The President's Proposal to Lower the Deficit/Increase Employment-- A First Look from an Environmental Perspective

The President, as promised, made his recommendations yesterday to the Joint Select Committee on Deficit Reduction commonly called the “Super Committee” to meet its ambitious agenda. This joint committee is responsible for finding between $1.2 and $ 1.5 trillion in deficit reductions over the next ten years.  The President has gone a giant step further than the Committee by recommending a deficit reduction package that totals $3 trillion over the same period.  As the President promised, his recommendations also include offsets for his $447 billion jobs program.

In general, the proposal aims to fund the government Americans want.  Most of the proposed cuts are focused on “mandatory” spending such as Medicare and programs such as direct payment to agriculture. The balance comes from higher taxes on higher income Americans and closing corporate loopholes. Discretionary spending that protects Americans from those things that cannot protect themselves: air pollution, tainted food, nuclear war, are all but left whole.  If the President’s proposal is not adopted or if the Joint Select Committee cannot reach an agreement that makes it through Congress, discretionary spending will be hit with an immediate cut of approximately 9 percent and the tax code will be undisturbed. That would bring federal domestic spending back to 2006 levels and have a dramatic impact on natural resource and environmental programs. The President has taken  a practical approach that makes difficult choices to get the country on a sustainable path to lower deficits while, in the short term, investing in infrastructure and other job-creating programs to increase employment and lower our dependence on dirty fuels.

The press will undoubtedly highlight the impacts on individual taxes and programs such as Medicare and Medicaid; the Republican echo machine is already on full-throated “class warfare” mode.  I will highlight some of the provisions that directly affect the environment.  My colleagues will be detailing comments over the next few days and weeks as details are flushed out.

Many of the President’s proposals recommend that subsidies and other handouts that help particular industries that directly or indirectly jeopardize the environment be reformed.

First, the President, as he has done several times recently, recommends eliminating oil and gas tax preferences and repealing the mandatory oil and gas research and development program (a program the Bush Administration also proposed getting rid of). He also calls for a scaling back of over $2 billion in subsidies for the coal industry. The economy is suffering and the most profitable companies in the country are enjoying billions in tax breaks.  It is time for these mature industries to stand on their own.  (It would be helpful if they also paid for the costs of the pollution they cause,)

Hardrock mining

The 1872 Mining Law – that’s right 1872! – governs hardrock mining on federal lands. This anachronism is a taxpayer giveaway of federally owned resources that was intended to settle the West. ( The West has been settled) Under the 1872 law, mining companies pay no royalties for the approximately $1 billion worth of minerals mining companies extract annually from federal lands. By comparison, the oil, gas and surface coal industries pay royalty rates of at least 12.5 percent, which are still among the lowest in the world.

The President also proposes to target abandon mine lands cleanup fees to areas with greatest reclamation needs and to create a comparable program for abandoned hardrock mines, financed by a new fee on hardrock mines.  

Pesticide Fees

The President also recommends increasing fees on chemicals and pesticides registrants. These fees, which were intended to cover a significant share of the cost of registration, now cover only a small percentage of the costs.

Agriculture 

The President, recognizing the dramatic increase in farm incomethat are projected to increase by over 30% this year after an almost record year last year, recommended scaling back on subsidies for commodity crops. These subsidies, given to mostly large corn, cotton, wheat, rice, and soybeans make up 90 percent of the commodity crop subsidies.  Most are direct payment, not counter-cyclical assistance intended to help agriculture during lean times.  These subsidies distort the market and effectively encourage production systems that deplete the soil and result in pollution runoff to the nation’s waterways.   Loopholes in the current subsidy system result in windfall payments of taxpayer dollars to the largest corporate farms.  

 The President also proposes to cut $2 billion from agriculture conservation programs over the next 10 years.  This cut is in the projected growth in the program, but nevertheless these are very important environmental programs that have significant impacts in water quality and other environmental benefits.  These cuts seem unwise.

Subsidized Insurance

The President proposes to have flood insurance and crop insurance rates closer to the actuarial rate of the risk.  The huge subsidies, sometimes as high as 70 percent encourage dangerous development and unwise crop management.  The private market, without these subsidies, will encourage wiser choices by those now subsidized by federal insurance.

Nuclear Power

The Department of Energy’s Uranium Enrichment Decontamination and Decommissioning Fund pays the decontami­nation and decommissioning (D&D) costs of the Department of Energy’s gaseous diffu­sion plants in Tennessee, Ohio, and Kentucky.  The authority to collect those assessments on the nation’s nuclear energy facilities and nuclear contractors expired in 2007.  The President proposes to reauthorize the special assessment from domestic utilities and Federal contribu­tion into the Fund. Clearly those responsible for the mess should pay to clean it up.

Increased Spending in the Proposal

Infrastructure

Building on the themes in his speech to Congress last week, the President underscored the immediate need for jobs. One of his proposals is to put people to work by moving forward on needed investments in our aging infrastructure. The President’s proposal has three major components s aimed at improving our transportation system, schools and housing stock.

• The President’s transportation infrastructure proposal includes $9 billion for transit; $2 billion for intercity passenger rail; $4 billion for high speed rail and then approximately $5 billion for transit-eligible projects.  There is also an additional $10 billion for a national infrastructure bank that is intended to leverage funds for needed jobs-heavy projects.  These projects would need to meet tough environmental standards and have a dedicated source of revenue that is likely to include public transit projects.
•  The President’s plan provides to fix-up 35,000 of the nation’s schools. Old, outdated school buildings require significant funds for building maintenance.  The President noted these old structures require our financially pinched schools to spend over $6 billion annually on their energy bills, more than they spend on computers and textbooks combined.  We will work with the White House and the Congress to assure that energy efficiency is made part of the rebuilding efforts.
•  The same for the President’s proposal for rehabilitating homes, businesses, and communities. The President is proposing Project Rebuild to help address both of these problems by connecting Americans looking for work in distressed communities with the work needed to repair and repurpose residential and commercial properties. Project Rebuild will invest $15 billion to leverage private capital and to rehabilitate hundreds of thousands of properties in communities across the country.  To make these homes more affordable, we will be working to assure these projects will include energy efficiency that will dramatically lower the cost of homeownership.

A major part of the President’s proposal deals with “Health Savings” primarily related to Medicare and Medicaid.  What is not in the President’s recommendations, but will have a major effect on the cost of health care is prevention of illness and disease caused by environmental pollution.  EPA has recently proposed or finalized several standards to decrease pollution by industrial sources.   These standards will reduce the number of  asthma attacks, decrease exposure to toxic mercury and save thousands of lives.   The cost to industry to comply will be a fraction of savings to our healthcare system not to mention the impact on the quality of life of all Americans. These benefits will be lost if the Tea Party is successful in its plan, detailed in a memorandum issued by House Majority Leader Eric Cantor (R-VA) to kill these life-saving rules.  A letter to Congress from 13 major environmental groups, including NRDC, urged the Joint Committee to not use this must-passed legislation as a vehicle to weaken public health and environmental protection.