The Obama Budget FY 2017

Feb 22, 2016, 10:40 AM by Ben Raimer

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It is often hard to hear the message because of the noise of the crowd, especially during the middle of political primary season. Perhaps you missed it several weeks ago when President Obama released his $4 trillion budget. The proposed budget would increase federal spending by 4.9 percent mainly driven by the nation’s mandatory programs (Social Security and the national debt interest). Discretionary spending would increase by less than 1 percent. Nevertheless, the President sent a loud and clear message to Congress regarding his priorities for the nation in his 8th and final budget.

One might dismiss the proposed budget from a “lame duck” president, but Mr. Obama has learned several lessons over the years and that certainly shows in this particular budget proposal. There is something for everyone to like; and of course, there is something for everyone to dislike, depending upon your party affiliation.

A few of those options in his playbook for a future budget may actually get some play in the halls of Congress, for instance:

  1. A “moonshot” for cancer research
  2. Increased Pell grants for college students from low-income backgrounds
  3. Renewed incentives for GOP-governed states to expand Medicaid
  4. Incentives to boost individual retirement accounts
  5. Increased funding for select military projects
  6. Targeted funding to attack opioid abuse which is a larger than life problem in cities all over America and is not confined to class, income level or other status
  7. More funding ($19 billion) for cybersecurity defense to protect the US government and major US companies from domestic and international cyberterrorism
  8. More funds aimed at deficit reductions across the board
  9. Closure of tax “loop holes” that allegedly permit the wealthy (individuals with incomes greater than $250,000 a year) to escape some of the ACA taxes
  10. Additional revisions to the tax laws that are aimed to impose more taxes on wealthier individuals and corporations
  11. Included in the budget is a $1.2 billion request to expand programs for the prevention of drug abuse and developing a Zika virus response program
  12. A ½ percent increase in defense funding to $582.7 billion to modernize the US forces currently dealing with ISIS, especially for precision-guided bombs that target the Islamic State

Under the budget is a proposal to increase the spending in HHSC to $1.1 trillion. Even though many of these increases would soften the blow of the “Cadillac tax” on health plans in states with high insurance rates, and subsidize Medicaid expansion for three years in those states who have been recalcitrant to expansion, it remains to be seen if the Republican majority can find their way to vote for such measures that are certainly to be seen as increasing taxes and increasing the “entitlement” programs in what they deem as already too large and an example of an invasive government.

A more sobering analysis of the proposed $4 trillion budget (New York Times 2/10) notes that only a quarter of the $4 trillion would be directed toward discretionary spending.  $3 Trillion would go toward mandatory spending on interests on the federal debt, Social Security payments, and Medicare and Medicaid benefits. Expect Republicans to careful bring into question the merit of any programs that can be viewed as “entitlements”.

The President’s budget proposal does also adversely impact medical school financial aid programs and loan repayment programs for medical students. In short, changes to Income-Driven Repayment Plans (PAYE and REPAYE) would see significant changes with no monthly payment cap and 25-year forgiveness for medical students), Public Service Loan Forgiveness (PSLF) with a cap forgiveness at $57,000 (the limit for undergraduates), and Education Tax Incentives proposing consolidated education tax incentives. Changes would apply only to new borrowers. The cap on Public Service Loan Forgiveness would be a negative blow to medical students who currently gain benefits of forgiven loans through service to underserved populations.

You can certainly be assured that the American Association of Medical Colleges (AAMC) and other interest groups will be on hand to protest changes in the proposed budget that have negative impacts on health care education.

It promises to be a long, hot, spring and summer as Congress debates the attributes and deficits of any budget. Expect these budget proposals to also become a major issue in the forthcoming presidential campaign. President Obama’s call for a $10 tax per barrel on oil was met with protests just days ago. The discussions on other aspects of the budget are likely to be just as loud and vitriolic. Senator David Perdue (R-Ga) was quoted as saying, “The only positive thing about this budget request is that it’s the last one we will receive from President Obama.”