Capitol Hill Democrats Represent Deficit Roadblock

Rep. George Miller (D-Calif.) (Bob Larson/Contra Costa Times/ZUMA Press)

As Capitol Hill Democrats consider proposals to pull the country out of its huge deficit hole, they’re repeatedly running into a formidable impediment: themselves.

On issues as diverse as health care and student lending, provisions designed to rein in deficit spending have all run smack into the ubiquitous inclination of lawmakers to protect their home turf from the scalpel of budget cuts. Their message is familiar: Congress must do something to get its fiscal house in order, just don’t do it in my back yard. And party affiliation is largely irrelevant.

[Congress1] The most recent case surrounds a popular proposal to eliminate government subsidies to private companies that lend to students. The legislation, which has already passed the House and enjoys enthusiastic support from President Obama, would save the government tens of billions of dollars over the next decade — most of which would go toward expanding scholarships for low-income college students. Never an overly partisan issue, it was proposed by President Bush several times during his tenure. Senate Democrats are hoping to attach the legislation to their sweeping health care reform proposal.

Not so fast.

Those billions of dollars don’t go nowhere. And six Senate Democrats — Bill Nelson (Fla.), Blanche Lincoln (Ark.), Ben Nelson (Neb.), Mark Warner (Va.), Jim Webb (Va.) and Tom Carper (Del.) — voiced their objections to the proposal on Tuesday. The lawmakers — most representing hubs of large, private lenders — say they support student loan reform “to generate historic budget savings,” but have concerns that the White House proposal “could put jobs at risk.” They’re asking Senate Majority Leader Harry Reid (D-Nev.) to approach any action “in a thoughtful manner that considers potential alternative legislative proposals.”

Though short on specifics, the message is clear: The lawmakers want to rein in spending, but not if it threatens jobs in their states.

It’s an argument that’s applicable to almost every budget reform lawmakers tackle. That is, even if some industry, or project, or siphon of federal spending is utterly wasteful — even if it’s utterly pernicious — it’s still likely that somebody’s livelihood depends on it, and therefore someone in Congress is going to defend it. (Some examples include the fights over dropping the F-22 fighter jet; canceling the presidential helicopter; and forcing the automakers to keep dealerships around even if they weren’t selling cars).

In a more recent case, the Senate, as part of its health care bill, included creation of an independent commission empowered to recommend Medicare pay reforms if Congress didn’t do enough to control program costs. The recommendations would take effect unless Congress voted them down. Yet House Democrats are balking at the idea. Rep. Mike Capuano (D-Mass.), for example, sent a letter to supporters Thursday, saying he’s worried that the panel’s recommendations “would quickly and inevitably result in Massachusetts losing tens of thousands of jobs and would seriously undermine one of our region’s economic engines.”

“Other regions with heavy concentrations of health care would feel a similar impact,” he wrote.

Such resistance highlights the question facing leaders on Capitol Hill as they try to rein in federal deficits: How does Congress “generate historic budget savings” when thousands of jobs likely hinge on the spending?

The question is timely — and not only because the country is in the middle of a jobs crisis. The nation’s budget deficit hit $1.4 trillion last fiscal year and is on pace to top that figure this year. Much of that spending represents emergency measures enacted to address the recent economic downturn, the worst the country has suffered since the Great Depression. Yet even absent those temporary measures, federal spending remains on an unsustainable course, with Medicare and Medicaid alone threatening to swamp the federal budget in a few short decades.

Aiming to maximize tax dollars, the House passed a bill in September that would eliminate the Federal Family Education Loan program, or FFEL, under which the government subsidizes private lenders that cater to students. Instead, all loans would originate directly from the U.S. Treasury, though private lenders would still compete to service those loans. The Congressional Budget Office has estimated that the provision to eliminate the for-profit middle man would alone save the federal government $67 billion over the next decade. The bill’s sponsor, Education and Labor Committee Chairman George Miller (D-Calif.), told reporters at the Capitol Thursday that the current system represents “a titanic boondoggle in excess subsidies to some of the nation’s rich and most powerful banks.”

Banks, he could have added, that employ large numbers of folks in a large number of states.

The regional protectionism is hardly limited to Democrats. When the White House last month proposed to cut an expensive defense contract in Alabama, for example, GOP Sen. Richard Shelby (Ala.) was quick to retaliate, placing a hold on every Obama nominee before the Senate. When President Bush vetoed a $300 billion farm bill in 2008 — citing taxpayer subsidies to wealthy farmers — it was Sen. Saxby Chambliss (R-Ga.), among other farm-state Republicans, to rally the successful override. The list goes on.

Joshua Gordon, policy director for the Concord Coalition, a budget watchdog group, said the FFEL debate mirrors that over Medicare Advantage, the program under which private companies cater to Medicare patients. Each program represents “a system that everyone knows is inefficient,” Gordon said, but reforms have gone nowhere in Congress, largely due to the local interests of some members.

The reluctance of Congress to make difficult budget decisions, Gordon added, only bolsters the argument for an independent deficit commission “empowered to think of the country on the whole and not just individual districts.”

Then again, in bipartisan fashion, the Senate shot down such a proposal last month.

“There is one thing that often unifies Congress,” Gordon said, “and that is irresponsibility.”