Debt Limit: 87 Ways for GOP to Call Biden's Bluff
Part 1
Key Points:
- CBO says extraordinary measures suffice until the summer.
- Four key areas of outlays that are bleeding the Treasury.
- Tax expenditures.
- Fraud in COVID-19 relief programs.
- Refundable tax credits improper payments.
- Government-wide improper payments.
- 87 potential cost-cutting and reform measures (with references).
The Congressional Budget Office (CBO) has given Republicans on Capitol Hill the green light to counter President Biden’s shrieking bluff about an imminent debt limit crisis and link their support for an increased debt ceiling to concrete action to curb runaway federal debt.
In this regard, they will have allies in the genuinely nonpartisan Government Accountability Office (GAO), CBO, and Joint Committee on Taxation (JCT), with additional support even coming from the United States Secret Service.
“Continued use of those [extraordinary] measures, along with regular cash inflows, would, in CBO’s estimation, allow the Treasury to finance the government’s activities until the summer without an increase in the debt ceiling, a delay in payments, or a default,” CBO, on February 15th, said in a report titled “Federal Debt and the Statutory Limit, February 2023.”
There is no legitimate reason for Republicans to cower like frightened sheep when, as noted in a separate CBO report titled “The Budget and Economic Outlook: 2023 to 2033” issued on Feb. 15th, the agency projects net interest on the debt will be $640 billion in FY 2023 and $739 billion in FY 2024. By FY 2033, the amount is projected to mushroom to $1.43 trillion.
There are four major areas of outlays that are bleeding tens of billions of dollars from the U.S. Treasury and are ready-pickings for cost-cutting by Congress and Biden:
#1 Tax Expenditures
#2 Fraud in COVID-19 Relief Programs
#3 Refundable Tax Credits Improper Payments
#4 Improper Payments by the Federal Government
Background
Tax expenditures are revenue losses due to provisions of federal tax law which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, preferential tax rate or a deferral of tax liability. It is estimated by CBO that the total cost of lost revenue to federal coffers is some $1.6 trillion.
To understand the breath-taking scope of tax expenditures, take a look at the Dec. 22, 2022, JCT report (JCX-22-22) titled “Estimates of Federal Tax Expenditures for Fiscal Years 2022-2026.”
According to a CBO report titled “The Distribution of Major Tax Expenditures in 2019,” tax expenditures “significantly affect” the federal budget by causing revenues to be lower than they would otherwise be for any underlying structure of tax rates. The $1.6 trillion price tag amounted to 7.8% of gross domestic product in FY 2019. “That amount was equal to nearly half of all federal revenues, exceeded all discretionary outlays, and equaled 61% of all mandatory spending in the federal budget, which includes spending on Social Security and Medicare,” the report said.
More about this is upcoming in Part 2 of this article.
Fraud related to COVID-19 relief programs has been rampant. See for yourself.
On February 1, the GAO released a report (GAO-23-106556} titled “Emergency Relief Funds: Significant Improvements Are Needed to Address Fraud and Improper Payments.”
According to GAO, as of Nov. 30, 2022, the government had obligated $4.4 trillion and expended $4.1 trillion of the $4.6 trillion appropriated from six COVID-19 relief laws. Three programs – the Small Business Administration’s Paycheck Protection Program (PPP), SBA’s COVID-19 Economic Injury Disaster Loan (COVID-19 EIDL) program, and the Department of Labor’s (DOL) Unemployment Insurance (UI) program – have been added to GAO’s “High Risk List.”
Improper payments of refundable tax credits have been a persistent problem for many years and is considered a “high risk” issue by the GAO.
As described by the IRS, a refundable tax credit is particularly advantageous because it can reduce your tax liability to below zero. If the amount of a refundable tax credit is more than the amount of taxes due, the difference will be given back to you as a tax refund. If you are already owed a tax refund, the refundable credit will be added to increase the amount of your refund.
Examples of refundable tax credits include: recovery rebates, earned income tax credit, child tax credit, premium tax credits (which subsidize the purchase of health insurance under the Affordable Care Act), and American Opportunity Tax Credit. During the first four months of FY 2023, the Treasury paid out $32 billion just for these refundable credits.
Government-wide improper payments were estimated to total $281 billion in FY 2021.
More about this is in the upcoming Part 3 of this article.
87 Common-Sense Proposals
1. Designate all new federal programs distributing more than $100 million in any one fiscal year as “susceptible to improper payments” and thereby subject to more timely improper payment reporting requirements. (Source: GAO-23-106556)
2. Require federal agencies to report improper payment information in their annual financial reports. (Source: GAO-23-106556)
3. Reinstate the requirement that agencies report on their antifraud controls and fraud risk management efforts in their annual financial reports. (Source: GAO-23-106556)
4. Amend the Social Security Act to accelerate and make permanent the requirement for the Social Security Administration to shall its full death data with the Treasury Departments Do Not Pay working system. (Source: GAO-23-106556)
5. Require agency chief financial officers to certify the reliability and validity of improper payment risk assessments and estimates and monitor associated corrective action plans. (Source: GAO-23-106556)
6. Sustain the Pandemic Response Accountability Committee’s (PRAC) Pandemic Analytics Center of Excellence (PACE) beyond the PRAC’s scheduled sunset date of Sept. 30, 2025, in order to equip the Inspector General community with an effective data analytics platform. (Source: Michael Horowitz, inspector general, Department of Justice)
7. Pass legislation to retain the PACE, “a critical antifraud analytics center and invaluable resource,” to bolster oversight of federal expenditures. (Source: Michael Horowitz)
8. Extend the statute of limitations for many pandemic-related Unemployment Insurance (UI) programs that will expire in 2025 “as the statutes most often used to prosecute UI fraud have a 5-year limitation.” (Source: Michael Horowitz)
9. Amend the Program Fraud Civil Remedies Act to raise the jurisdictional limit for administrative recoveries of “smaller” false or fraudulent claims from $150,000 to $1 million. (Source: Michael Horowitz)
10. Provide adequate funding which is “of paramount importance” for the Secret Service and its law enforcement to maintain a robust ability to deter, detect and disrupt fraud schemes. (Source: David Smith, assistant director, U.S. Secret Service’s Office of Investigations)
11. Stem the continued decline in federal white-collar crime highlighted in a report titled “White Collar Crime Prosecutions for 2021 Continue Long Term Decline” and posted on a Syracuse University website. (Source: David Smith)
12 – 27. See Options for Reducing the Deficit, 2023 t0 2032 - Vol. I: Larger Reductions which contains detailed descriptions of 17 options that would each reduce the deficit by more than $300 billion over that 10-year period or, in the case of Social Security options, would have a comparably large effect in later decades. (Source: CBO)
28 – 87. See Options for Reducing the Deficit. 2023 to 2032 - Vol. II: Smaller Reductions which contains short descriptions of 59 options that would each reduce the deficit by less than $300 billion over the next 10 years.
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