Capitol to Capitol | Oct. 22, 2018

U.S. Budget Deficit Swells

DYK?

Virginia was the first state to formally protect the press. The 1776 Virginia Declaration of Rights stated, “The freedom of the Press is one of the greatest bulwarks of liberty, and can never be restrained but by despotic Governments.” More than a decade later, Virginia Representative (and later U.S. president) James Madison would borrow from that declaration when drafting the First Amendment.

The U.S. Treasury confirmed what the Congressional Budget Office (CBO) estimates declared last week: that the country’s deficit rose to $779 billion for the fiscal year ending Sept. 30, 2018. This is the federal government’s largest budget shortfall in six years and marks a 17 percent increase, or $113 billion, over last year’s deficit. Revenues remained generally flat, while spending increased around 3.2 percent as funding for domestic programs and the military grew.

As elections loom closer, the finger-pointing is in multiple directions, but the most frequent instances point to the fiscal 2018 omnibus package, natural disaster emergency funding and last year’s federal tax reform law. While all these things have undoubtedly influenced the deficit numbers, CBO has said the key driver of rising deficits in the long term can be attributed to the costs of Medicare, Medicaid and Social Security. Senate Majority Leader Mitch McConnell (R-Ky.) said last week that “It’s a bipartisan problem: unwillingness to address the real drivers of the debt … to adjust those programs to the demographics of America in the future.”

President Donald Trump has called for an additional 5 percent cut from all agency budget requests that are currently being drafted for the next fiscal year. Although outcomes of the midterm elections and the willingness of Congress to reduce funding remain unknown, if Congress doesn’t make some big decisions regarding the budget and entitlement spending, annual deficits will most likely continue to rise.

NCSL Contact:  Jake Lestock

US, EU, UK and Japan Set to Begin New Trade Negotiations

On Oct. 16, in three separate letters, the Trump administration notified Congress of its intention to begin trade negotiations with the European Union (EU), the United Kingdom (UK) and Japan. The primary objective of negotiations between Japan and EU is to “address both tariff and non-tariff barriers and to achieve fairer, more balanced trade.” An objective noted in potential negotiations with the UK includes “expectations for an ambitious agreement that would remove tariff and non-tariff barriers on goods and services and develop cutting edge obligations for emerging sectors.”

Timelines for all three negotiations vary. The UK letter mentioned that negotiations with Britain would not begin until after Britain exits the EU, set for March 29.

NCSL Contacts: Jon Jukuri, Miranda McDonald

United States-Mexico-Canada Agreement Update

DYK?

NBC ran “The Best of Carson” reruns on the weekends from 1965-1974, but in 1974, Johnny Carson Americans spend more on the lottery than all other forms of entertainment. According to the North American Association of State and Provincial Lotteries, Americans spent $70.1 billion on lottery tickets in 2014. For comparison, we spend $63 billion on sports tickets, books, video games, movie tickets and recorded music combined.

As negotiations surrounding the United States-Mexico-Canada Agreement (USMCA) continue, trade officials from all three countries are discussing possible replacements for the 25 percent tariff on steel. President Donald Trump first enforced these tariffs based on a national security provision and, in August, it was reported that more than $1.4 billion in revenue had been collected from these tariffs.

This month, the Office of the United States Trade Representative released fact sheets for all 50 states and Puerto Rico related to USMCA. Each fact sheet contains a breakdown of each state and Puerto Rico’s 2017 revenue from exports to Canada and Mexico, as well as their top exported goods.

View the complete list of fact sheets.

NCSL Contacts: Jon Jukuri, Miranda McDonald

US Treasury Releases Guidelines for “Opportunity Zones”

On Oct. 19, the U.S. Department of Treasury released guidelines on investing in the new Opportunity Zone programs created in last year’s federal tax reform package. These zones were created to draw capital into urban and rural areas that were deemed distressed economic areas. Under the program, investors can reduce or even eliminate capital gains taxes on profits held in an Opportunity Zone. The Treasury worked with state and local governments earlier this year and identified 8,761 communities, representing all 50 states and U.S. territories, eligible for the tax-advantaged development. The new guidelines clarify the type of investment projects that qualify. Treasury Secretary Steven Mnuchin announced that the Treasury estimates $100 billion in private capital will be dedicated towards creating jobs and economic development in Opportunity Zones.

NCSL Contact: Jake Lestock

Borrower Defense Rule Effective

On Oct. 16, U.S. District Judge Randolph Moss rejected an injunction request from the California Association of Private Postsecondary Schools (CAPPS) delaying the implementation of the “borrower defense rule,” an Obama-era policy intended to protect students defrauded by for-profit colleges. In September, Moss ordered the borrower defense rule effective, but suspended the ruling until CAPPS’s request was heard by the court. With this final legal hurdle cleared, the borrower defense rule is now effective. The rule provides automatic loan discharge eligibility for students whose postsecondary schools closed mid-program and assigns financial responsibility to the school in question.

“The Department respects the role of the court and accepts the court’s decision,” said the Department of Education spokeswoman Liz Hill. Moreover, Hill stated that Education Secretary Betsy DeVos would “continue writing a new rule that protects both borrowers and taxpayers” and more information would be forthcoming.

NCSL Contacts: Joan Wodiska, Miranda McDonald

On This Day, Oct. 22, in…

  • 1907: The Panic of 1907 started when the depositors of the Knickerbocker Trust Company began withdrawing money, facilitating a run on the bank.  
  • 1939: The first televised pro football game was a telecast from New York. Brooklyn defeated Philadelphia 23-14.
  • 1962: President John F. Kennedy addressed the nation about Russian missile bases in Cuba and imposed a naval blockade on Cuba, beginning the Cuban Missile Crisis.
  • 1986: President Ronald Reagan signed the Tax Reform Act of 1986 into law.

Read the Oct. 15 Capitol to Capitol.

Have ideas or suggestions for how Capitol to Capitol can be improved? Please take two minutes to let us know in this very short survey.

We are always looking for interesting trivia about states, legislatures and American history. If you have some great facts, don't keep them to yourself. Let us know by clicking this link. We will likely include them in a future edition of Capitol to Capitol!

If you have comments or suggestions regarding Capitol to Capitol, please contact jake.lestock@ncsl.org.

NCSL's Advocacy in Washington

NCSL's Washington staff advocate Congress, the White House and federal agencies on behalf of state legislatures in accord with the policy directives and resolutions that are recommended by the NCSL Standing Committees and adopted by the full conference at the annual NCSL Legislative Summit Business Meeting. As a result of the advocacy that is guided by these policies positions, NCSL is recognized as a formidable lobbying force in state-federal relations.

NCSL Staff in Washington, D.C.

  • Molly Ramsdell | 202-624-3584 | Director
  • Jake Lestock | 202-624-8171 | Budgets and Revenue
  • Danielle Dean | 202-624-8698 | Communications, Financial Services
  • Susan Frederick | 202-624-3566 | Law, Criminal Justice, and Public Safety
  • Abbie Gruwell 202-624-3569 | Human Services
  • Ben Husch | 202-624-7779 | Natural Resources and Infrastructure 
  • Jon Jukuri  | 202-624-8663 | Labor, Economic Development and International Trade
  • Haley Nicholson | 202-624-8662 | Health
  • Molly Ramsdell | 202-624-3584 | Commerce and Financial Services
  • Joan Wodiska | 202-624-3558 | Education