (R-Ohio) are all original cosponsors of the budget reform bill.

"The federal government's budgeting process is broken and continues to contribute to our nation's record debt and deficits," said Thune. "If American families and small businesses operated their budgets as irresponsibly as Washington does, they would go bankrupt.

"My bill would improve transparency and efficiency in the federal budgeting process by creating a legislative line-item veto, establishing a biennial budget timeline, preventing the abuse of emergency spending designations, enacting real PAYGO rules, and creating a permanent joint committee of Congress focused solely on passing spending cuts, among other reforms."

Part I: Budget Reform

Legislative Line-Item Veto

Creates a legislative line-item veto. The president may propose through a special message to Congress the cancellation of any discretionary spending item, direct spending item, limited tariff benefit, or targeted tax benefit contained within a bill. The president may submit up to five special messages to Congress on bills and joint resolutions and up to ten for any budget reconciliation or omnibus appropriations measure. Any cancellations must be applied to reducing the deficit or increasing a surplus.

Within three legislative days of receiving the special message, the majority or minority leader of each House must introduce legislation to approve the provisions in the special message. The bill will receive expedited consideration in both the Senate and the House requiring only a simple majority to pass and is not amendable.

Biennial Budget

Establishes a biennial budgeting timeline. In odd numbered years, Congress would pass a two-year biennial budget. That same year, Congress would pass two-year appropriation bills. A biennial budget would give Congress more time for oversight of government spending during even numbered election years. This provision is particularly important because Congress has only completed all of the annual appropriation bills on-time in four of the last 34 years. Should Congress fail to pass a biennial budget and appropriation measures, there would be an automatic Continuing Resolution at the previous year's funding level (not to exceed specified discretionary spending caps).

Binding Federal Budget

Adds teeth to the budget process by passing a biennial joint budget resolution rather than a concurrent budget resolution. The president would have to either sign the budget into law, or veto the budget. If the president vetoes the joint budget resolution, Congress must vote on the veto override. If this veto override fails, an automatic Continuing Resolution is put in place for the relevant biennium.

Preventing the Abuse of Emergency Designations

Improves the process of adding an emergency designation to bills. It would require that there be an affirmative vote to add an emergency designation to a bill, would require a bipartisan motion to be filed signed by 16 Senators stating that the spending is an emergency (necessary, sudden, urgent, unforeseen, and not permanent), and would require a two-thirds vote in both the House and Senate to add an emergency designation to a bill. The emergency designation was used to pass over $200 billion in deficit spending since the enactment of the FY 2010 Budget Resolution.

New Community Living Assistance Services and Support (CLASS) Act Trigger

Creates a CLASS Act Trigger if the program is not actuarially sound over a 75-year time frame. The CLASS Act, a controversial long-term care entitlement program created by the new health spending law, has been described by the Senate Budget Committee Chairman as a Ponzi scheme. The CLASS Act trigger would require the president to submit a plan to reform the CLASS Act and allow for this legislation or different legislation which would resolve the imbalance to receive expedited consideration. It is expected that the program will suffer from significant adverse selection as those in need of this insurance are more likely to enroll. This will further drive up costs and premiums and lead to decreased enrollment. The problems associated with this program are expected to lead to large deficits in future years.

Honest Accounting for the Medicare Cost Containment Trigger

Reforms calculation of the Medicare cost containment trigger. As part of the Medicare Modernization Act, if the Medicare Trustees report two years in a row that funds from the general fund will account for more than 45 percent of total outlays in the current fiscal year or any of the next six fiscal years, the president is required to present legislation to prevent this from occurring. Congress then has expedited procedures to consider legislation to address this issue. However, due to the double-counting of new revenues and savings in the Medicare Trust Fund, it is expected that Medicare will not surpass this 45 percent threshold in the coming years even though these savings are effectively being used to pay for the new health exchange subsidies. This proposal eliminates that gimmick and prevents savings and revenues from the new health care law from being counted when calculating the 45 percent threshold.

Improving Pay-As-You-Go (PAYGO) and Trust Fund Accounting

Reforms PAYGO rules to prevent the double-counting of new revenues or reduced spending in trust funds for the purposes of offsetting other expenditures. Over $600 billion in trust fund offsets were used to pass the health care reform bill and last year an attempt was made to increase the per-barrel tax for the Oil Spill Liability Trust Fund to offset other non-related tax measures. By preventing these changes from being used as an offset under PAYGO rules in the future, this provision would end the practice of double counting the spending reductions and revenue increases in trust funds.

Credit Reform Act (CRA) Modernization

Amends the CRA to direct Congressional Budget Office (CBO) to score purchases of debt, stock, equity, or capital using a discount rate that incorporates market risk. The CRA directs the CBO in scoring federal loan programs and loan guarantees. The current methodology does not account for market risk, a key factor when the government is the lender of last resort, leaving taxpayers exposed to uncompensated risk. This methodology was not used to score the $30 billion Small Business Lending Fund in the Small Business Jobs Act which led to taxpayers being exposed to an additional $7.3 billion in risk.

Part II: New Joint Committee on Deficit Reduction

Standing Joint Committee of Congress for Biennial Budget Deficit Reduction

Creates a permanent Joint Committee on Deficit Reduction composed of 20 members. Ten members would be from the House of Representatives, including five members appointed from the majority party by the Speaker of the House and five members from the minority party to be appointed by the minority leader. Ten members would be from the Senate, including five members appointed from the majority party by the majority leader of the Senate and five members from the minority party to be appointed by the minority leader.

Not later than July 15th of each odd numbered year, the Joint Committee must introduce legislation that eliminates or reduces spending on government programs and achieves a savings equal to or greater than the deficit reduction target. The deficit reduction target is ten percent of the previous two years' budget deficits not exceeding ten percent of total outlays and not less than one percent of total outlays of the previous year. These savings must be achieved over the subsequent two years. The legislation is not amendable and would receive expedited consideration in the House and Senate. If the legislation is vetoed, both the Senate and the House must vote on the veto override within one week.

Part III: Eliminating Wasteful Spending

Discretionary Spending Caps

Establishes binding discretionary spending caps for all non-defense, non-veteran, non-homeland security discretionary spending from 2011 to 2021. Discretionary spending caps are set at FY 2008 levels adjusted for inflation and any bill that exceeds the spending caps is subject to a point of order requiring a three-fifths vote to waive in the Senate and a two-thirds vote to waive in the House of Representatives.

These spending caps are enforced through sequestration. Within 15 calendar days after Congress adjourns to end a session, the Office of Management and Budget shall issue a final spending reduction report to reduce any excess discretionary spending. Upon receipt of the report, the president must issue an order to carry out the discretionary spending cuts needed to meet the spending caps. The president's order shall reduce, by a uniform amount, non-defense, non-veteran, non-homeland security discretionary spending to meet the discretionary caps. Congress may waive the presidential orders by a two-thirds vote in both chambers.