ATR Analysis of Budget Proposal
Below is Americans for Tax Reform’s analysis of the Bipartisan Budget Act of 2013 (BBA13). We are deeply troubled by both the increase in the TSA user fee and the temporary relaxing of the spending caps for 2014 and 2015, but we are pleased by the permanent, large, long-term spending cuts contained in the legislation.
Long-Term Government Spending
Over the long term budget horizon, BBA13 is a large net spending cut. Long-term numbers are not available, but the spending cuts included in the plan are permanent and mandatory. It would take an act of Congress to amend them. Meanwhile, the spending increases in the bill are limited to 2014 and 2015 only, leaving the 2016-2021 sequester budget caps unchanged.
BBA13 does not set up an annual “patch” or “cliff” or give an excuse for Congress to re-adjudicate these cuts every year or two. The 2014-2015 divergence from the discretionary spending caps’ trend line was a one-time event not repeated in the window. The cuts to pay for this anomaly, however, are permanent and will reduce government spending by many times more than the small spending increases in 2014 and 2015. BBA13 is a short-term discretionary spending increase dwarfed in size by a long-run mandatory spending cut.
Continuing Successful Spending Caps
There are also new sequester budget caps in 2022 and 2023 that didn’t exist before. This secures $22 billion in additional spending restraint. The sequester has netted the only real year-over-year reduction in outlays in the modern era, and extending them for as long as possible is a proven way to continue to rein in spending.
TSA Ticket Fee
By far, the worst element of BBA13 is the per-ticket airline fee hike that goes to the Transportation Security Agency (TSA.) The TSA is a bloated, unionized government agency which should be privatized. The TSA should not receive a special portion of money from every airplane ticket sold.
ATR supports repealing the entire TSA ticket fee permanently, and replacing it with permanent spending cuts elsewhere. ATR supports fully privatizing the TSA, which currently costs taxpayers $8 billion per year.
BBA13, however, structures the TSA ticket fee not as a tax, but as an offsetting receipt to pay for TSA “services.” In so doing, this fee straddles the line between a tax increase and a user fee without technically crossing into tax hike territory – nevertheless, it should be replaced with spending cuts. The provision is scored by CBO as a spending cut in the form of an offsetting receipt and has been since TSA was first created by Congress.
This is a very, very bad way to write legislation. CBO’s scoring methodology here is gimmicky, and it does not hold up to strict scrutiny as a serious policy initiative.
ATR is strongly opposed to this provision of BBA13, and urges Congress to replace it with permanent spending cuts elsewhere.
Government Employee Pensions
Federal employees currently receive both a 401(k) style pension and a defined benefit pension. They have to contribute a percentage of their salary toward this defined benefit pension. BBA13 increases this by 1.3 percentage points of salary for employees hired after January 1, 2014 (and who have not worked for the federal government for more than five years previously).
This will take years to phase in, since it applies only to new employees. However, once it is completed, it should save taxpayers $2 to $3 billion per year in today’s dollars by having government employees contribute more towards their own pension plan.
When someone serves 20 years in the military, they get an immediate pension equal to 50 percent of their military annual salary. Under current law, this pension amount increases with inflation annually. Under BBA13, it would only increase at inflation-minus-one percentage point. Upon retirement age (62), the veteran is held harmless by having their pension going forward plussed-up and their full COLA restored from there.
This should save taxpayers about $1-2 billion per year in today’s dollars in perpetuity.