New executive for the US Senate Budget Committee

The US Senate Budget Committee is a peculiar entity. The committee was created in 1974 in response to President Richard Nixon’s “seizure” of money appropriated by Congress to prevent spending on programs he did not favor. This led to a constitutional crisis, as the US Constitution gives Congress the power of the purse. Congress responded by creating the 1974 Congressional Budget and Impoundment Control Act in conjunction with the Senate Budget Committee. The committee is officially responsible for “preparing budget plans for Congress and for overseeing and enforcing regulations regarding expenditures, revenues, and the federal budget.”

During its two years in the 118th Congress (2023–2024), the committee moved away from this mission. It held 43 hearings, only a handful of which focused on the nation’s budget. 24 of them dealt with the impact of climate change on the economy. Committee Ranking Member Chuck Grassley (R-Iowa) pointed out in an April 2024 letter that Majority Committee Chairman Sheldon Whitehouse (D-RI) was using the committee to conduct an alarmingly disastrous crusade, supported by unqualified testimony. Grassley responded to a March 2024 letter from the Whitehouse to Republicans complaining about their complaint. 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 the Republican takeover of the Senate on January 3, 2025, a Republican senator will replace Whitehouse as chairman, likely steering the committee in a new direction. As we look back on its hearings in the 118th Congress and forward 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 nation’s $1.8 trillion deficit and $33 trillion debt mountain.

1. Refocus on the basic mandate. In 2023-2024, there were only a few budget committee hearings that really focused on the budget. In addition to the 24 that focused on climate change, others dwelt on unrelated topics such as reproductive freedom, immigration and income inequality.
2. Give the other side a chance. There is an unsavory 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 hearing on December 18 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 data-rich , both reports were released just hours before the hearing, giving the minority precious little time to familiarize themselves with their contents. It is difficult to provide a book report on a book you have not had the opportunity to read.

3. Stop 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 “engaging the residents of Connecticut in changing the power relations to create a more just society.”

4. See more relevant data. The December 18, 2024 hearing was to focus on the policy non-renewal data requested from insurers on November 2, 2013. It was not clear whether non-renewals included consumer-driven policy purchases, in which case the non-renewals renewal data does not accurately reflect the behavior of the insurance company. A more informative analysis would have simply looked at insurer losses and combined ratios by state and smaller subdivisions. The committee’s premise that non-renewals are leading indicators of climate change-driven insurers is therefore flawed, as are conclusions based on such data.

5. Let go of excess. The budget committee has been the source of unwarranted alarmist rhetoric declaring the insurance industry on the brink 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 could spill over into immediately affected sectors and cause widespread economic damage. The primary risks are collapses in the insurance sector, affecting the mortgage and real estate markets.” The argument goes like this: Climate change encourages property losses, which drives up insurance premiums and causes insurance companies to stop offering insurance. Homeowners leave their homes as a result, catalyzing the loss of home values, triggering a housing crisis, stimulating a massive systemic financial crisis and crippling our economy – especially if carbon emissions are not immediately brought under control.

6. Report the good news. The committee commented that insurance availability and affordability are particularly pressing issues in Florida and California. What their analysis failed to report is that these are special cases. Florida’s insurance-related problems stem from rampant meritless litigation, while California’s problems stem from insurance regulation that effectively discouraged insurers from pricing policies at risk-adjusted rates. However, the situation in both states has improved. Claims reform measures passed in Florida in 2023 are helping to stabilize the insurance market, and California insurance regulators have begun allowing insurers to factor climate trends and reinsurance costs into their pricing.

7. Trim wasteful government programs. The committee missed the opportunity to comment on two climate change-related areas that do affect the budget: government spending on flood losses and massive subsidies 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 huge disaster payouts. The budget could benefit from either cutting these wasteful programs or introducing free market principles. (Are you listening, Elon and Vivek?)

8. Promote resilient building. The best protection against losses from natural disasters, including those exacerbated by climate change, is resilient building. Building hardened homes, following building codes, and refraining from building in disrepair can all reduce the need for federal disaster assistance. Examples of successful programs in action include Strengthen Alabama Homes, whose homes with “reinforced” roofs sell for 7 percent more than those without. Forest Resilience Bonds effectively introduce private capital to help mitigate wildfire risk in California.

9. Tell the truth about the financial situation of insurance companies. While the budget committee maintains that insurance companies are failing and Florida home prices are rising, the facts say otherwise. Florida median home prices have been stable for the past two years, at approximately $400,000 (up from $250,000 in 2020). During the same period, property and casualty insurance industry profits increased from $929 billion to $1.13 trillion with a combined ratio of 97.8 percent through Q3 2024 – the healthiest financial performance in the past five years.

The Senate Budget Committee has a critical mandate. Fingers crossed that it gets out of the starting blocks in the 119th Congress with constructive work to reduce our nation’s crippling debt and deficit. And if it doesn’t, you can count on R Street to egg it on.

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USA