New Direction for U.S. Senate Budget Committee
The U.S. Senate Committee on the Budget is a peculiar entity. The committee was established in 1974 in response to President Richard Nixon “impounding” money allocated by Congress to prevent spending on programs he did not favor. This led to a constitutional crisis, as the U.S. Constitution gives Congress the power of the purse. Congress responded by creating the 1974 Congressional Budget and Impoundment Control Act along with the Senate Budget Committee. The committee is officially responsible for “drafting budget plans for Congress and for monitoring and enforcing rules surrounding spending, revenue, and the federal budget.”
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During its two years in the 118th Congress (2023-2024), the committee strayed from this mission. It held 43 hearings, only a handful of which focused on the nation’s budget. Twenty-four of them dealt with climate change’s impact on the economy. Committee Ranking Member Chuck Grassley (R-Iowa) pointed out in an April 2024 letter that Majority Committee Chair Sheldon Whitehouse (D-RI) used the committee to conduct an alarmist catastrophizing crusade, abetted by unqualified expert witness testimony. Grassley was responding to a March 2024 letter from Whitehouse to committee Republicans, in which he complained about their complaining. Grassley also indicated in his letter that other committees, such as the Environment and Public Works and Finance committees, have primary jurisdiction over climate change policy.
With Republicans taking charge of the Senate on Jan. 3, 2025, a Republican senator will replace Whitehouse as chairman, likely steering the committee in a new direction. Looking back at its hearings in the 118th Congress and ahead to those in the 119th, we humbly offer some suggestions and comments to help the Senate Budget Committee deliver value. After all, there is much to be done to address our country’s $1.8 trillion deficit and $33 trillion debt mountain.
- Restore focus on the foundational mandate. In 2023-2024, few Budget Committee hearings actually focused on the budget. In addition to the 24 focused on climate change, others dwelled on unrelated topics like reproductive freedom, immigration, and income inequality.
- Give the other side a chance. There is an ignoble tradition in congressional hearings for the majority to release its testimony just before the hearing. This nasty trick deprives the minority of sufficient time to read and digest what the majority is proposing. The committee’s Dec. 18 hearing took this abuse to extremes. Two voluminous reports accompanied the hearing: the 36-page “Uncovering the Economic Costs of Climate Change” report and the 84-page “Next to Fall: The Climate-Driven Insurance Crisis Is Here—and Getting Worse” Highly technical and rich with data, both reports were released mere hours before the hearing, giving the minority precious little time to get acquainted with their contents. It is hard to deliver a book report on a book you have not had the chance to read.
- Stop cherry-picking data. The committee has a history of cherry-picking sources and data. For example, it has used arguments and data in reports prepared by Insure Our Future, a broad-based organization whose partners focus on ideology rather than science. One such partner is the Connecticut Citizen Action Group, which describes itself as dedicated to “involving the residents of Connecticut in altering the relations of power in order to bring about a more just society.”
- Consult more relevant data. The Dec. 18, 2024 hearing was supposed to focus on the insurance policy non-renewal data requested from insurers on Nov. 2, 2013. It was not clear whether non-renewals included consumer-driven policy shopping, in which case the non-renewal data do not accurately reflect insurer behavior. A more informative analysis would have simply looked at insurer loss and combined ratios by state and smaller subdivisions. The committee’s premise that non-renewals are leading indicators of climate change-driven insurer exits is therefore faulty, as are conclusions relying on such data.
- Ease up on hyperbole. The Budget Committee has been the source of unwarranted alarmist rhetoric, declaring the insurance industry on the verge of collapse and in climate change-driven crisis. The committee reported that “climate change poses new systemic risks to the U.S. economy; systemic risks that can cascade beyond immediately-affected sectors and inflict widespread economic damage. The primary risks are collapse in the insurance sector impacting mortgage and property markets.” The argument is as follows: Climate change is stoking property losses, which drives up insurance premiums and leads insurers to cease providing insurance. Homeowners are abandoning their homes as a result, thereby catalyzing the loss of home values, precipitating a housing crisis, stimulating a massive systemic financial crisis, and crippling our economy—especially if carbon emissions are not immediately brought under control.
- Report the good news. The committee commented that insurance availability and affordability are especially acute issues in Florida and California. What their analysis failed to report is that these are special cases. Florida’s insurance-related woes stem from rampant unmerited litigation, while California’s issues stem from insurance regulation that effectively straitjacketed insurers from pricing policies with risk-adjusted rates. However, the situation in both states has improved. Tort reform measures passed in Florida in 2023 are helping stabilize the insurance market, and California insurance regulators are starting to allow insurers to factor climate trends and reinsurance cost into their pricing.
- Trim wasteful government programs. The committee missed the opportunity to comment on two climate change-related areas that do impact the budget: government spending on flood losses and massive subsidies awarded to crop insurance buyers. Currently, the government’s flood insurance program is $20.5 billion in debt. The federal crop insurance program subsidizes two-thirds of the cost farmers pay for insurance. As a result, flood insurance and crop insurance are sources of enormous disaster payments. The budget could benefit from either slashing these wasteful programs or introducing free-market principles. (Are you listening, Elon and Vivek?)
- Promote resilient building. The best protection against losses due to natural catastrophes, including those amplified by climate change, is resilient building. Building hardened homes, following building codes, and refraining from building in harm’s way can all decrease the need for federal disaster relief. Examples of successful programs in action include Strengthen Alabama Homes, whose homes with “fortified” roofs sell for 7 percent more than those without. Forest resilience bonds effectively introduce private capital to help contain wildfire risk in California.
- Tell the truth about insurers’ financial condition. Whereas the Budget Committee maintains insurers are failing and home prices in Florida are tanking, the facts say otherwise. Median Florida home prices have been stable in the past two years, at approximately $400,000 (up from $250,000 in 2020). In this same period, property and casualty insurance industry surplus has risen from $929 billion to $1.13 trillion with a combined ratio of 97.8 percent through Q3 2024—the healthiest financial result in the past five years.
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The Senate Budget Committee has a critical remit. Fingers crossed it comes out of the starting blocks in the 119th Congress with constructive work to bring down our nation’s crippling debt and deficit. And if it doesn’t, you can rely on R Street to egg it on.
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The U.S. Senate Committee on the Budget is a peculiar entity. The committee was established in 1974 in response to President Richard Nixon “impounding” money allocated by Congress to prevent spending on programs he did not favor. This led to a constitutional crisis, as the U.S. Constitution gives Congress the power of the purse. Congress responded by creating the 1974 Congressional Budget and Impoundment Control Act along with the Senate Budget Committee. The committee is officially responsible for “drafting budget plans for Congress and for monitoring and enforcing rules surrounding spending, revenue, and the federal budget.”
During its two years in the 118th Congress (2023-2024), the committee strayed from this mission. It held 43 hearings, only a handful of which focused on the nation’s budget. Twenty-four of them dealt with climate change’s impact on the economy. Committee Ranking Member Chuck Grassley (R-Iowa) pointed out in an April 2024 letter that Majority Committee Chair Sheldon Whitehouse (D-RI) used the committee to conduct an alarmist catastrophizing crusade, abetted by unqualified expert witness testimony. Grassley was responding to a March 2024 letter from Whitehouse to committee Republicans, in which he complained about their complaining. Grassley also indicated in his letter that other committees, such as the Environment and Public Works and Finance committees, have primary jurisdiction over climate change policy.
With Republicans taking charge of the Senate on Jan. 3, 2025, a Republican senator will replace Whitehouse as chairman, likely steering the committee in a new direction. Looking back at its hearings in the 118th Congress and ahead to those in the 119th, we humbly offer some suggestions and comments to help the Senate Budget Committee deliver value. After all, there is much to be done to address our country’s $1.8 trillion deficit and $33 trillion debt mountain.
- Restore focus on the foundational mandate. In 2023-2024, few Budget Committee hearings actually focused on the budget. In addition to the 24 focused on climate change, others dwelled on unrelated topics like reproductive freedom, immigration, and income inequality.
- Give the other side a chance. There is an ignoble tradition in congressional hearings for the majority to release its testimony just before the hearing. This nasty trick deprives the minority of sufficient time to read and digest what the majority is proposing. The committee’s Dec. 18 hearing took this abuse to extremes. Two voluminous reports accompanied the hearing: the 36-page “Uncovering the Economic Costs of Climate Change” report and the 84-page “Next to Fall: The Climate-Driven Insurance Crisis Is Here—and Getting Worse” Highly technical and rich with data, both reports were released mere hours before the hearing, giving the minority precious little time to get acquainted with their contents. It is hard to deliver a book report on a book you have not had the chance to read.
- Stop cherry-picking data. The committee has a history of cherry-picking sources and data. For example, it has used arguments and data in reports prepared by Insure Our Future, a broad-based organization whose partners focus on ideology rather than science. One such partner is the Connecticut Citizen Action Group, which describes itself as dedicated to “involving the residents of Connecticut in altering the relations of power in order to bring about a more just society.”
- Consult more relevant data. The Dec. 18, 2024 hearing was supposed to focus on the insurance policy non-renewal data requested from insurers on Nov. 2, 2013. It was not clear whether non-renewals included consumer-driven policy shopping, in which case the non-renewal data do not accurately reflect insurer behavior. A more informative analysis would have simply looked at insurer loss and combined ratios by state and smaller subdivisions. The committee’s premise that non-renewals are leading indicators of climate change-driven insurer exits is therefore faulty, as are conclusions relying on such data.
- Ease up on hyperbole. The Budget Committee has been the source of unwarranted alarmist rhetoric, declaring the insurance industry on the verge of collapse and in climate change-driven crisis. The committee reported that “climate change poses new systemic risks to the U.S. economy; systemic risks that can cascade beyond immediately-affected sectors and inflict widespread economic damage. The primary risks are collapse in the insurance sector impacting mortgage and property markets.” The argument is as follows: Climate change is stoking property losses, which drives up insurance premiums and leads insurers to cease providing insurance. Homeowners are abandoning their homes as a result, thereby catalyzing the loss of home values, precipitating a housing crisis, stimulating a massive systemic financial crisis, and crippling our economy—especially if carbon emissions are not immediately brought under control.
- Report the good news. The committee commented that insurance availability and affordability are especially acute issues in Florida and California. What their analysis failed to report is that these are special cases. Florida’s insurance-related woes stem from rampant unmerited litigation, while California’s issues stem from insurance regulation that effectively straitjacketed insurers from pricing policies with risk-adjusted rates. However, the situation in both states has improved. Tort reform measures passed in Florida in 2023 are helping stabilize the insurance market, and California insurance regulators are starting to allow insurers to factor climate trends and reinsurance cost into their pricing.
- Trim wasteful government programs. The committee missed the opportunity to comment on two climate change-related areas that do impact the budget: government spending on flood losses and massive subsidies awarded to crop insurance buyers. Currently, the government’s flood insurance program is $20.5 billion in debt. The federal crop insurance program subsidizes two-thirds of the cost farmers pay for insurance. As a result, flood insurance and crop insurance are sources of enormous disaster payments. The budget could benefit from either slashing these wasteful programs or introducing free-market principles. (Are you listening, Elon and Vivek?)
- Promote resilient building. The best protection against losses due to natural catastrophes, including those amplified by climate change, is resilient building. Building hardened homes, following building codes, and refraining from building in harm’s way can all decrease the need for federal disaster relief. Examples of successful programs in action include Strengthen Alabama Homes, whose homes with “fortified” roofs sell for 7 percent more than those without. Forest resilience bonds effectively introduce private capital to help contain wildfire risk in California.
- Tell the truth about insurers’ financial condition. Whereas the Budget Committee maintains insurers are failing and home prices in Florida are tanking, the facts say otherwise. Median Florida home prices have been stable in the past two years, at approximately $400,000 (up from $250,000 in 2020). In this same period, property and casualty insurance industry surplus has risen from $929 billion to $1.13 trillion with a combined ratio of 97.8 percent through Q3 2024—the healthiest financial result in the past five years.
The Senate Budget Committee has a critical remit. Fingers crossed it comes out of the starting blocks in the 119th Congress with constructive work to bring down our nation’s crippling debt and deficit. And if it doesn’t, you can rely on R Street to egg it on.
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