January 30, 2004

Budget Issues

Washington is anxiously awaiting the President’s 2005 budget proposal. This massive document will be released to Congress on Monday, February 2. In the meantime, members interested in reading an extremely detailed overview of federal budget projections for the next decade, should see the testimony of Congressional Budget Office (CBO) Director Douglas Holtz-Eakin before the Senate Budget Committee. Holtz-Eakin discussed the CBO projections for the federal deficit, economic growth, and growth in entitlement outlays. The testimony can be found athttps://www.senate.gov/~budget/republican/hearingarchive/testimonies/2004/01.04.outlook_testimony_senate.pdf. Relevant excerpts from his testimony regarding “The Budget and Economic Outlook Fiscal Year 2005 to 2014” follow: “CBO projects that under current laws and policies, the federal government will incur a total budget deficit of $477 billion this year and $362 billion in 2005…Such a deficit for this year would set a record in dollar terms, but at 4.2 percent of the nation’s gross domestic product (GDP), it would represent a smaller share of the economy than the deficits of the mid-1980s and early 1990s. In the absence of further legislative changes, deficits would diminish after their peak in 2004, although outlays would continue to exceed revenues for most of the next 10 years. Deficits are projected to total $1.4 trillion for the five years after 2004 and $1.9 trillion for the 2005-2014 period.” “The baseline projections reflect CBO’s forecast of robust economic growth for the next two years. By late 2003, stronger investment by businesses, a weaker dollar, and a rising stock market—augmented by expansionary monetary and fiscal policies—were spurring economic activity. CBO forecasts that real (inflation-adjusted) GDP will grow by 4.8 percent in calendar year 2004 and by 4.2 percent in 2005 and that the unemployment rate will fall to 5.8 percent in 2004 and 5.3 percent in 2005. Between 2006 and 2014, the annual rise in real GDP will average 2.7 percent, CBO projects.” “Even if economic growth turns out to be greater than projected, however, significant long-term strains on the budget will start to intensify within the next decade as the baby-boom generation begins to reach retirement age. Federal outlays for the three largest retirement and health programs—Social Security, Medicare, and Medicaid—will consume a growing share of budgetary resources even under moderate assumptions about the programs’ growth, rising from over 8 percent of GDP in 2004 to more than 14 percent in 2030. Such increasing demands on spending will exert pressure on the budget that economic growth alone is unlikely to alleviate.” In my opinion, all of this means we will continue to hear Congress and the Administration call for restraint on don-defense, non-homeland security, discretionary programs—like housing.

Bankruptcy Reform

The House took advantage of an opportunity to revive the bankruptcy reform bill, the Bankruptcy Abuse Prevention and Consumer Protection Act. (HR 975). After substituting the text of HR 975 for that of a more limited bill which the Senate approved to extend expired bankruptcy protections for farmers (S 1920), the House passed its version of S 1920 and requested a conference with the Senate to resolve differences between the bills. NAHMA supports the House bankruptcy reform bill because it closes a legal loophole which allowed some tenants to avoid eviction by filing for bankruptcy. Specifically, it reforms the application of the automatic stay provisions of bankruptcy laws to tenants facing eviction. Generally, evictions may proceed if the judgment was obtained before the tenant filed for bankruptcy. Such judgments can be based on non-payment, illegal drug use or property endangerment. In the cases of illegal drug abuse and property endangerment, the bill also allows for commencement of eviction actions after the tenant has filed for bankruptcy. NAHMA also believes this language upholds the “one-strike” rule, which permits eviction for illegal drug use in subsidized properties.