The Omnibus Spending Bill Reveals the Economic Consequences of the Murray-Ryan Budget Deal
Congress just passed an omnibus spending bill that makes important choices about where we need to invest to get our economy moving. This bill is based on the budget compromise negotiated at the end of 2013 by Senate Budget Committee Chairwoman Patty Murray (D-WA) and House Budget Committee Chairman Paul Ryan (R-WI), which set an overall fiscal year 2014 funding level for discretionary spending. The discretionary budget is split between defense and nondefense programs, with many of the federal government’s most critical economic investments found within the nondefense discretionary budget. Congress decides how much funding each discretionary program will receive each year in appropriations bills such as this year’s omnibus.
The Murray-Ryan budget agreement limits nondefense discretionary spending to about $492 billion in FY 2014. That is about $22 billion more than the spending limit imposed by sequestration, but it is also about $14 billion less than the pre-sequester spending level set by Congress in the American Taxpayer Relief Act of 2012, which was already slightly reduced from the original level agreed to in the Budget Control Act of 2011. More importantly, the Murray-Ryan agreement is a severe cut from just a few years ago. In FY 2010, Congress allocated about $542 billion for nondefense discretionary programs. Had it frozen spending at FY 2010 levels, nondefense discretionary programs would have received about $586 billion in FY 2014, when adjusting for inflation. This is about 19 percent more than the Murray-Ryan agreement provides.
The omnibus reverses some of the most damaging sequester cuts, but not all of them. The omnibus also makes a few excellent investments in our economy, and it is certainly better than allowing the full sequester cuts to continue for another year. This column focuses on four major areas of economic investment: infrastructure, early childhood education, scientific research, and job training. It also examines the smaller but very important long-term investment in preventing lead poisoning. Altogether, the omnibus delivers mixed results for these sectors, primarily because it faces restrictions from a spending cap that is simply too low to enable the investment our economy needs.
Despite a very low spending limit, Congress was able to make two very positive investments in infrastructure. First, the Transportation Investment Generating Economic Recovery, or TIGER, grant program received $600 million, which is enough to reverse all of last year’s sequester cuts and add $100 million in new funding compared to last year’s pre-sequester levels. While most federal transportation funding is doled out based on a preset formula, TIGER grants are competitively awarded based on the benefits a project offers to its region and the nation. The TIGER program was first created by the American Recovery and Reinvestment Act of 2009, commonly known as the stimulus package, and House Republicans tried eliminating the TIGER program completely in an earlier FY 2014 spending bill. Expanding TIGER in the omnibus is a major victory that will improve our transportation infrastructure and grow the economy.
The second victory for infrastructure investment is increased funding for the Army Corps of Engineers. The omnibus provides about $5.5 billion for the Army Corps of Engineers, which is enough to reverse last year’s sequester cuts and add nearly $500 million in new funding. The Army Corps of Engineers will use this funding to prevent floods, keep waterways open for shipping, and maintain the nation’s harbors.
Early childhood education
Early childhood education is one of the best investments we can make in our economic future. The omnibus spending bill does not accomplish President Barack Obama’s goal of making quality preschool available to all children, but it is a good start, as it provides about $8.6 billion in Head Start funding. That reverses the entire sequester cut to Head Start, which dropped 57,000 children from the program in 2013. This funding also enables a new investment in the Obama administration’s Early Head Start-Child Care Partnerships to expand high-quality early learning programs for infants and toddlers.
But this investment could have been even stronger. Last year, the Senate Appropriations Committee produced spending bills based on the pre-sequester spending caps for FY 2014, which were $46 billion higher than the cap for the omnibus. The Senate’s earlier spending bill would have provided about $1 billion more for Head Start than the omnibus does, which would have enabled a far greater expansion of Early Head Start programs. While the omnibus takes a good first step, Congress will not be able to expand high-quality preschool to all children until the overall spending caps are increased.
World-class scientific research is a major source of our nation’s economic strength, but the omnibus delivers mixed results to the scientific community. The sequester cuts to medical research at the National Institutes of Health, or NIH, are only partially reversed, meaning that NIH funding remains $714 million below last year’s pre-sequester level of about $30.6 billion. A portion of the sequester cuts to the National Science Foundation, or NSF, were also left in place, which leaves its funding about $71 million below last year’s pre-sequester level of about $7.2 billion. The Energy Department’s Office of Science fared better, however, with an allocation of slightly more than $5 billion, which fully reversed its sequester cut and added more than $200 million in new funding.
While the FY 2014 omnibus makes better investments in scientific research than would be possible under full sequestration, these investments could be much stronger. The Senate’s earlier FY 2014 appropriations bills invested more in each of the agencies listed above. These bills would have fully repealed the sequester cuts for all three agencies, and research would have been expanded beyond last year’s pre-sequester levels.
Millions of Americans are out of work, and the job market is particularly dire for the long-term unemployed. The Department of Labor’s Training and Employment Services funding is focused on reducing unemployment and investing in a more productive workforce. States utilize this funding under the Workforce Investment Act to help unemployed workers and young people build the skills they need to find a job. The Workforce Innovation Fund also uses Training and Employment Services funding to provide competitive grants to state and local workforce investment boards, as well as Native American communities, which support new evidence-based strategies to deliver better results at a lower cost than traditional workforce development programs.
With so many unemployed Americans needing new skills to find work, job training should be an obvious target for expansion. Unfortunately, this has not been the case. The omnibus only reversed a portion of the sequester cuts, leaving funding for Training and Employment Services about $63 million below its 2013 pre-sequester level of about $3.2 billion. But the 2013 pre-sequester level was already sharply reduced relative to the allocation Training and Employment Services received just a few years ago. Training and Employment Services received more than $3.8 billion in FY 2010, before Congress committed to austerity; this translates to about $4.1 billion in today’s dollars. As a result of austerity, Congress is set to cut job training by almost $1 billion from 2010 levels at a time when such training should be expanding.
Moreover, the omnibus does not fund every agency at a higher level than sequestration; some agencies are taking even more cuts than in years prior. One of these agencies is the Office of Healthy Homes and Lead Hazard Control, located within the Department of Housing and Urban Development, or HUD. While some cuts in the omnibus may be justified, lead abatement is not one of them. Lead poisoning has been linked to poor school performance, reduced lifetime earnings, and even violent crime. HUD’s lead abatement programs remove lead paint from older homes that were built before this toxic paint was banned—an investment that has been found to return at least $17 for every $1 spent.
We should be dramatically increasing lead-removal efforts, but instead, Congress has cut them over and over again. The Office of Healthy Homes and Lead Hazard Control received $140 million in FY 2010, which is about $151 million in today’s dollars. Funding was cut to $120 million in FY 2013, and sequestration cut that by another $6 million. Now, the omnibus is set to cut this investment even further, to $110 million. That is a terrible decision, but it could have been worse: House Republicans attempted to cut HUD’s lead removal budget to just $50 million in their earlier FY 2014 spending bill.
Setting a better economic course
All in all, the omnibus spending bill makes mostly good choices to invest in our economy, but its potential is sharply limited by the constraints of the Murray-Ryan budget agreement. That agreement finally took a step back from the ever-increasing austerity policies of the past few years, but it was only a small step.
If federal and state governments had not chosen austerity in the first place, the U.S. economy could have added more than 8 million jobs since 2010, which is 2.4 million more jobs than have been created. Many of those new jobs would have been the result of investments in infrastructure, education, scientific research, job training, and lead removal—investments that could be laying the foundation for long-term prosperity rooted in a growing middle class.
The omnibus spending bill is a decent start, especially after the damage done by sequestration, but it is also a reminder of how much our fiscal policy still needs to improve to get the economy moving.
Harry Stein is the Associate Director for Fiscal Policy at the Center for American Progress.
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Director, Fiscal Policy