12 things you may have missed in the budget

April 10, 2013

The headline initiatives in Obama's budget include adoption of chained CPI and other cuts offered as a concession to House Republicans in December, the funding of universal preschool through a $78 billion increase in the tobacco tax, and the inclusion of various infrastructure investments first proposed as part of the American Jobs Act (not to mention the implementation of the Buffett rule).

But budgets are long, long documents, and usually include interesting items that don't get a lot of play. The fiscal year 2014 budget is no exception. Here are the b-sides, the interesting items in the budget that might get lost in the discussion.

Permanent tax credits

Laura Fritz, 27, applies for assistance. (Kristen Wyatt/AP)

The budget makes permanent the American Opportunity Tax Credit (AOTC) and the expansions of the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) which were first passed in the 2009 stimulus package. Those provisions are currently set to expire in 2017.

The AOTC is a credit for higher education costs that replaced the Hope credit. Unlike that policy, up to 40 percent of the AOTC is refundable, and the maximum benefit in 2013 is $2,500 rather than $1,950. It also has a higher income threshold than Hope (so more middle-class families quality), can be used to pay for book expenses, and is available for the first four, rather than first two, years of college.

The EITC and CTC are refundable credits intended to provide aid to low-income workers and working families, and low/middle-class families with children, respectively. The stimulus package made the CTC available for people with income above $3,000 rather than above $10,000 (indexed for inflation), increased the maximum EITC for families with three or more children, and increased the amount married couples can make before EITC starts to phase out.

According to the budget, these policies will cost $161 billion over 10 years in addition to the cost of them under existing law from 2013 to 2017 (when they're currently set to expire).

A Race to the Top for smart grids

Arne Duncan talks up Race to the Top. (Drew Angerer/Associated Press)

The budget pledges $200 million for a "Race to the Top"-style competition designed to reward state governments who implement policies that cut down on energy waste and modernize their electric grids.

Lower discretionary caps

(Martin Cathrae/Flickr)

Since the Budget Control Act of 2011, passed as a result of the debt ceiling standoff, caps have been in place on discretionary spending, cutting $1.2 trillion from defense and non-defense spending, almost equally between the two. The "fiscal cliff" deal added $12 billion in additional savings. The budget adds another $202 billion, again, almost evenly distributed between defense and non-defense.

Reforming the Postal Service


The budget includes what it boasts is "a comprehensive and balanced legislative proposal" to cut $20 billion in Postal Service spending over 10 years, while increasing the flexibility of the Postal Service in changing business practices.

Shift costs onto federal retirees


Maaaaatloooooock. (Tracy A. Woodward/The Washington Post)

The budget would increase the share of pensions that federal workers have to pay for, increasing what employees hired before 2013 have to pay from 0.8 percent of pay to 2 percent of pay. That raises $20 billion over 10 years.

One percent federal pay increase


Marvin Joseph / Washington Post

In a change from the two-year pay freeze for civilian federal workers that's been in effect since 2011, the budget increases pay by 1 percent for 2014. That still saves $18 billion over 10 years compared to normal practices.

Cutting farm subsidies


(Sean Stipp/AP)

The budget would cut farm subsidies by $38 billion over 10 years. It eliminates "direct payments" to farms while maintaining disaster assistance funding. It creates a new conservation program for agricultural land, wetlands, and grasslands, but cuts other conservation programs to pay for that.

End "pay for delay"

As Sarah has written, "pay for delay" deals wherein brand-name drug manufacturers pay generic suppliers to put off releasing generic versions of popular drugs cost consumers billions every year. The budget authorizes the Federal Trade Commission to block these deals, saving $11 billion over 10 years.

Means-testing Medicare


Warren Buffett will pay more for Medicare. (Yahoo!)

Well, "means-test" may be strong, the program increases income-related premiums for Medicare Parts B and D, effectively raising prices for high earners, and raising $50 billion over 10 years.

Reform food aid


A Haitian woman carries rice donated by USAID. (Lynne Sladky/Associated Press)

As The New York Times has reported, the budget ends the requirement that U.S. food be used for international famine relief. That's a policy that both hurts farmers in the third world and makes food aid less effective, and aid experts at groups like the Center for Global Development have hailed the change.

Expanding HOPE


Hawaii's very happy Congressional delegation, and Gov. Neil Abercrombie, in November 2012. (Marco Garcia/AP)

HOPE - or the Hawaii Opportunity Probation and Enforcement program - is a system in which probationers are subject to "swift and certain" sanctions, such as a guaranteed night in jail, if they break their probation requirements. Mark Kleiman and other criminologists have hailed the program, and will be pleased to learn that the budget proposes evaluating and expanding it further.

"Pay for Success"

Socialimpactbond
Via Social Finance UK.

The budget places a heavy emphasis on evidence-based policymaking, including a $495 million "Pay for Success" program which would promise to pay back providers of services only if they generate results according to predefined metrics. The approach, also known as "social impact bonds," was pioneered in Britain, and has been championed by evidence-based policy advocates.

This post originally stated that $195 million is allocated for "Pay for Success". However, $300 million is also allocated for its implementation, so $495 million is a better figure.

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Sarah Kliff | April 10, 2013